If you’ve been following our series on Reserve Funds and Reserve Studies, you know why it’s so important to have an adequate reserve—and how a reserve study can help ensure that. There are basically three types of reserve studies you can have conducted on your association. Which is right for you and how often they should be repeated is specific to your community: the size and age, and the types of amenities and common areas offered all play a role.
Understanding the types of reserve studies and when you should conduct them is crucial to successfully running a homeowners association.
1: The Full Reserve Study
This is the mother of all reserve studies, and should be conducted at least once after the community is fully built. This study is an exhaustive evaluation of your amenities and common areas, roads and landscape—anything that is common use for your residents and susceptible to wear and tear over time. These resources will be categorized, evaluated, and given a shelf life of sorts: how long before they will need replacement or repair, and what sort of cost could that incur.
As this is such an extensive study, it’s of course the most costly. If you are in the planning or building stages of a property that will be part of an HOA, it’s highly recommended that you budget for this type of study and have it conducted once the property is ready. If done correctly, and follow up with the other types of studies, you shouldn’t have to do a full reserve study a second time.
2: Onsite Reserve Study Update
Once you’ve completed the initial full reserve study, you should follow up with regular updates. About every three to five years, you should conduct an updated study (on a smaller scale) with a site visit. For this study, a specialist will come onsite to review and evaluate your association’s ongoing financial and physical condition. Not only does the study allow the analyst to assess any new additions to your property, it also gives them the chance to pick up on anything that may have been overlooked or inaccurately estimated during the initial study.
Additionally, as years pass, your property is at risk of unexpected damage from natural disasters or other unforeseen events. Regular studies can take these into account and make adjustments to your reserve fund needs accordingly.
3: Offsite Reserve Study Update
The third and final type is a reserve study update conducted offsite by a professional analyst. These studies are much smaller in scale and, as such, are much more cost effective to conduct on a frequent basis. An analyst will review your reserve balance influxes since the last study, as well as any changes in your association’s leadership, rules and regulations, and any changes in taxes, interest, or inflation. Typically, these studies should be conducted every one to two years in tandem with regular onsite studies to keep your reserve fund at its optimal level.
Unsure what type of study you need to conduct or how soon you should schedule your next update? Contact us and we’d be happy to help!