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 […]
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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 […]
Reserve Study Frequently Asked Questions Part 8
Why are our reserve dues higher or lower than neighboring communities? The reserve dues in your association have very little to do with other associations’ reserve dues. There are many factors that go into figuring out the current reserve dues. Some of the main differences for current reserve dues of competing communities may be: The […]
Why Some Associations Hesitate to Get a Reserve Study
Associations can be reluctant to get a reserve study for a number reasons. There can be a general misunderstanding of what a reserve study does and what it accomplishes. Here are some of the most notable reasons community associations hesitate to get a reserve study: We Can Do It Ourselves This sentiment is pretty common. […]
Should an Insurance Deductible be a Reserve Item?
Many associations have relatively high insurance deductibles, sometimes as much as $100,000 or $200,000. This is the case in particular in hurricane prone areas. I have been asked several times if it should be a reserve item or how to go about funding it. Sometimes I already encounter it in an association’s current reserve schedule […]
Maximize Reserve Fund Interest
One of the powerful things about having a large reserve fund balance is the ability to gain interest earned on the money in the fund. The last several years since the Great Recession, however, have produced paltry returns, typically less than 1% for regular savings or money market accounts. Many associations just use money market […]
Reserve Study Frequently Asked Questions Part 7
We have to make very costly renovations to our building and do not have the reserve funds to cover it. What should we do? In this case, there are two realistic options the board has. The first is to get a bank loan for the community to cover the cost of the renovation. There are […]
What is the Purpose of a Reserve Study
A reserve study is a tool for budgeting. Reserves funds are part of the budget. A reserve study will help the association manage their long-lasting assets. Part of the Budget Each year an association puts together a budget. Most of the budget consists of one-year-only expenses. The remaining portion is for items that will last […]
How a Reserve Study Can Save Your Association Money
Reserve studies are beneficial to associations for several reasons. Proactively Get Organized A reserve study helps an association get organized with its capital assets. A reserve study will have an itemized section for that shows projected asset repair and/or replacement year by year. This serves a meaningful purpose. If an association is not well organized, […]
Reserves for New Community Associations
There is a lot of organization involved when setting up a new community. Budgeting for reserves is not necessarily the first thing that new boards may be concerned with. However, the opposite effect of not setting up reserves properly can have lingering effects. Money that is not set aside is an opportunity lost to fund […]
Reserve Study Frequently Asked Questions Part 6
What are some of the most typical reasons that a reserve study would require revisions? A reserve study can require revisions for a number of different reasons. Some typical reasons may be that the reserve study had omitted a reserve item or certain group of items. It is also possible that the reserve study included […]