If you live in a development with a HOA (Homeowners’ Association) you usually pay a fee to help it keep up with maintenance where you live. This can include minor things like landscaping and also major issues like plumbing problems. The type of maintenance varies depending on what your living space is like and where it is. But no matter where your living space is located, if you have a HOA, they need to have an adequate amount of money saved to help with any future maintenance problems. Your Homeowners’ Association needs to have sufficient cash reserves, which is why it needs to have a reserve study done.
What is a Reserve Study?
A reserve study is a planned long-term budget for the HOA. This way, it can plan and set aside money from its annual budget for regular maintenance and also unexpected problems. Reserve studies usually will plan out a HOA budget for the next few decades so it can be fully prepared. By doing this, it will help the HOA to save enough money to pay for both expected and unexpected situations.
Your HOA should hire an expert to do this reserve study. Reserve studies should be performed by certified reserve study specialists. When your HOA hires them, they can help your Homeowners’ Association get a more accurate estimate for how much they should save which they can then put into a fund.
How Does a Reserve Study Help My HOA?
The main purpose of a reserve study is to help your HOA save money for possible future problems. When your HOA works with an expert on this, the expert will help plan out possible scenarios that could happen. They then make estimates based on these scenarios to find out how much your Homeowners’ Association should save. Eventually, this will determine how much money your HOA will put into this budget when they collect annual payments from you.
Your HOA though needs to make sure to keep funding this budget. The Homeowners’ Association shouldn’t just stop collecting and saving for this budget. If they do, this could end up causing them to not be prepared for incidents due to a lack of funds.
What Happens if My HOA Doesn’t Have Sufficient Cash Reserves?
Often HOA’s are required to have a reserve study done every few years. However, this isn’t always the case. If your HOA doesn’t have sufficient cash reserves and a reserve study done, it could lead to some serious problems. If your HOA doesn’t save money for possible incidents, it won’t be prepared to deal with them when they happen. Reserve studies will help to prevent this from happening by helping your HOA save and budget its money properly.
It’s extremely important that your HOA has a reserve study done. This will help it to be prepared with funds to fix any possible future problems. If your HOA doesn’t have a reserve study done, it might not be well prepared for serious issues, like roof replacement. By using a reserve study to help plan a budget, your HOA will have enough cash reserves to help fix any issues that might occur.