What is a Reserve Study?

What is a Reserve Study?

Reserve Study, or a Reserve Fund Study, is a long term capital budgeting tool used by homeowner associations to budget for capital reserve expenses.

The main purpose of a Reserve Study is to access the association’s financial standing and encourage it to budget wisely. When a Reserve Study’s recommendations are followed, associations have cash on hand for expected capital repair and replacement projects, and avoid unnecessary costly Special Assessments.

A Reserve Study details a property’s common area assets, determines the current strength of the association’s Reserve Fund account, and recommends a Reserve Contribution level.

Prospective home buyers should know what a Reserve Study is and how to interpret the results of a Reserve Study – this can be very helpful in choosing the right association to buy into. Below, find a concise breakdown of the main results of a Reserve Study.

Reserve Study Results

The Component List

The Component List section of a Reserve Study inventories an association’s commonly shared assets which the association is responsible for reserving for, as determined by the association’s CC&Rs and National Reserve Study Standards.

As shown above, the Component List typically provides information about the assets including their expected Useful Life (UL), Remaining Useful Life (RUL), and Current Replacement Cost.

Reserve Fund Strength – Percent Funded

The current status of an association’s Reserve Fund is represented in terms of Percent Funded, and reveals how well past and current homeowners have budgeted for the repair and replacement of an association’s commonly shared assets.

An underfunded Reserve Fund indicates a higher likelihood of  an eminent Special Assessment and increased HOA contribution levels. A strong Reserve Fund Strength means that the association is in strong fiscal standing, and unlikely to encounter cash flow deficiencies.

Recommend Funding Plan

All Reserve Studies come with a recommended funding plan for the association to follow in upcoming years. The Funding Plan is based off of the prior two results, and recommends adequate monthly, quarterly or yearly Reserve Contributions.

Reserve Studies prepared by Association Reserves and DIYReserveStudy.com include a detailed 30-Year Funding Plan for your association. Our Funding Plans avoid Special Assessments when possible, account for both interest and inflation, and have a Full Funding Objective.

So what is a Reserve Study? We believe it is an essential, helpful long term budgeting tool for associations, that should be updated and reviewed by the board annually.

Order your DIY Reserve Study Kit today!

Frequently Asked Questions About the DIY Reserve Study Kit

Though we here at Association Reserves, Inc. introduced the concept of the DIY Reserve Study several years ago, DIYReserveStudy.com launched this year and is just now finally popularizing this low-cost, effective Reserve Study solution.
Since launching, we have received a significant number of inquiries about the DIY Reserve Study Kit. Today, I want to address some of the most common questions people have been asking.
1. How does the Kit work?
The process is rather simple. After you purchase the kit, you build your association’s Component List using the instructional materials we provide. Once complete, submit the information to us & receive your report within just 1 week. This is the fastest turnaround in the industry.
2. Can the Kit be used to create a Reserve Study from Scratch?
Yes! The Kit is a great solution for associations who have previously been unable to afford to hire a full-service Reserve Study provider. The Free Instruction Booklet details how to build your association’s Component List from scratch, in accordance with National Reserve Study Standards.

3. Who will process my information, and create the Reserve Study report?

DIYReserveStudy.com is an Association Reserves company, and shares the same staff of over 21 certified Reserve Study Specialists. After receiving your association’s information, your report will be assigned to one of our skilled Project Managers. They will work with your data you provide to craft the Reserve Study report.

4. How does the Kit differ from an Update No-Site-Visit Reserve Study?

The primary differences between the DIY Reserve Study Kit and an Update No-Site-Visit Reserve Study are: 1) Who updates the Component List & 2) Price ($499 vs. $500+). Additionally, certain Reserve Study providers such as Associations Reserves, offer 1 free revision to the report at the No-Site-Visit service level. For more information, check out our detailed comparison table.

5. Shouldn’t we instead hire a professional to craft our Component List?

Perhaps. The answer depends on your association, its complexity, the opinions of the board members and your confidence in constructing a Component List.

Simple associations with only a few common area assets often do not need a professional’s help. Large, complex associations with an on-site staff who meticulously inspect & track the condition of common area assets, are also unlikely to need a Reserve professional to inspect & draft another inventory of the assets.
If you think your association may need the help of professionals, Request a Proposal from Association Reserves now!

Do-It-Yourself Reserve Study Promo Video

DIYReserveStudy.com launched this past Wednesday and is off to a promising start!

For more information, please watch the above promotional video that we shot for the new website just last week! A transcript to the video has been provided below.

In it, the founder of Association Reserves, Inc. Robert Nordlund, PE, RS, proudly announces the launch of this new, cost-effective Reserve Study solution. Robert also highlights the site’s key features and explains the Do-It-Yourself Reserve Study process: clients purchase the kit, build and submit a Component List, and are sent their completed DIY Reserve Study within one week.

After watching, please tell us what you think of the new site: comment below!

For even more information, visit the site’s All You Need to Know page.

Video Transcript

My name is Robert Nordlund, and I’ve been working in the Community Association Industry for over 25 years.
We know, based on the 30,000 Reserve Studies that we’ve prepared, that a whooping 70% of the associations in the United States are underfunded. <www.reservestudy.com/a-whopping-70-of-association-governed-communities-are-underfunded>
Underfunding Reserves not only puts your organization at an increased risk of unfair Special Assessments, it introduces a number of other concerns.
The path from underfunded to appropriately funded, is a journey, and a Reserve Study is your roadmap. But not all associations can afford the cost of a professionally prepared study.
Welcome to DIYReserveStudy.com.
Our new website is dedicated to a low cost, do it yourself solution for cost-concious, enterprising boardmembers and managers, just like you.
You can use this tool to create a Reserve Study for the first time, or update an existing Reserve Study.
Simply purchase the DIY Reserve Study Kit online, build and submit your association’s Component List, and receive your custom Reserve Study Report within 1 week. It’s that easy.
So how is this possible?
We’ll take the Component List that you provide us, and use our staff of Certified Reserve Specialists to calculate your Reserve Fund Strength, craft a Custom Funding Plan and publish a professional report.
If you are creating a Reserve Study for the first time, the Kit’s Instruction Booklet, which available for free download on the site, teaches you how to build a Component List according to National Reserve Study Standards. Otherwise, it’s just a matter of updating your existing Reserve Component List.
With one flat price for all clients and secure online billing, there’s no need to request a proposal.
Isn’t it time to start your association on a journey towards responsible Reserve Budgeting?
Order your DIY Reserve Study Kit today!