RealManage Insight

How Can a Reserve Study Benefit Your Community?

by Staff Writer on Nov 6, 2014 9:18:24 AM

Financial advisors to HOA communities recommend that their clients perform a reserve study at least once annually to ensure that the reserve fund is properly funded. In many cases, HOA board members may not have the training and experience to properly perform a financial reserve study. Consequently, many communities choose to outsource the reserve planning process to an HOA management provider that offers comprehensive financial services for planned communities.

Benefits of a Reserve Study

Reserve studies are primarily performed to ensure that the reserve fund contains enough capital to afford sudden, unexpected expenses, such as storm damage repair; and to pay for planned expenses, such as replacing water boilers in common buildings. However, a reserve study can do more than simply precipitate a new reserve account funding plan. It also provides administrators of communities with options for simplifying financial management, such as:

  1. Allowing treasurers to refer to the reserve plan to evaluate planned expenses
  2. Helping community leaders communicate the specifics of upcoming expenses
  3. Assisting treasurers and managers with planning for next year’s reserve contributions
  4. Helping the board understand the need and nature of specific expenditures
  5. Expediting the performance of annual expense audits by financial management professionals
  6. Helping community leaders keep residents informed about upcoming expenditures

Some communities choose to fund the reserve fund without the assistance of an HOA management provider that offers financial services. This is generally not recommended, as the community may become underfunded or may overfund the reserve account due to a vague idea of what expenses are in the offing. A provider of HOA management services will help your community develop reserve funding plans that apply to the specific financial needs of the neighborhood.

Have a Reserve Study Performed

Near the end of the year is a perfect time to have a financial reserve study performed. Professional financial planners can review reserve fund expenses for the past year and extrapolate the information to help develop the best funding plan for the coming year. If your community has not had a reserve study performed recently, now is the time to do it. For more information about reserve planning, contact an HOA management company in your area today.

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