Question 1

What is a Reserve Study?

Accepted Answer

A Reserve Study is a a financial guide that helps community associations budget for future major repairs and replacements of common area components (i.e. roofs, pavement, mechanical systems, etc.). When well-prepared, it helps to minimize surprises while maximizing proactive maintenance and property values!

Question 2

Why do we need a Reserve Study?

Accepted Answer

Many reasons, including but not limited to:

A Reserve Study provides clear information on what major, predictable projects (and related costs) are anticipated to occur over the next 30 years. This allows the association and its membership to prepare accordingly for those costs, eliminating major surprises such as special assessments!

Reserve Studies promote proactive maintenance, which allows each community to present a positive aesthetic appearance. This enhances property resale value!

Strategic coordination of projects within a Reserve Study can promote project cost savings through higher economies of scale!

In some states (such as California, Florida, New Jersey, and Tennessee), Reserve Studies are required at specific intervals!

Question 3

How much does a Reserve Study cost?

Accepted Answer

The cost for a Reserve Study is almost always based on level of time required to conduct the engagement, including travel. A small, simple community may pay as low as $1,500, while complex properties might come with a price tag of well over $10,000. Overall, a Full, or "from scratch", Reserve Study for most property types falls somewhere between $2,500 and $5,500.

After completing a Full Reserve Study, future updates should be less costly. Excluding any inflation from year to year, Reserve Study Updates "With Site Visit" typically cost around 65% to 85% of the Full Reserve Study's cost. Reserve Study Updates "No Site Visit" typically cost around 25% to 35% of the Full Reserve Study's cost.

Question 4

How long does it take to complete a Reserve Study?

Accepted Answer

At Prime Reserve Planning, our goal is to complete most Reserve Studies within four weeks of the inspection date!

One important note is that the timeline can be affected by the following:

Complexity and Size of Property: A longer turnaround may be provided within our proposal if we believe a longer time period is needed for appropriate evaluation, data review, follow up research with clients/vendors, and report creation.
Delays in Client Response: Any timeline provided assumes that requests we make to a client are responded to in a timely manner. If we don't have information critical to completing the Reserve Study itself (such as current financial information), there is no way for us to complete the report until we receive that information.

Question 5

What information is needed to get a Reserve Study proposal?

Accepted Answer

To prepare an accurate Reserve Study proposal, every provider typically requires at least basic information about the property:

Property/Association Name
Type of Property (Condo, HOA, Townhome, Worship Facility, Etc.)
Property Address
Point of Contact Information
Number of Units
General Description of Responsibilities

Other files and/or information that is deemed beneficial for an accurate proposal:

Governing Documents (To Review Responsibilities)
Property Maps
Prior Reserve Studies
Construction Year
Number of Buildings
Description of Amenities
Description of Major Concerns

The above allows each Reserve Study provider the capability to understand the property details, the engagement level required (Full vs. Updates), and the amount of time associated with the work to be done. From there, a customized proposal can efficiently be prepared and provided for your review!

Question 6

Are Reserve Studies legally required?

Accepted Answer

Reserve Studies are required in many states - California, New Jersey, Florida, Tennessee, Virginia, and Washington to name a few! Others, like Illinois, are considering requirements in new legislation proposed.

Requirements do vary by state, so it's best to check local laws. You can check out the Community Associations Institute's webpage outlining all Reserve requirements per state here, which also tags specific legislation connected to the requirements stated.

Question 7

How often should we update our Reserve Study?

Accepted Answer

Great question! The Community Associations Institute (CAI), which established the Reserve Study Standards that guides our industry, recommends that a Reserve Study "With Site Visit" be completed at least once every 3 years.

Some states set specific requirements, such as:

3-Year intervals in California 
5-Year intervals in Tennessee
10-year intervals in Florida for a Structural Integrity Reserve Study (SIRS).

Due to the many economic factors (COVID, supply chain issues, insurance premium jumps, etc.) and project cost fluctuations we've seen over the past several years, we recommend that all properties conduct a Reserve Study at least once every 3 years. For more complex clients with specific nuances or complex component lists, we may recommend a more active approach with annual updates.

Question 8

Is a site visit required for every Reserve Study?

Accepted Answer

The short answer is no. However, whether a site visit is required will be based on the age and quality of your last Reserve Study!

Per the Reserve Study Standards established by the Community Associations Institute, best practice is to conduct a Reserve Study "With Site Visit" once at least every 3 years. However, a Reserve Study Update "No Site Visit" can be conducted in the interim. So, as of 2026, if you had a Reserve Study from 2023 or earlier, we'd recommend conducting a Reserve Study update with a site visit (Level 2). If its from 2024-2025, a no site visit update may be appropriate.

Question 9

Who typically conducts a Reserve Study?

Accepted Answer

Each Reserve Study engagement should be conducted by a credentialed reserve study provider, which we qualify as someone with Reserve Specialist (RS) or Professional Reserve Analyst (PRA) credentials. Architects, engineers, or consultants with extensive capital planning experience may also qualify depending on their level of reserve knowledge.

Question 10

What’s included in a Reserve Study?

Accepted Answer

Each Reserve Study should include at least the following:

Component Inventory (What Your Property Has)
Component Details (Useful Life, Remaining Useful Life, Cost Estimate)
Financial Projections of Projects (Over a 20 to 30-Year Timeline)
Evaluation of Your Current Budget (Your Funding Strength)
Reserve Study Provider's Funding Recommendations

How each provider presents the above information is typically what differentiates them. In our case, our goal is to provide as detailed of a report as possible while still achieving a pleasant and educational experience for any reader. Check out our Reserve Study samples for reference of that goal!

While all companies provide a report (typically through PDF), we also provide a dynamic Excel file for the association to conduct "what if" testing at their discretion. That file is for the association to keep, so there are no future "subscription" fees tagged with it in future years!

Question 11

What’s the difference between operating and reserve expenses?

Accepted Answer

The operating budget covers routine expenses incurred annually, such as landscaping maintenance contracts or snow removal. Reserve funds are for larger capital projects incurred less frequently, such as asphalt resurfacing, exterior painting, roof replacements, amenity renovations, and/or major equipment replacements.

Question 12

What if we don’t follow the Reserve Study's funding recommendations?

Accepted Answer

In general, you risk special assessment needs, loan dependence, and deferred maintenance of common area assets. All three of these factors can cause reduced property values, increase project costs due to rush "emergency" needs, and potential legal issues due to project deferrals (if deferral results in a threat to guest safety).

In some states, you'll need to follow the Reserve Study's recommendations or submit related disclosures related to the association's budget decisions. If not followed appropriately, the association may risk penalty.

*NOTE: We are not attorneys so this is not intended to represent any form of a professional legal opinion. This answer is just based on our past knowledge/experience as Reserve professionals.

Question 13

What types of components are included in a reserve study?

Accepted Answer

We consider every common area asset within a property for Reserve designation. Every component that is funded within a Reserve Study has to pass three tests per the Reserve Study Standards (RSS) established by the Community Associations Institute (CAI):

1) The component must be the association's obligation to maintain, repair, or replace. If something is leased (like laundry machines) or is the unit owners responsibility (such as unit HVAC systems), those items will be excluded from Reserve funding.

2)  The component's designated project must have a reasonably anticipated need and schedule (useful life/remaining life). On one hand, this can mean certain components will be excluded because they are deemed too indeterminate for Reserve designation, such as comprehensive replacement of a buildings foundation. On the other hand, the Reserve Study provider may exclude funding on the basis that a visual inspection alone does not allow them to appropriately determine the project timeline or need. A good example is for plumbing infrastructure, of which the interior condition of the piping can't be determined without a more intensive form of inspection (such as scoping lines with cameras).

3) The cost of the component must be predictable and deemed "material" to the association. In essence, each Reserve Study engagement should set and state a threshold to be used. A typical starting point is approximately 0.5% to 1% of the association's total budget. Once set, a Reserve component is included in funding if its cost is above that threshold and it passes #1 and #2 above.

The "big three" are often seen as paving, painting, and roofing. However, other items such as elevators, fencing, HVAC, interior renovations, pools, signage, and sport courts are always considered as well.

Question 14

Will a Reserve Study tell us exactly when to replace things?

Accepted Answer

Yes, but with an important caveat. A Reserve Study's point of view is at what point the association should be financially capable to complete a project. While this does often align with when a repair or replacement should be completed, it doesn't always mean "exactly when it should be done".

For Example -> Let's say you have a HVAC system that is now 16 years old. Under normal circumstances, that HVAC system was expected to last 15 years. We now believe the association should be financially capable of immediate replacement (i.e. remaining useful life of 0 shown in report), although you may decide that the system is functioning fine and there's no reason to replace now. In this scenario, the association should have all reserve funds needed for replacement now even though replacement may be delayed since the system still functions appropriately.

Question 15

Can we use reserve funds for emergency repairs?

Accepted Answer

Generally, yes. As long as the emergency repair relates to a reserve component and meaningfully prolongs its remaining life, we believe Reserve funds should be available for use. However, some state laws or association governing documents (such as bylaws) may have restrictions, so it’s best to consult with your association's legal counsel.

Question 16

Can reserve funds be used for capital improvements or new amenities?

Accepted Answer

New Assets/Components = No

Reserve funds are intended for the repair and replacement of existing common area components, not the installation of new amenities or capital improvements. If reserve funds were to be used to install new assets, the shortfall would have a negative effect on the association’s capability to maintain, repair, or replace the existing assets the funds were intended for. As such, new buildings or amenities (like pickleball courts or playgrounds) are typically funded through operating fund surplus, loans, special assessments, or a combination of the three. Once a new asset is installed and in place, components (reserve projects) should then be added to the property’s funding plan so the association can begin saving for future repairs or replacements!

Natural Evolution of Existing Reserve Components = Yes

A Reserve Study calculates funding based on assets that already exist at the property, such as pavement, pools, and sport courts. But let’s say your association has a surveillance system, of which replacement is funded through reserves, that doesn’t meet the needs of the property. You obtain a bid to upgrade the system by replacing the existing cameras and installing (5) additional cameras. We believe this expense can be incorporated through Reserve funding because it would be seen as a “Natural Evolution” of an existing asset on site. For specific cases where you’d like our opinion on funding approach, you can contact us here!

Question 17

How does a Reserve Study help prevent special assessments?

Accepted Answer

Without proper reserve planning, many associations have no choice but to issue special assessments or take out loans to cover major projects. They just haven’t collected enough reserve funds in past years for the projects now coming due.

A well-prepared Reserve Study clearly communicates predictable reserve projects (called components) and simultaneously creates a stable, structured funding plan to account for those expenses. By planning ahead, associations avoid those surprise expenses that inevitably cause special assessments!

Question 18

What inflation and interest rate assumptions are used in a Reserve Study?

Accepted Answer

The answer to this varies from year to year based on consideration of both short-term and long-term trends:

Inflation: Most of the time, inflation (project cost increases assumed per year) hover somewhere between 2-4%. Actual inflation has been higher in recent years for many components, although long-term data suggests reversion to a lower figure in future years.

Interest: Historically, interest earned (net after tax) have often been right around 1%. Throughout the 2010's, many association's weren't even making that on Reserve funds. However, newer trends and available investment options allow some clients to currently make 2%+ on their funds. We recommend that all clients optimize their earning potential but we are not financial investment consultants, so we recommend discussing with a qualified investment specialist and/or the association's accountant for more information on options.

Question 19

How should we track or adjust reserve funding after the Reserve Study is provided?

Accepted Answer

The key is to update reserve data and projections annually, adjusting each subsequent budget accordingly. Many communities use spreadsheets, accounting software, or specialized reserve tracking software.

Prime Reserve Planning provides a dynamic Excel file with each Reserve Study engagement designed to aid in this process. Feel free to reach out and we'd be happy to schedule a demo for your association's Board and/or Property Management!

Question 20

What’s the difference between “useful life” and “remaining useful life”?

Accepted Answer

Useful Life = Total expected lifespan of a component when replaced under normal circumstances.

(e.g., a newly installed roof should last 20 years after consideration of this property's environment)

Remaining Useful Life = How many years are left before the existing item needs replacement

(e.g., the existing roof should last approximately 7 years based on available repair/replacement history and its current visual condition).

Question 21

Can we update only the cost estimates within a Reserve Study?

Accepted Answer

Yes! You can request a "No Site Visit" Reserve Study update even if no reserve projects have occurred since the last study was done, as long as the prior report being updated was conducted within the past two years. Otherwise, a more significant update will be necessary.

Question 22

How do you estimate future component costs - especially 20–30 years out?

Accepted Answer

Every cost estimate within the Reserve Study is based on current data. That current cost is based on consideration of multiple factors in the following order: the property's project history, available quotes provided to the property from contractors, our experience/data, applicable vendor research, and other available resources/databases.

Within the 30-year projection, the current component cost assigned is increased annually by the assumed inflation rate stated within the Reserve Study report.

Question 23

What happens if we don’t fund our reserves properly?

Accepted Answer

When you fail to fund reserve property, you can expect any form of the following:

Emergency Special Assessment or Loan Needs To Complete Projects
Decreased Owner Satisfaction
Negative Resale Impacts
Difficulty with Insurance or Lender Approvals
State Compliance Issues (Where Applicable)

Question 24

Could a Reserve Study affect our ability to get loans or insurance?

Accepted Answer

Yes. In fact, lenders and insurance carriers increasingly requesting Reserve Study reports along with budgets from their clients for review. Those companies want to see that an association is financially stable and planning for long-term repairs. Obtaining a Reserve Study and budgeting appropriately shows that you’re being proactive and fiscally responsible!

Question 25

What happens if we want to make changes or revisions to the Reserve Study?

Accepted Answer

Our engagements include a 60-day revision period, which gives a property's decision makers (often the Board of Directors, Committee Members, and/or Property Management) the time to review and request changes!

As an important detail to include, we don't agree to changes "just because".  Our Reserve Study was created based on consideration of available conditions and information when we completed the engagement. Thus, when you request changes, we do ask that you provide associated context and documentation to support the specific change. We're happy to make a change as long as we know the "why" and how it's justified!

Question 26

Can we incorporate the cost of future updates within our association's Reserve Study?

Accepted Answer

Yes!

Per the Reserve Study Standards (updated in 2023) from the Community Association Institute, professional inspections, evaluations, or related building services can qualify as Reserve components. We believe Reserve Study update engagements can quality for inclusion as long as a specific interval of completion is set!

Question 27

What is a cost threshold in relation to Reserve Study components?

Accepted Answer

A cost threshold set for a Reserve Study is the specific cost at which a component is considered "material", or substantial, to the association. If it isn't substantial, it should be more easily absorbed within the Operating budget. However, if it is considered substantial, it should be expensed to the Reserve account.

Setting a threshold for Reserve Study components sets a clear boundary for the provider to determine whether a project's cost makes it large enough to incorporate within Reserve funding or to designate it as an Operating expense.

Question 28

What happens during a Reserve Study site inspection?

Accepted Answer

During the inspection, the reserve professional documents all common area components. This includes measurements, photographs, visual condition assessments, and any additional notes required to adequately evaluate each component. When available, the inspector also reviews maintenance practices as well as any documented repair or replacement history. This can include elevator maintenance charts, or history written on equipment shells (seen often for HVAC systems).

All of this information is used to determine the remaining useful life of the existing reserve components.

Question 29

How long does a Reserve Study site inspection take?

Accepted Answer

That completely depends on the size and complexity of your property! A small, simple HOA may take a few hours, while a high-rise condominium with complex design could take two days, while an expansive resort property could take more than a week. If you'd like a more specific estimate/timeline for your property, feel free to reach out to us here.

Question 30

What types of properties need a Reserve Study?

Accepted Answer

Any property responsible for maintaining common or shared infrastructure can benefit from long-term capital planning!

The longer answer is that every property needs a long-term capital or reserve plan for its major assets. Reserve Studies are commonly used by community associations throughout the United States, such as condominium associations, HOAs, and townhome communities. However, the same report, sometimes called a Capital Reserve Plan, would be beneficial for any other type of property (commercial, mixed-use, office, worship, etc.). Costs for capital projects will come due and Reserve Studies are useful tools for bringing that information to light, regardless of property type!

Frequently Asked Questions (FAQs)