A reserve study, or reserve report, investigates the infrastructure of the HOA and assesses its expected life as well as replacement cost. This enables HOAs to attempt to fund these costs in a planned and orderly manner, rather than through special assessments. While the timing of emergency repairs/replacement can not be predicted, a well-funded reserve should enable most issues to be addressed without scrambling to raise funds from owners.
The types of items covered in a reserve study depends upon the nature of the community; if it’s an HOA there will be common roads, gates, potentially a clubhouse, tennis court or pool. If you live in a townhouse it could also include the common roof. In a condo, items such as elevators, siding and windows could be included.
The cost of having a reserve study completed can run from a few hundred dollars to several thousand. The study should be renewed every few years as assets’ useful life is reduced. A physical review of all common assets is followed by financial modeling to estimate the schedule for replacement and associated cost.
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