CAPITAL RESERVE FUND STUDY
What is a Reserve Fund Study?
A reserve study is an important financial tool that helps Community Associations prepare and plan for their future capital replacement projects. By assessing the physical condition of the common area components and pricing out replacements, a monthly budget can be created to pay for future replacement projects.
Whether it is a 20-story high-rise building in the city, or a 200-unit residential community in the suburbs, financial preparation is an integral element in the life of the community. Capital improvements help keep a community looking fresh and prevent deterioration.
There Are Two Levels of Capital Reserve Studies:
Comprehensive Study: A reserve study that not only provides a thorough review of the common area components, but also an easy-to-read narrative report, along with the reserve fund analysis.
Update Study: After a site visit, the previous reserve study will be updated to reflect the current balance of the reserve fund and common area components. New funding options may need to be provided based on the current date status.
Each Capital Reserve Fund Study Will Include Three Phases:
1. Physical Analysis:
An inspection of the community focusing on the common area components. The common area components are compiled through the Association documents and approved by the Board of Directors. We encourage an onsite meeting with the Community Manager and Board Members so that we can focus on the needs and concerns of the community.
2. Reserve Analysis:
Input the current financial balances and contributions, determine a reasonable rate of return on investments and rate of inflation, apply either a 20 or 30 year basis period, then quantify and estimate the components' cost and remaining useful expected lives - all into one spreadsheet. We offer multiple alternatives, as our analysis program has flexibility to meet the individual needs of any association.
3. Meeting Participation:
We find that just giving the data collected to an Association does not always give them the full picture the report communicates. We prefer to present the Reserve Fund report to the Board of Directors because we feel strongly this is the final step in the process.
