Your Capital Reserves: Fully Funded or Flat Broke?

What You Need to Know About Your Homeowners’ Association Capital Reserve Fund

What Is a Capital Reserve Fund? 

A capital reserve fund is a pool of money which the Homeowners’ Association (HOA) sets aside - much like a savings account - for covering repair or replacement of the Association’s common area components. 

What Makes HOA Reserve Funds So Important?

• INFRASTRUCTURE MAINTENANCE - In communities that have a Homeowner’s Association, the HOA is responsible for the upkeep and maintenance of the common areas inside the community. Within these common areas are the common area components, also known as the infrastructure for which the Association is responsible. It is the due diligence of the HOA to keep the common elements from falling into disrepair, looking shabby or having an appearance that threatens property values or resident’s safety. 
  
• DEPENDABLE LIFESTYLE CONDITIONS - This means handling day-to-day operations, but it also means being prepared for future large scale project expenses or urgent projects that may arise. For example, the HOA must be prepared for the financial burden when a storm damages the clubhouse roof causing a leak or the pump blows out on the community pool, while simultaneously planning for replacement of the roadways, sidewalks, and siding. These and similar issues can diminish the quality of life for the entire community, and residents will expect these problems to be fixed right away. 
• MAJOR IMPROVEMENT OPTIONS - Capital improvements help keep a community looking fresh and prevent deterioration. The funds can be used to make major upgrades or enhancement to common areas that benefit everyone who lives in the community. These types of projects tend to be more costly, so by having reserve funds in place, the Homeowners’ Association can handle these projects without the need for a special assessment or by incurring debt and large loan payments.
  

How Much Should We Have In Our Reserve Fund?

That depends - the balance of money in the reserve fund account will depend on the amount of infrastructure, the condition of the capital components, and the age of these items. This is where a Reserve Fund Study can help the Association. This all sounds a bit overwhelming and raises the question...

Why Do I Need a Capital Reserve Fund Study?

Simply put, a Comprehensive Capital Reserve Fund Study  is a plan that helps make all of these questions a lot less overwhelming.  This study will provide a better grasp of how much money will be needed in the reserve account by assessing the physical condition of the common area components and pricing out replacements with current construction costs.  It should be combined with a financial assessment, providing some insight into the current fiscal health and the stability of the reserve funds.  Based on these two pieces of information - the condition assessment and the financial analysis - a monthly budget can be created to pay for future replacement projects.

Rely on the Professionals from BUSTAMANTE ENGINEERS 

• A Comprehensive Reserve Fund Study from BUSTAMANTE ENGINEERS will provide not only a thorough review of the common area components but also an easy-to-read narrative report along with the reserve fund analysis. We appreciate the subtleties of Associations and recognize the importance of personal contact and local knowledge. 
• With an Update Study, the previous reserve study will be revised to reflect the current balance of the reserve fund and current condition of the common area components. New funding options may need to be provided based on the current day status.

All The Community Association Engineering Services You Need, All in One Place

A reserve study conducted by our CAI Reserve Specialist evaluates the condition of the common area components and provides a plan of replacement. Our commitment is ongoing from the early planning stages through maintenance and into future replacements. Our expertise in Community Associations meets the standards of the Community Association Institute (CAI). 

Every proactive Homeowners’ Association should have a properly funded reserve account to provide funding for replacement of their infrastructure. Unfortunately, many communities have an underfunded reserve balance and no plan to cover future repair costs. Click to contact us online or call 215-340-6990 and let’s discuss how our Capital Reserve Fund Study services may be of assistance to you today!