Reserve studies are a critical review of a buildings components and an analysis of the necessary capital reserves that will be necessary to maintain the building in satisfactory condition. It is the art and science of anticipating and preparing for major common area repair and replacement costs.
Here’s another little secret about lots of reserve studies. Many folks performing them don’t necessarily understand buildings, have no experience in construction, and don’t know how the components of the building interrelate and work in real life.
Like Home Inspection Reports, there are a multitude of Reserve Study Software packages. The individual performing the reserve study punches in the components of a property, and a generic report is generated.
The problem is, buildings age and wear in different ways depending on a very wide set of variables. With generic software reports, the home owner’s association might find themselves paying for components that don’t necessarily need repair or replacement.
There are two components to any Reserve Study, the Property Condition Report and the Financial Analysis. The PCR includes a component inventory, condition assessment, and a life expectancy projection for each major building component. The Financial analysis figures out how to structure finances to accommodate necessary repairs and maintenance.
To prepare a customized reserve study, I will conduct an initial information gathering inspection with the Board of Directors, HOA members, or both. This is important to secure important background information on the property. It’s also an opportunity for any HOA member to describe specific problems they are experiencing.
After the initial meeting, I develop the PCR, and then determine what components will need repair or replacement on 5, 10, and 15 year projections. Some associations need longer projections, which I can advise on when I see the property. Some buildings need to be looking out as much as 30 years; if necessary, I develop a report that reflects those needs.
I am able to provide accurate projections of costs for buildings from my 20+ years experience of inspecting and working on them.
The finished report includes the narrative PCR, a Photolog of pictures summarizing my findings, and then a financial analysis of estimated costs and a reserve funding plan to accommodate them.