HOA Reserve Study: Why Does Your Community Need It?
As an HOA board member, you may be wondering why your community needs a reserve study . After all, aren't HOAs supposed to be self-sufficient? And doesn't having a reserve fund mean that the HOA is saving up for future repairs and replacements? The answer is yes and no. While it's true that an HOA should strive to be financially self-sufficient, there are always going to be big-ticket items that come up from time to time that the HOA simply can't afford on its own. That's where a reserve study comes in. A reserve study is basically an analysis of the HOA's long-term financial needs. It takes into account things like expected repair and replacement costs, inflation, and the HOA's current cash reserves. Based on this information, the study will recommend how much money the HOA should set aside each year in order to have enough money when those big-ticket items come up. There are a number of reasons why your community needs a reserve study. First and foremost, ...