Are you a Board Member of a Homeowners Association? Do you have questions about if you should have a reserve fund or how much you should have in reserves? Alliance Association Management would like to help you understand how Reserve Funds work!
The Reserve fund is there to help the Association prepare for large future expenses. It allows the Board Members to care for the physical assets of the Association by maintaining property value. Associations have two budgets, Operating Budget, and Reserve Budget. The Operating budget is the money an HOA uses to pay the monthly bills such as utilities, landscaping, management services, etc. Reserve expenses are the largest expenses an Association will face, it allows for Board Members to protect and enhance the community.
Board Members alongside Management work together to create and follow yearly budgets that adequately fund the Reserves to protect and enhance the physical assets in the community. This also allows to protect and enhance owners that bought a property in the community by maintaining value. It does this by making sure that funds are available to start work on big project such as paving & roofing on a timely manner, so repairs don’t get delayed while avoiding the need for a special assessment.
Board Members use reserve studies as a basis and guideline to know how much funds are needed in the community. A reserve study diagnoses the common area elements of your Association to determine their estimated remaining life and the cost of repairing or replacing them. Some examples of these assets are roads, pools, buildings, gates, and other aspects of the common area. Using this study, you can calculate how much you need to collect from homeowners in monthly assessments for the reserves as well as what the right funding level is for your HOA. Built from an on-site inspection of your community, a Reserve Study outlines a stable, equitable, and proactive Annual Funding Plan to offset your community’s long-term often costly expenditures.
Why Should your Institution conduct a reserve study?
· Protect your property value
· Increase fairness within member contributions
· Enhance & maintain your common areas
· Be financially prepared for scheduled expenses
To learn more about reserve funds or HOA budgeting please contact Alliance Association Management. We would love to assist you and answer any questions you may have regarding your community!