The goal of any association budget is to properly identify their annual operating costs and their long-term capital reserve item portion contributions. Associations are pretty good at budgeting their annual operating costs, but sometimes not as good when it comes to budgeting the reserve portion. With reserves, not funding enough money will not have a […]
Reserve Funds: Expectations versus Reality
Most associations know that it is important to adequately fund their reserve items. However, the reality of actually doing it is a different matter. It takes time, effort, and political capital to properly fund reserves. Reserve schedules should be examined every year and not left on a shelf to collect dust. The political capital comes […]
5 Ways to Turn Around Your Reserve Fund Situation
It is common for associations to be a couple decades old and to never have had a reserve study performed. In fact, we hear that quite a bit. It is likely that if your association has never had a reserve study that they are not funding enough in reserves or are issuing special assessments to […]
How Does Our Reserve Fund Compare to Other Associations?
Reserve funding for associations varies widely based on the size of the association, number of reserve components, and cost of the reserve components. So comparing the annual funding amount of one association to another is an apples-to-oranges comparison. The best comparison, however, would be to compare the percent funded of associations. Percent funded essentially measures […]
Fannie Mae Reserve Funding Requirements
The Federal National Mortgage Association (“Fannie Mae” or “FNMA”) is a government-sponsored enterprise that along with Freddie Mac is the largest holder of residential mortgages in the United States. Increasingly, Fannie Mae is asking to see reserve studies for homeowner associations (HOA’s) and condominiums. Their reason for asking for this analysis of the community’s reserves […]
Understanding Percent Funded of Reserves
One key feature that a reserve study should indicate is how well funded an association is. The way that is measured is by a term called percent funded. In Layman’s terms, percent funded means how much money you have in reserves versus how much money you should have in reserves. The Community Associations Institute defines […]
Five Myths of Reserve Studies
Reserve studies are an essential part of property management, especially for larger community associations. Many communities get them performed and rely on them for the long-term planning part of their budget. Nevertheless, some communities are reluctant to have one done. The following are five myths regarding reserve studies. Myth 1: Reserve studies are too expensive […]
FHA Reserve Funding Requirements
FHA financing is a popular choice to finance single family homes or condominium units. FHA loans require only a 3.5% down payment minimum on purchases by the buyer, making it the most affordable option for many families. FHA Condominium Project Guidelines Due to the small down payment amount, many condominium projects are interested in obtaining […]
Why Some Owners Don’t Want to Properly Fund Reserves
Reserves can be the most challenging part of the budget to board members. It is essentially setting money aside that will not be used right away or even for many years in some cases. Additionally, it can be difficult to determine how long something will last and what it will cost to replace. Some communities […]
Why Large Associations Should Use the Pooled Method
The State of Florida accepts two primary types of reserve funding: the pooled method and the component method. The pooled method draws reserve funds from one reserve pool. With the pooled method, there is one reserve account balance and anywhere from a few to many reserve items. With the component method, each reserve item has […]
Why Should a Special Assessment Be a Last Resort?
The phrase “Special Assessment” can be a dirty word around a community association. It essentially means that all members of the association pay their fraction of the cost to repair or replace something around their community at one time. On the surface it seems like that may be an okay way to find the funding […]
What Should Be in the Reserve Schedule?
The purpose of the reserve schedule is to disclose reserve information to members of the association in the annual budget. The reserve schedule lists each reserve item, how much longer it will last (remaining life), how long it will last when new (useful life), and how much it will cost to replace (replacement cost). Also […]