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February 28, 2013 By admin

There is No Typical Reserve Study

DSC04157 (Small)One question we frequently encounter is what type of reserve contributions is typical?  This question has no easy answer because associations and their funding are so vastly different.

Different Property Types

Along the same lines, the scope of work for each assignment can differ greatly because there are so many types or sub-types of associations.  For example, we have done reserve studies for single family subdivisions, community development districts that feature large recreation areas, villas, timeshares, high rise condominiums, mid-rise condominiums, garden style condominiums, churches, golf courses, cooperatives, industrial condominiums, office condominiums, and townhomes.  All of these different types of facilities have different components to them.  Some associations handle more maintenance items out of their operating budget than others.  Additionally, even communities of the same type have greatly varying reserve items to fund.  Association budgets vary widely based on different property types and many other factors.

Large Difference in Reserve Funds

Another reason reserve studies differ in funding from one association to the next is the starting balance.  Obviously, an association that is well funded has much less money to fund compared to an association that is poorly funded.  The best way to measure the relative health of an association is the percent funded model.  The following are general measures to the health of an association based on the percent funding model:

  • 30% funded: poorly funded
  • 30-70% funded: fairly funded
  • 70-100% funded: well funded
  • 100+% funded: very well funded

Large Difference in Number of Owners

One more reason association fees vary so much is because of the number of paying members.  Large associations with a couple thousand members and no big-ticket replacement items and limited infrastructure will sometimes only pay a few dollars per month in reserve fees.  Conversely, we have seen associations with as few as ten members that have a lot of infrastructure and building item reserves that pay a few hundred dollars per month in reserve dues.

Different Funding Goals

Finally, the funding goal of every association may be different.  Fully-funding is most commonly recommended and is the most equitable way of funding reserves.  By this approach, each member pays their fare share of reserve dues when they live in the association.  However, some associations decided to waive reserve or to only partially fund them.  Some associations just have always historically assessed and do not have much interest in creating reserve accounts.

Filed Under: Blog Tagged With: Reserve Study, reserve study differences, types of reserve studies

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