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Subject: Reserve Study - DIY or hire a professional
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KP1
(Colorado)

Posts:73


11/20/2019 12:42 PM  
I saw an older post about this from 5 years ago but decide to start a new one.

I am on our Board and we are discussing the need for a Reserve Study. We are small, 14 units, no amenities - just parking, garages and units/property. We have never had a reserve study done - we were built in 1985. Colorado does not require them for HOA's (yet).

Please help me with the pros and cons of hiring a professional vs. DIY by the Board. As usual it comes down to time or money. I also truly wonder what kind of time commitment this is to get a finished product completed - how many hours a month, say to reach a deadline of 6 months for completion.

Also - if any have hired a service recently - if comparable to our HOA size - what was the cost of the Level One reserve study?

Any help or guidance is appreciated.

Thanks,

KP
MarkW18
(Florida)

Posts:254


11/20/2019 12:47 PM  
I would always recommend that a professional handle the initial study. After that and depending on the complexity and state requirements, I could see a HOA manage it from there on out.
GeorgeS21
(Florida)

Posts:1469


11/20/2019 1:02 PM  
I agree with Mark.

In addition to engineering qualifications and assessment, most Reserve Studies include a recommended assessments schedule.

If nothing major occurs, and the assessment schedule is solid, then a small association such as yours can probably skip 5 years, maybe even 10 ... as long nothing affects the basis.
CathyA3
(Ohio)

Posts:526


11/20/2019 2:04 PM  
I agree with both Mark and George.

One comment: a lot will depend on the level of knowledge and skills possessed by your board members. Reserve studies are basically educated guesses, but with the emphasis on "educated". I suggest finding educational materials on the web and seeing if you think it's something your board can tackle successfully. Another advantage to having professionals do it is that people are less likely to disregard or argue with professional opinions that they've paid good money for. You don't want to devote a lot of time to doing a study, only to have spendthrift boards ignore it so that they can spend freely.
GenoS
(Florida)

Posts:3362


11/20/2019 2:43 PM  
I agree with Mark and George and Cathy. You're small enough that it shouldn't cost a fortune. As for timeframes, I've seen literature recently from several reserve study firms and they all say you should allow 3 months for it to be completed once you've signed the contract.
KP1
(Colorado)

Posts:73


11/20/2019 3:28 PM  
Thanks for the feedback folks.

I have read that as well about the time frame for the hired pro - which kind of indicates to me the amount of time required to put all the components together - both long term maintenance and long term finances.

For those who did their own Level One Study thru committee or Board- what kind of time commitment and deadline did you invest in?

Colorado had an odd approach - no reserve study is required BUT once one has been done it then becomes mandatory to do follow ups every 3 years. But i don not think it's mandatory to hire a professional. So Board could potentially do the follow ups internally, I believe.

Kyle
KP1
(Colorado)

Posts:73


11/20/2019 3:28 PM  
Thanks for the feedback folks.

I have read that as well about the time frame for the hired pro - which kind of indicates to me the amount of time required to put all the components together - both long term maintenance and long term finances.

For those who did their own Level One Study thru committee or Board- what kind of time commitment and deadline did you invest in?

Colorado had an odd approach - no reserve study is required BUT once one has been done it then becomes mandatory to do follow ups every 3 years. But i don not think it's mandatory to hire a professional. So Board could potentially do the follow ups internally, I believe.

Kyle
SteveM9
(Massachusetts)

Posts:3412


11/21/2019 7:26 AM  
not a bad idea to do 1 professional reserve study. since your all volunteers and professionals there may be many items missed. once a professional reserve study is done, it will be easy to update.
NpS
(Pennsylvania)

Posts:3910


11/21/2019 8:43 AM  
As you consider which way to go, maybe my stats can help you assess your needs.

We are a townhouse community with no amenities. Our HOA is not responsible for roofs, driveways, or siding. Our HOA is responsible for exterior painting of homes. I know that some HOAs fund painting through reserves - We don't.

We have 2 water meters for the entire community - one for domestic use and one for fire hydrants. We own our own streets, and consequently we are responsible for curbs and storm water systems. We do not have sidewalks.

Here's a list of the components on our reserve study:
- Asphalt paving
- Curbing
- Entrance Sign
- Street Signs
- Storm/Sewer System
- Storm Water Basins
- Street Lights
- Water Mains & Pits

Our property is around 17 Acres.

For us, the big expenditures are the first and last items on the list.

We spend $2-3k for a reserve update every 5-6 years.






Sikubali jukumu. Read all posts at your own risk.
MarkW18
(Florida)

Posts:254


11/21/2019 8:57 AM  
We had a professional study done by the developer at the community's inception. It was maintained afterwards by the association, more specifically a Finance Committee.

Our stats included:

80+ acres
12 private streets
street maintenance including asphalt replacement
repair of sewer system
outside fire break system
4 entry and exit points with 10 gates and 10 gate operators
pool and spa parks, and extensive landscaping
sophisticated irrigation control system
fencing

$1M annual budget
$2M fully funded reserve

An excel spreadsheet works very nicely that also handles reserve account investment strategies.
JohnC46
(South Carolina)

Posts:8867


11/21/2019 1:07 PM  
We are an HOA of small patio homes. 40 duplexes (adjoining side, one story), 32 singles (one and two story) for a total or 112 owners. We have no amenities. Our streets are public (but we are a dead end neighborhood), and we are on city water and sewage. We have a $94K per year budget, if all pay on time......LOL

Now the bad/tricky part. The HOA is responsible for all outside landscaping, home shell maintenance (roofing and house exterior), some fence repair (each house has a small, privacy fenced backyard), and sprinkler repairs.

We did not need a paid for reserve study as the builder left us with a shell of a one. We estimate we will need to re-roof beginning in 2027 and extending over a 7 year period at a total cost of about $600K. We had this verified by a local roofing company.

We estimate we will have to start replacing siding (brick and vinyl) in about 2035 (7 year project) at a cost of about $250K. We had this verified by a local siding company.

Sprinkler repairs are ongoing and running about $2500 per year and we have budgeted for it.

Fences (wooden, 6ft, shadowbox) we estimate are good for another 15 years before we must replace. The HOA is only responsible for any side of your fence that faces common ground which is typically on the rear section. Owners are jointly responsible for replacing sides they share with next door neighbors. We have estimates of $450 per side, This will be a 7 year project and cost the HOA about $60K.

We have fountain in our retention pond and so far it seems it needs to be replaced every 5 years at a cost of about $3K. We cover this under landscape repairs. This item was not in the study.

I am posting this to show we did not need a professional study but had we not been left with a shell of one, we would have needed at least one professional study to get us on track. Thus my bottom line recommendation is most HOA's will need an initial study done by a professional.
TimM11


Posts:323


11/21/2019 1:13 PM  
I think it would be a very good idea to have a professional study done since your HOA has not had one performed before. Down the line, you can look at whether or not it needs to be done again, but at least this way you have the foundation. We had one done in our HOA for the first time in its 25 years of existence, and we learned a lot, including things that we probably wouldn't have considered if left to our own devices.
KP1
(Colorado)

Posts:73


11/22/2019 4:44 PM  
Anybody else have advice or experience to share about this?

Is there anyone who thinks a Reserve Study, either DIY or Hired out is not needed or a good idea?

Trying to get as much feedback as possible and present it to the Board. I really appreciate those who have responded - your info is valuable and appreciated.

Kyle
GeorgeS21
(Florida)

Posts:1469


11/22/2019 5:29 PM  
A RS by a qualified, licensed company/individual ensures you have the facts when the arguing starts.

If you have no arguing after the study is introduced .... means the facts have spoken.
NpS
(Pennsylvania)

Posts:3910


11/22/2019 9:02 PM  
Posted By KP1 on 11/22/2019 4:44 PM
Anybody else have advice or experience to share about this?

Is there anyone who thinks a Reserve Study, either DIY or Hired out is not needed or a good idea?

Trying to get as much feedback as possible and present it to the Board. I really appreciate those who have responded - your info is valuable and appreciated.

Kyle


At the end of the day, you are likely to find that your reserves are underfunded, especially if this is your first reserve study. Someone is going to have to tell the folks in the hood that fees are going up.

If you use an outside professional, no one can point at the BOD members and say that - you don't know what you're doing - you've inflated the figures - you never liked me - etc.

If it's a DIY reserve study, you run the risk of intentionally or unintentionally understating the amount needed because your BOD doesn't want to raise fees more than X%. The truth is that you are not neutral and you are likely to get push-back regardless of the quality of the study. The last thing you want is a reserve study that people don't trust.




Sikubali jukumu. Read all posts at your own risk.
GenoS
(Florida)

Posts:3362


11/22/2019 9:19 PM  
Posted By KP1 on 11/22/2019 4:44 PM
Anybody else have advice or experience to share about this?

Is there anyone who thinks a Reserve Study, either DIY or Hired out is not needed or a good idea?

Trying to get as much feedback as possible and present it to the Board. I really appreciate those who have responded - your info is valuable and appreciated.

We've never had a reserve study done. When I moved in and asked about it some years ago, I was told by a board member, "We don't need one. We can do it ourselves." Followed up by 4 years of not doing one.

Earlier this year myself and a few like-minded homeowners began beating the drum (gentle persuasion more like it) for a professional reserve study. A majority of the board was initially in favor of having one done, only to change their minds when there was not money in the 2019 budget to do one. The thinking was we'd put money into next year's budget and have one done in 2020. When budget time came around, a majority of the board told the RS advocacy group that they were against it because they had heard (from sources unknown) that a Reserve Study was likely to identify components of the common property that we needed to reserve for above and beyond the list of reserve components we currently have in place. They were afraid that adding components to the reserves would result in higher assessments. They don't plan on living here in another 5 or 10 years so they're not going to go down that road.

Unfortunately, Florida is not a state that requires Reserve Studies, so we're stuck until we get a better board that will vote to have a Reserve Study done.

So there are a couple of examples about boards who thought both that it wasn't needed and then, a couple of years later, that it wasn't a good idea.
GeorgeS21
(Florida)

Posts:1469


11/23/2019 5:15 AM  
Geno,

Is your association one of those covered by FS 720 that requires a note be in the annual financial statement, per the below?

While not specifically addressing a requirement for a reserve study, it does address the requirement to have reserve accounts/funding ... or, one of the statements shown - so that everyone knows the community is likely not funded appropriately.

(c)1. If the budget of the association does not provide for reserve accounts pursuant to paragraph (d) and the association is responsible for the repair and maintenance of capital improvements that may result in a special assessment if reserves are not provided, each financial report for the preceding fiscal year required by subsection (7) must contain the following statement in conspicuous type:
THE BUDGET OF THE ASSOCIATION DOES NOT PROVIDE FOR RESERVE ACCOUNTS FOR CAPITAL EXPENDITURES AND DEFERRED MAINTENANCE THAT MAY RESULT IN SPECIAL ASSESSMENTS. OWNERS MAY ELECT TO PROVIDE FOR RESERVE ACCOUNTS PURSUANT TO SECTION 720.303(6), FLORIDA STATUTES, UPON OBTAINING THE APPROVAL OF A MAJORITY OF THE TOTAL VOTING INTERESTS OF THE ASSOCIATION BY VOTE OF THE MEMBERS AT A MEETING OR BY WRITTEN CONSENT.
2. If the budget of the association does provide for funding accounts for deferred expenditures, including, but not limited to, funds for capital expenditures and deferred maintenance, but such accounts are not created or established pursuant to paragraph (d), each financial report for the preceding fiscal year required under subsection (7) must also contain the following statement in conspicuous type:
THE BUDGET OF THE ASSOCIATION PROVIDES FOR LIMITED VOLUNTARY DEFERRED EXPENDITURE ACCOUNTS, INCLUDING CAPITAL EXPENDITURES AND DEFERRED MAINTENANCE, SUBJECT TO LIMITS ON FUNDING CONTAINED IN OUR GOVERNING DOCUMENTS. BECAUSE THE OWNERS HAVE NOT ELECTED TO PROVIDE FOR RESERVE ACCOUNTS PURSUANT TO SECTION 720.303(6), FLORIDA STATUTES, THESE FUNDS ARE NOT SUBJECT TO THE RESTRICTIONS ON USE OF SUCH FUNDS SET FORTH IN THAT STATUTE, NOR ARE RESERVES CALCULATED IN ACCORDANCE WITH THAT STATUTE.

Quoting all of this in case others are in Florida 720 covered neighborhoods and don’t realize the requirement.
GenoS
(Florida)

Posts:3362


11/23/2019 10:39 AM  
I think so, George, but my HOA's annual financial report has never had that language.
GeorgeS21
(Florida)

Posts:1469


11/23/2019 12:00 PM  
I think the core issue is that FS 720 requires reserve accounts and a reserve allocation process, but not a reserve study?

Not sure if FS718 has same language.
KP1
(Colorado)

Posts:73


11/23/2019 2:10 PM  
Some really great points made.

I really like the idea of disclosure of sorts to the homeowners and potential buyers about our HOA's financial and reserve status. I think that helps everyone have a clear picture and the info they need - I'll bet savvy buyers pay attention to HOA Reserve funds or savvy Real Estate agents might point them out as well as something to be concerned about.

As mentioned before Colorado has no Statute requiring Reserve Studies be done. HOA's do have to have a policy about Reserves and funding which we do. Ours basically says we have never had or desire to have a Reserve Study, we are not required to have a Reserve Study, but Board can consider one - hired or internal and that can be done without any financial analysis. Board can fund the HOA from monthly assessments and Reserves and should we need more funding - Special Assessments or bank loan can be done.

I am reading that 30 states now have some type of legislation about Reserve Studies and also financial disclosures - that's a good thing I think - to protect homeowners. Also reading FHA loan officers are starting to inquire about reserve funding as well - for buyers they maybe working with.

Here's another question - has anyone who does the Reserve Study consistently and worked to correct funding issues still needed to do a special assessment for something that was overlooked in the study?


KP1
(Colorado)

Posts:73


11/23/2019 2:10 PM  
Some really great points made.

I really like the idea of disclosure of sorts to the homeowners and potential buyers about our HOA's financial and reserve status. I think that helps everyone have a clear picture and the info they need - I'll bet savvy buyers pay attention to HOA Reserve funds or savvy Real Estate agents might point them out as well as something to be concerned about.

As mentioned before Colorado has no Statute requiring Reserve Studies be done. HOA's do have to have a policy about Reserves and funding which we do. Ours basically says we have never had or desire to have a Reserve Study, we are not required to have a Reserve Study, but Board can consider one - hired or internal and that can be done without any financial analysis. Board can fund the HOA from monthly assessments and Reserves and should we need more funding - Special Assessments or bank loan can be done.

I am reading that 30 states now have some type of legislation about Reserve Studies and also financial disclosures - that's a good thing I think - to protect homeowners. Also reading FHA loan officers are starting to inquire about reserve funding as well - for buyers they maybe working with.

Here's another question - has anyone who does the Reserve Study consistently and worked to correct funding issues still needed to do a special assessment for something that was overlooked in the study?


KP1
(Colorado)

Posts:73


11/23/2019 2:10 PM  
Some really great points made.

I really like the idea of disclosure of sorts to the homeowners and potential buyers about our HOA's financial and reserve status. I think that helps everyone have a clear picture and the info they need - I'll bet savvy buyers pay attention to HOA Reserve funds or savvy Real Estate agents might point them out as well as something to be concerned about.

As mentioned before Colorado has no Statute requiring Reserve Studies be done. HOA's do have to have a policy about Reserves and funding which we do. Ours basically says we have never had or desire to have a Reserve Study, we are not required to have a Reserve Study, but Board can consider one - hired or internal and that can be done without any financial analysis. Board can fund the HOA from monthly assessments and Reserves and should we need more funding - Special Assessments or bank loan can be done.

I am reading that 30 states now have some type of legislation about Reserve Studies and also financial disclosures - that's a good thing I think - to protect homeowners. Also reading FHA loan officers are starting to inquire about reserve funding as well - for buyers they maybe working with.

Here's another question - has anyone who does the Reserve Study consistently and worked to correct funding issues still needed to do a special assessment for something that was overlooked in the study?


MarkW18
(Florida)

Posts:254


11/23/2019 3:01 PM  
Posted By KP1 on 11/23/2019 2:10 PM
Some really great points made.

I really like the idea of disclosure of sorts to the homeowners and potential buyers about our HOA's financial and reserve status. I think that helps everyone have a clear picture and the info they need - I'll bet savvy buyers pay attention to HOA Reserve funds or savvy Real Estate agents might point them out as well as something to be concerned about.

As mentioned before Colorado has no Statute requiring Reserve Studies be done. HOA's do have to have a policy about Reserves and funding which we do. Ours basically says we have never had or desire to have a Reserve Study, we are not required to have a Reserve Study, but Board can consider one - hired or internal and that can be done without any financial analysis. Board can fund the HOA from monthly assessments and Reserves and should we need more funding - Special Assessments or bank loan can be done.

I am reading that 30 states now have some type of legislation about Reserve Studies and also financial disclosures - that's a good thing I think - to protect homeowners. Also reading FHA loan officers are starting to inquire about reserve funding as well - for buyers they maybe working with.

Here's another question - has anyone who does the Reserve Study consistently and worked to correct funding issues still needed to do a special assessment for something that was overlooked in the study?





You might want to run that by Melissa to see if she feels the same as you?
KP1
(Colorado)

Posts:73


11/23/2019 3:50 PM  
wow - how did that triple posting by me happen? Sorry about that. I have no idea what I did.
MarkW18
(Florida)

Posts:254


11/23/2019 3:57 PM  
You hit submit three times. Sometimes it takes time for the message to post because of connection speeds.
EdC5
(Florida)

Posts:114


11/24/2019 5:12 AM  
Posted By GeorgeS21 on 11/23/2019 12:00 PM
I think the core issue is that FS 720 requires reserve accounts and a reserve allocation process, but not a reserve study?

Not sure if FS718 has same language.




Chapt 718 doesn't since it mandates reserves (as does Chapt 719 for coops).

Edward J Cooke, CMCA, LCAM
EdC5
(Florida)

Posts:114


11/24/2019 5:28 AM  
I wish this bloody thing had an edit feature.

Chapts. 718 & 719 require reserves for associations (These accounts must include, but are not limited to, roof replacement, building painting, and pavement resurfacing, regardless of the amount of deferred maintenance expense or replacement cost, and any other item that has a deferred maintenance expense or replacement cost that exceeds $10,000.), -- quoted directly from statute.

Chapt. 720 doesn't have the requirement for reserves, but does state that if reserves are established then the same statutory restrictions for condo and coop reserves apply the HOA.

Edward J Cooke, CMCA, LCAM
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