Reserve Analysis

Alex,

As an example of something to compare to, my HOA upon our "turnover", decided to have an engineering study done in order to have a good grasp on where we were with setting up the Reserve funds. I realize that your HOA is not like mine was, but just to kick this into the pot, we spent $25,000 for the study. It was well spent because we had a couple of hugely expensive infrastructure items that the Developer needed to fix or else we would not sign off on his bond money being held.

Based on that, we then knew about how much to Reserve. Now, if I remember right, you are either manufactured or mobile homes? Your Reserve Funds should be allocated for major items like buildings, roads, pools, sewers or irrigation and infrastructure items. The Reserves do not cover chairs, grills and all of what are known as "disposable items"

So if you want to spend more money, then you do need a certified inspector to look at the items in person. The Reserve fund money that you spent already seems excessive. Maybe they can apply that charge towards a full inspection.

DonnaS - Maybe your study didn't include chairs, however mine does, as well as clubhouse furniture, etc. Anything the association is to replace has a life-span, the estimated unit cost of measure of which can be calculated and funded for over time.

DonnaS - I was just trying to point out that pool furniture can be in the reserve analysis because that is where all the elements the association must maintain are calculated (cost, life-span). I guess the Board can then make a decision to fund the replacement cost through another line item in the budget. Either way, it's good to know how much something cost, estimate how much it will cost, and fund for that replacement over time.

Yes, Alex, the computer would do it. Item, cost of new item, item's life, item's remaining life. Put it into a chart and you will come up with lots of reserve category "items", and an annual amount needed per year for X years until the item needs to be replaced.

The 10 questions probably involve a lot or pre-research on YOUR part. The info is fed into the computer program, and out spits a chart.

You will have the "basics" for a reserve fund plan.

Do some more research on companies or individuals who do reserve fund studies.

Since it has not yet been suggested, let me recommend a visit to the following web site:

Association of Professional Reserve Analysts (APRA)

http://www.apra-usa.com/

Are you familiar with a "transition study." I have not had any experience with a homeowners association or developer that has conducted one.

Susan,

I wonder if George means what we packaged as an "engineering study" which encased all and any of the infrastructure of the developement including a financial and document scrutney.

AlexL1
Sorry for entering this discussion a bit late but I hope what I can contribute may help. Your first posting expressed concern, and rightly so, about the casual way some planners were conducting reserve studies. “At arms length” I guess we’d call it!

But if I had to separate a reserve study into its parts, I’d come up with two. One would indeed be the part that estimated the costs and timing related to future repairs and expenditures. A good professional planner will visit the site — and that’s NOT an option — inspect the property thoroughly, and arrive at a table of figures. But a Reserve Planner is not the only one that can do this. Any qualified buildings consultant or engineer can do it.

The second part would be putting these numbers together with a funding plan and, at the same time, introducing calculations for earned interest on the balances and for inflation. This can be done by anyone who understands the “model” (mathematics) but there is software that will handle this part very well and very easily.

If you were interested, please contact me and I’ll send you a new paper we’ve prepared called “Creating a Reserve Plan from Scratch”.