Most people have no clue what a reserve study is. In fact at family gatherings, I still have to explain to at least a couple of cousins and an uncle. Some HOA board members have heard of a study, and while most association managers know what they are, confusion is quite common concerning what is included in a study and how a study should be used. I will start by giving a very basic explanation of what a reserve study is. Hopefully future posts, will flesh out the concept of a reserve study in a logical fashion.
A reserve study is essentially a budget planning tool. A reserve study is concerned with an association’s assets that are expensive to replace and have a useful life of more than 1 year. A study will inventory a community’s assets and then provide a funding strategy to cover costs associated with the repair or replacement of these assets. Retaining walls, streets, tennis courts, pools, roofs, and siding are the most obvious reserve items, but there are many more. Our software has a database of literally hundreds of various assets. It might be helpful to explain what a reserve study is NOT, but I will get to that in another post.
