Question 1

What is a reserve study?

Accepted Answer

A reserve study is a financial planning report that helps community associations budget for future major repairs and replacements of common area components—like roofs, pavement, and mechanical systems.

Question 2

Why do we need a reserve study?

Accepted Answer

It ensures the association is setting aside enough funds to avoid large special assessments and keep the property well maintained over time. In some states, it’s legally required.

Question 3

How often should we update our reserve study?

Accepted Answer

Most industry standards (like CAI) recommend updating the reserve study every 3–5 years. Some clients like to be more proactive and update their reserve study annually.

Question 4

Is a site visit required?

Accepted Answer

For a full reserve study, yes. For updates, it depends—some updates are done with a site visit (Update with Site Visit), and some without (Update with No Site Visit) if prior data is reliable.

Question 5

Who typically conducts a reserve study?

Accepted Answer

A qualified reserve study provider—often someone with an RS (Reserve Specialist) or PRA (Professional Reserve Analyst) designation. Engineers, architects, or experienced consultants may also qualify.

Question 6

How much does a reserve study cost?

Accepted Answer

It varies based on the size and complexity of the property. A smaller community might pay $2,000–$4,000, while large communities or commercial properties can be $6,000+.

Question 7

What’s included in the reserve study?

Accepted Answer

a. Component inventory
b. Cost estimates
c. Remaining useful life estimates
d. A 30-year expense/income outlook
e. Funding recommendations (Full Funding and Baseline)

Question 8

What’s the difference between the operating budget and the reserve fund?

Accepted Answer

The operating budget covers routine expenses (e.g., landscaping, snow removal). The reserve fund is for large, infrequent projects (e.g., roof replacement, repaving).

Question 9

What if we don’t follow the funding recommendations?

Accepted Answer

You risk special assessments, loan dependence, and/or deferred maintenance—which can reduce property values or cause legal issues.

Question 10

Are reserve studies legally required?

Accepted Answer

In some states, yes—especially for condos and HOAs. Requirements vary by state, so it's best to check local laws (e.g., Virginia, New Jersey, and Tennessee all have specific mandates).

Question 11

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

Accepted Answer

Useful Life = Total expected lifespan of a component (e.g., 20 years for a roof).

Remaining Useful Life = How many years are left before it needs replacement (e.g., 7 years left on that same roof).

Question 12

What types of components are included in a reserve study?

Accepted Answer

Typically, any shared/common area component with a limited lifespan and replacement cost over a certain threshold (e.g., $5,000). Think: roofs, asphalt, HVAC, fencing, signage, paint, pools, elevators, etc.

Question 13

Will this study tell us exactly when to replace things?

Accepted Answer

Not exactly. The reserve study provides projections based on typical life cycles—but actual replacement timing depends on wear, maintenance, weather, etc.

Question 14

Can we use reserve funds for emergency repairs?

Accepted Answer

Generally, yes—as long as the emergency repair relates to a reserve component. But some bylaws or state laws may have restrictions, so it’s best to consult with your association attorney.

Question 15

How should we track or manage the reserve fund after the study?

Accepted Answer

Many communities use spreadsheets, accounting software, or specialized reserve tracking tools. The key is to update annually and re-evaluate after major projects or cost changes.

Question 16

What inflation and interest rate assumptions are used in the funding plan?

Accepted Answer

Usually, 2–3% inflation and 1–2% interest earned, but this can be customized based on market conditions or your accountant's recommendations.

Question 17

Can we update only part of the study—like just the cost estimates.

Accepted Answer

Yes. You can request a No Site Visit update to your study, even if no reserve projects have occurred since the last study was done. Now you will have real-time market value costs for all of your components.

Question 18

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

Accepted Answer

We use current cost data which includes: historical costs from the client,
vendor quotes, and industry databases. The current cost is then adjusted
for inflation trends.

Frequently Asked Questions