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, they may not know how much a reserve item will cost to replace or when it will be projected to be replaced.
With a reserve study, however, the association has an effective tool to have a good idea of when something may wear out and what to expect to replace. An association can get bids before the absolute failure point for a reserve item and will have more say in which company they choose. Conversely, if a reserve item fails unexpectedly, the association will have to act retroactively and probably work with a vendor that can work on a more emergency basis. Getting bids or proposals proactively rather than retroactively is always a better way to save money and hire precisely who you want.
Sequence Your Projects
A reserve study can also save your association money when it comes to budget planning. It would be great if all associations could pay for all big-ticket expenses with funds just sitting in the bank. However, for some associations this is not a reality. In some older associations that are undergoing infrastructure repairs with limited reserve funds, they have to get creative and organized in the way in which fund their projects. For instance, if both the water lines and pavement are near the end of their life spans, you would want to do the underground work first before you did the above ground work. It would not make much sense to re-pave the roads and then have to tear it up a year or two later to address underground problems.
Probably the best thing a reserve study does is help associations get organized. It is common for us to get feedback from board members that our reserve study report uncovered some items that they didn’t think of. The advantage with this is that now the proper items are on the reserve schedule and they can be funded over a series of years rather than a surprise special assessment. These are a few examples of how reserve studies can help save your association money.