Making Sense of Your HOA Reserve Study

You joined the HOA board to make a difference, and that’s great! You also joined to have some fun. And that reserve study doesn’t look like fun.

It’s complicated, but the reserve study is nothing to fear. It’s also not something to avoid. It’s an important financial planning tool for your HOA and shared property.

We see you glaring at us as a 40-60 page document lands on your desk. Do you really need to read it? Yes, you do. Let’s get started!

Start with the Component Report

While not usually the first section of the reserve study, this is the section to read first. The component report is where you’ll find information on community assets and their condition.

The component report looks at assets over a 30-year time frame. It tells you the expected lifespan for assets like furnaces and roofs. It also gives you estimated replacement costs.

Dive into Percent Funded

Once you understand the community assets, you’re in a better position to understand the percent funded portion. This tells you the HOA’s cash reserves, and how they compare to the ideal.

Remember that the percent funded is a dynamic number. Reserve studies should be redone regularly. In general, your HOA should aim for 70% funded or higher. Look at both current and projected funding.

Using Your Reserve Study

After reading the reserve study, read it again. Don’t expect to absorb it all at once. Ask questions, and never be afraid to speak up if something doesn’t make sense.

The reserve study is a roadmap for your HOA. It guides dues and fees and helps avoid special assessments. Use it to plan funding strategies and prepare for inevitable maintenance costs.

It isn’t glamorous, but reading, understanding, and using a reserve study is well within your grasp as an HOA board member.

If you find yourself struggling to understand or make sense of your reserve study, talk with us! Homey simplifies your reserve study by importing the data into an interactive, graphical, financial-modeling tool. Want to try it out? Talk with us to learn how Homey can bring your reserve study to life.