Your Reserve Study Questions, Answered

A budgeting tool that outlines a long-term plan for repairing and replacing the major items your community is responsible for maintaining. This can include but is not limited to: fencing, pavement, painting, roofing, elevators, HVAC, major mechanical equipment, playgrounds, pools, sport courts and so much more.

Overall, a Reserve Study answers two questions: What projects are predictably going to happen, and how much needs to be collected to pay for them? The result is a detailed report with a component-by-component analysis, a 30-year projection of expenses, and funding recommendations for your association/property!

For a project (also known as a "reserve component") to be funded within a Reserve Study, it must pass the following three-part test provided by the Community Associations Institute:

1. The association has the obligation to maintain or replace the existing element.
2. The need and schedule for this project can be reasonably anticipated.
3. The total cost for the project is material to the association, can be reasonably estimated, and includes all direct and related costs

The second line (#2) can be as much a limitation of the Reserve Study's scope. Reserve Studies include a visual inspection only, so the condition and life of hidden elements (structural, underground, utilities) often can't be reasonably anticipated based on that visual assessment alone.

The third line (#3) mainly means that a cost must be financially significant to the association to be included. A reserve "threshold" is typically set at the beginning of an engagement and if a component's estimated cost falls below that dollar amount, it will not be included in the Reserve Study's funding schedule.

There are four engagement types, also known as "Levels of Service", established by the Reserve Study Standards (from the Community Associations Institute):

Level 1: Full Reserve Study

A Reserve Study is created completely "from scratch" through a site visit. Everything is new, from component counts and measurements to the financial analysis.

Level 2: Reserve Study Update - With Site Visit

A prior report, whether by our company or another provider (we can update another company's report as long as it provides adequate information), is reviewed and updated through a site visit. By choosing this level, the association acknowledges that most component counts and measurements will be re-used. Spot checks and corrections may be made if errors in the prior report are found and/or reported during the engagement. Thus, the component list generally remains the same but conditions, costs, remaining lives, and the financial recommendations are updated as appropriate.

Level 3: Reserve Study Update - No Site Visit

A prior report, whether by our company or another provider (we can update another company's report as long as it provides adequate information), is reviewed and updated without a site visit. Component quantities from the prior report are re-used. Thus, this report is predominantly a "financial" update only to your Reserve Study.

Level 4: Preliminary Community Not Yet Constructed

This is a Reserve Study based on available plans and specifications for a development that is still yet to be built. It helps set a preliminary budget figure for reserve funding, which is then to be re-evaluated after construction concludes and a site visit can be conducted (through a Level 1 Reserve Study engagement).

In short, the Percent Funded metric compares your current reserve balance (the amount you have now) to a benchmark called the Fully Funded Balance (the amount you should have now).

Your Percent Funded position is a way for us to look at your association's (or property's) financial strength. It provides indication of risk, as in how likely your association/property is to incur a special assessment recommendation in the future, especially if anything unanticipated occurs.

For more information on the Fully Funded Balance and Percent Funded calculations, please visit our Lessons webpage for more detail!

It is the amount your association should have in reserves based on the deterioration your components have accumulated so far in their life. For each component, it considers current cost, the anticipated life expectancy, and how much of that life has been used up to this point.

As a simple example: If an association's clubhouse roof is halfway through its life, the Fully Funded Balance for that roof would be exactly half of its current replacement cost. Thus, the association should have collected that approximate amount through annual assessments and transferred that funding into reserves.

The Fully Funded Balance is the yardstick behind the Percent Funded figure mentioned within Reserve Study reports, although it is only a theoretical number based on the results of the Reserve Study.

For more information on the Fully Funded Balance and Percent Funded calculations, please visit our Lessons webpage for more detail!

There are three main options:

Full Funding

Specifically linked to the Percent Funded metric, this goal seeks to obtain the position of 100% funded within the 30-year projection of the Reserve Study. This is the lowest-risk option and mitigates chance of future special assessment needs.

Threshold Funding

A middle-ground approach between Full and Baseline Funding, the Board may set a funding floor that the reserve balance does not fall below. This is called a "Threshold", and can be set either based on a dollar value ($) or the Percent Funded metric.

Baseline Funding

This funding goal looks at the cash flow projection and seeks only to keep reserves cash positive (i.e. above $0). A high-risk financial approach, any unanticipated expenses can easily trigger a special assessment need within the reserve funding projection. As such, we believe this should be perceived as the bare minimum when discussing your property's budget. Coincidentally, this is typically what the state of Florida refers to when stating that associations are to "Fully Fund" their reserves, which is an unfortunate disconnect between our industry vs. the state in terminology.

A Structural Integrity Reserve Study, Florida's required deeper Reserve Study of structural components, applies to condominium and cooperative buildings three habitable stories and taller. It is similar to a traditional Reserve Study in scope (visual inspection only), but more specifically covers the following items:

• Roofs
• Structural Systems
• Fireproofing and Fire Protection Systems
• Plumbing
• Electrical Systems
• Waterproofing and Exterior Painting
• Windows and Exterior Doors
• Other Structural Elements (As Applicable Above the $25,000 SIRS Threshold)

See our Structural Integrity Reserve Study (SIRS) page for further information, and we always recommend conferring with your property's legal counsel as we are not attorneys and the above is not intended to represent any form of a legal opinion.

Best practice is to update your Reserve Study once at least every three years (per the Reserve Study Standards set by the Community Associations Institute). We agree with that recommendation, although there are a few caveats to note:

• The size and complexity of your property can have an effect on the recommended frequency. The more moving pieces within your financial plan, the more frequent you may want to consider updating that plan.
• The state of Florida requires a Structural Integrity Reserve Study to be completed once every 10 years. There are some caveats that could require immediate updates if the funding plan recommended in the most recent SIRS was not followed, although we recommend consulting with your association's accountant and legal counsel regarding those requirements.
• Florida specifically experiences major storm and weather events on a regular basis. If major damage occurs at your property from such events, your financial plan has likely changed (due to immediate repairs/replacements subsequently needed). Thus, we'd recommend considering a Reserve Study Update sooner to get a better, post-storm review of your new financial outlook. Our hope is that this won't ever be the case, although reality has its own plans!

This is an entirely subjective response and our own opinion, so take it with a grain of salt. To us, there are a few main factors:

Background

Since a Reserve Study is a financial report founded upon visual condition assessments, our opinion has been that the best two educational routes for someone to enter our industry would be either Engineering (physical side) or Business (financial side). However, there isn't a college education for conducting Reserve Studies (yet, that we know of). A strong Reserve Study can be created by many without the formal education but have the correct training, attention to detail, desire to provide a quality service, and the founded knowledge of the "how" and "why" we do what we do.

Credentials

Credentials don't guarantee that someone will provide a strong Reserve Study report. However, they do provide confirmation that the individual has conducted enough work over a long enough span of time to receive a formal acknowledgement. When considering an engagement, ask if your potential Reserve Study's project manager has either the Reserve Specialist (RS) or Professional Reserve Analyst (PRA) credentials.

Experience

Lastly, care and repetition really separate the levels of Reserve Study providers. If not listed in your Reserve Study proposal, ask about your potential project manager's specific experience with your property type, how many years they've been in the industry, and how many Reserve Studies they've conducted in that time.

We recommend learning who will actually be on-site conducting your Reserve Study rather than just seeing company credentials. Homeowner Insights, LLC may be a new company, but you would be served specifically by someone (David) with over a decade of experience and over 500 Reserve Studies completed.

This entirely depends on the size and complexity of your property, as well as the scope needed (i.e. Reserve Study vs. Structural Integrity Reserve Study). Thus, the ranges below should be seen as a "normal range" to be anticipated in 2027:

Full Reserve Study (Level 1): $2,000 to $6,000

Please note that costs for a Reserve Study Update are less than the cost of a Full Reserve Study. If conducting a Reserve Study Update - With Site Visit, the fee would typically fall between 60% and 80% of the original Full Reserve Study cost. If conducting a Reserve Study Update - No Site Visit, the fee would typically fall between 25% and 35% of the original Full Reserve Study cost. Those percentages don't account for inflation, so the value of the original Full Reserve Study would inflate (i.e. you might not get a With Site Visit Update at 60% to 80% of a Reserve Study you originally conducted 5+ years ago).

Structural Integrity Reserve Study: $4,000 to $10,000+

These engagements are typically conducted for more complex properties (co-ops and condominiums 3 stories and higher). Thus, the average fee is typically more than that of a standard Reserve Study. Note that this fee range includes the SIRS report as well as a traditional Reserve Study (non-SIRS items), so the cost may be less if only conducting the required SIRS scope and report alone.

If you'd like a specific proposal for your property, feel free to request one and we'd be happy to assist!

Request a Proposal

For Homeowner Insights, LLC, our goal is to finalize and deliver most Reserve Studies within four to six weeks of inspection completion. More complex properties might have a longer turnaround, which would be listed officially on your Reserve Study proposal.

As a side note, the inspection is scheduled as soon as we receive the deposit payment (50% of the current engagement's fee). For that reason, the stated timeline is dependent on the client.

If you have a specific deadline you've listed in your proposal request, the proposal will be adjusted accordingly to hit that mark.

Request a Proposal

Bare Minimum

• Governing Documents
• Current Year Financial Information (Total Assessment Income, Reserve Funding Level, Estimated Year-End Reserve Balance)
• Most Recent NFPA Annual Fire Alarm Inspection Report (If Applicable)

Beneficial For High-Quality Report

• Available History of Major Reserve Projects (With Related Documentation)
• Major Projects Planned in the Immediate Future (With Related Documentation)
• Current Vendor List (For Extra Research As Available)

We request all the above items through an easy-to-complete form (Excel-based). Once we complete the inspection, we'll send any necessary follow up questions for additional detail.

Increasingly, yes. In fact, the answer may very well be "All The Time" in the near future.

Lenders, such as Fannie Mae and Freddie Mac, have more recently increased reserve funding requirements. The real estate sales process is more aware, and increasingly more contingent, of Reserve Study results.

Insurance carriers will often ask to see Reserve Studies and budgets when they evaluate community associations, and their related funding strength. To them, Reserve Studies may help assess levels of financial risk. An association with a current Reserve Study, following a defensible funding plan generates smoother relations and coverage conversations.

Bare Minimum

• Property's Legal Name
• Property Address
• Number of Units
• Desired Deadline
• Your Contact Information
• Prior Reserve Study (If Requesting an Update)

Additional & Helpful For Us

• Governing Documents (Declaration Helps Identify Responsibilities)
• Property Maps

May Be Required

• Explanation of Any Nuanced Maintenance Responsibilities: We are typically able to identify the majority of responsibilities, although questions may arise if there are any unique features. Thus, we may follow up with specific questions such as whether roadways of an HOA are public or private, if unit owners are all responsible for their own unit exteriors, etc.