Most people who live in condominiums or upscale apartments and rental communities are familiar with their homeowners’ association. Likewise, these tenants and association members are likely already familiar with the reserve funds that keep these associations working. These funds also help address maintenance, regular aesthetic upkeep, disaster response, and much more.

But how can your association be sure that you’re taking in enough to keep this fund in good financial shape? How much is enough, and how much should you be taking in regularly to keep this amount on hand? Here’s what your condo association or HOA needs to know about reserve studies to make the best use of them and keep your funds in solid shape:

What are Reserve Studies?

Reserve studies for condominiums and other rental properties are assessments that evaluate how much your current reserve fund contains, as well as how adequately that amount can or will meet your association’s future needs. Some examples of fund usage that these evaluations can assess include:

• The current amount of funds readily available to an HOA.
• The past and current fundraising efforts and their efficacy.
• The regular financial demands of the organization.
• Projected expenses to the organization for things like regular maintenance.
• Potential expenses for otherwise unforeseen expenses, such as recovery from weather events.

Why is all of this so important? It’s because evaluating the current financial state of affairs of the association will help to ensure that fundraising efforts are retooled as needed to meet future demands. If the assessment finds that enough money is not being brought in, fundraising efforts should be reevaluated and changed as necessary. Spending can also be reevaluated, as can investments to improvements to the condominiums or surrounding properties which might make ongoing upkeep costs lower.

Do You Need a Reserve Study?

When was the last time your condominium or rental property had one of these assessments? For many associations, the answer is unclear. Most have these evaluations at their onset to plan for their future, but far fewer have them regularly. While you don’t have to invest in a full reserve study – the most thorough and most expensive variety – regularly, it is important to have the financial stability of your organization at the forefront of your group’s minds.

There are plenty of less expensive, albeit less thorough options for regular evaluation. These include:

• No site visit studies. As the name implies, these assessments involve evaluation of information only, rather than a site visit.
• Site visit studies – These studies are more thorough in that they do involve a site visit, but they only involve the assessment of the common elements in areas of the property. Still, many HOA members feel better about the results of their studies after having a site visit.

Which should your HOA choose? It really depends on your group’s needs. Do you need a major overhaul? You might be best suited by a full reserve study, which involves an examination of documentation as well as the property itself. Is your group on a budget? A less expensive, less thorough study might be just what you need. Either way, taking the time to reassess your organization's spending, fundraising, and financial health is never a wasted effort.