How Can HOA Financial Management Help Make the Most of Your HOA’s Reserve Study?
A reserve study is an important tool for any Tacoma, WA homeowners association. It provides a comprehensive look at the association’s financial situation and allows the board to plan for future maintenance and replacement of community assets.
However, a reserve study is only as good as the information it contains and the board’s ability to use it effectively. With proper HOA financial management, you can get the most out of your reserve study and ensure your community remains well-maintained, well-funded and attractive for years to come.
What Is a Reserve Study?
A reserve study is a detailed analysis of your community association’s assets and financial health. A reserve study aims to outline how your HOA plans to spend its funds in the next 30 years so it can maintain enough money to do so.
While each state has its laws regarding how often a physical inspection must take place, you need to assess your reserve study each year so you can include up-to-date information in your HOA’s annual budget report.
Complete a Physical Inspection
Most states require that you conduct a physical inspection every three or so years as part of your reserve study analysis. During this inspection, your reserve analyst and HOA management firm representative will examine common areas, assessing what may need to be maintained or replaced in the future.
Common areas for evaluation include roofing, plumbing, electrical wiring, streets and sidewalks, landscaping, irrigation, and any amenities. The condition of these and the expected cost of repairs in the future will dictate how much money you’re recommended to have in your reserve.
Undergo a Financial Analysis
Next, you’ll undergo a financial analysis of your HOA’s reserve fund. This will provide you with an understanding of the current and projected balances in the reserve fund and the impact of any new expenses or investments on the association.
This information is critical in helping you plan for future expenses and ensure sufficient funds are available. To make your information as accurate and thorough as possible, ask your community association management company to assemble all the necessary financial documents, including vendor invoices, bank statements and cost estimates.
Anticipate Commonly Overlooked Issues
Whenever estimating future financial needs, it’s always best to include a buffer for unexpected costs. Your reserve study should be thorough, but it may still fail to cover unplanned-for expenses such as natural disaster damage or emergency repairs. Commonly overlooked areas include:
- Unanticipated repairs
- Roofing repairs or replacement
- Emergency damage
- Increased prices for raw materials
Understand Your HOA’s Funding Plan
Understanding your HOA’s funding plan is also key to making the most of your reserve study. Knowing where your funds are coming from and how they are allocated will help you make informed decisions about how to use them wisely.
How will annual dues change over time? Will you hold fundraisers or rent out amenities? Ask your HOA management firm to share your current income breakdown and make a realistic long-term plan for covering the expected costs outlined in your reserve study. Planning strategically and comprehensively will help you avoid last-minute significant fee hikes or emergency special assessments that lower resident satisfaction.
With over 30 years in the industry and over 1,500 successfully managed communities, The Management Trust has the expertise to guide you in all aspects of community association management, including HOA financial management. To learn more about our comprehensive HOA management services in Tacoma, WA, call The Management Trust at (253) 472-0825 or fill out our online contact form today. We look forward to working with you!
