Categories: Business & Finance

How Can Capital Reserve Study Help Your Organization?

June 20, 2016

Any homeowners association wants to stay on top of its budget. You do not want to be taken unawares by unexpected expenditure on repairs and maintenance. Whether you are managing a condominium, you are a homeowner or a part of the community association, here’s how a reserve study can benefit your organization.

What Does Reserve Study Mean?

In a capital reserve study, the physical components and reserve funds of property are evaluated and analyzed in detail. A long-term plan is drawn up after thoroughly inspecting the site. It spells out how to handle daily maintenance while keeping aside enough to pay for major repairs and replacements to the common areas.

What Does It Comprise Of?

A reserve study usually happens in 2 parts – a physical and financial analysis. In the first part, the actual common property is studied, and inventory with the status of each component’s condition is made. Estimates are given for the value and life of each. In the second part, the current funds are studied, and a plan for funding in the future is recommended.

Quite a few reserve study providers have special software which can draw up different scenarios and help you see what effect each has on your fund status. Here are a few advantages of a reserve study:

1. You Get Custom Engineering Help

Trained engineers check your property and equipment. They list the problems and give you realistic estimates of how long you can expect each component to last. Also, they suggest how their lives can be extended with proper care and maintenance.

2. The Cost Estimates Are As Accurate As Can Be

An estimate can be precise only up to an extent. It’s worth it to get that full extent, though. In a capital reserve study, the provider will use his own knowledge and data about local contractors, material costs and historical information to give you estimates about how much replacement or repairs will cost in the future.

3. Your Property Looks Good And Maintains Its Value

Your property is your investment. You always want your investments to appreciate and for that the common areas also need to be looked after. If you budget for future enhancements, you ensure that the common areas look well-maintained and striking. This significantly ups the living quality quotient of your area.

4. The Budget And Financial Plan Are In Place

You keep aside enough for contingencies and unexpected repairs. You know what expenditure to expect and at what time. It’s the soundest way to ensure your association and area flourish.

5. Compliance

Plenty of states require organizations to gather reserves, disclose them and get professional capital reserve studies carried out.  If your state does not yet require it, it’s still best to do it, rather than start scrambling when it becomes a law.

With all these advantages it’s apparent that a reserve study can go a long way in making your community a thriving and attractive option for home buyers. At the same time, it keeps residents happy and involves everyone in making the area a better place to live in.

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