Serving on a homeowner’s association (HOA, sometimes called a Property Owners Association, POA, or Condo Owners Association, COA) board means planning not just for day-to-day needs, but for the community’s long-term financial health. One of the most important tools for doing that is a reserve study. If your association hasn’t completed one recently, or you’re unsure what to do with the results, this guide walks through the basics and next steps.
What Is a Reserve Study?
A reserve study is an in-depth analysis of your association’s physical assets, financial reserves, and projected repair or replacement costs over time. It evaluates major components such as roofs, siding, elevators, pools, and mechanical systems to estimate their remaining useful life and future expenses.
The end result is a report that helps your board understand:
- What repairs or replacements are going to be needed
- When they’re likely to happen
- How much they might cost
- Whether your current reserve funding is adequate
In short, it provides a roadmap for planning capital improvements responsibly.
Why Does Your HOA Need a Reserve Study?
Reserve studies help boards make informed decisions instead of reacting to unexpected expenses. Without a clear funding plan, associations often face difficult choices like delaying maintenance, obtaining loans, or levying special assessments.
There are also practical considerations:
- Governing documents: Some Covenants, Codes, & Restrictions (CC&Rs) or bylaws require reserve studies to be performed at specific intervals and by certified reserve specialists.
- State laws: Some states have statutory requirements for reserve funding and reserve studies.
- Financial transparency: Lenders, buyers, and homeowners often review reserve health when evaluating a community.
A current reserve study shows that the board is managing the association’s funds with care and diligence.
Hiring a Qualified Reserve Analyst
Not all reserve studies are created equal. Hiring an experienced, reputable professional ensures the analysis is accurate and thorough. Look for analysts with relevant credentials and experience working with communities similar to yours.
Industry organizations such as Community Associations Institute (CAI) offer education programs and designations for reserve specialists, which can be a helpful benchmark when evaluating providers. In addition to reserve specialists, engineers and architects may also be used to complete reserve studies.
If you work with a professional management company like CAMS, your community manager can help coordinate proposals from service professionals and guide you through the selection process.
What to Do Once the Study Is Complete
Receiving the report is just the beginning. Boards should take time to review the findings carefully and ask questions. A community manager or financial professional can help interpret recommendations and prioritize next actions.
Equally important is communication. Homeowners benefit from understanding:
- The overall condition of community assets
- Upcoming projects
- The association’s funding plan
Transparency builds trust and reduces surprises when the association needs expensive repairs or replacements.
How Do I Create a Reserve Funding Plan?
Most reserve studies include funding scenarios that outline a few different options to assist the board with determining how much the association should contribute to reserves each year. Sometimes the recommended contribution is higher than what the association currently collects, and an interim path may require a special assessment to be made, or possibly, to secure bridge-funding via a loan to the association.
While increasing assessments is never popular, gradual adjustments are often easier for owners to manage than sudden special assessments. A well-funded reserve account protects property values, supports timely maintenance, and reduces financial risk for the community.
Boards should consider:
- Phasing in increases over time if needed
- Aligning funding with long-term project schedules
- Reviewing the operating budget alongside reserve needs
What Comes Next?
Reserve planning is an ongoing process, not a one-time task. Best practices include:
- Reviewing the study annually during budget planning – take action to plan for scheduled capital projects in the budget year, or assess the condition and update the timeline if work can be deferred.
- Updating the study every 3-5 years (or as required by documents or law) – this ensures the timing of work is optimized to maintain assets, and funding is adjusted proactively if market conditions have changed
- Monitoring actual expenses against projections – unanticipated price changes for labor or materials can significantly impact the long-term plan
- Adjusting funding as conditions change, e.g., if interest rates change, earnings projections should be updated as the amount of available future funds will be impacted
Regular reviews show good stewardship and help boards stay proactive rather than reactive.
Other Considerations
- Association asset management is an important fiduciary responsibility for board members.
- A professionally prepared reserve study helps the board to plan for predictable aging.
- An insurance study helps protect your association against unpredictable catastrophes.
- Well-run HOAs need both studies, and they should be kept separate but aligned.
Conclusion
A reserve study is one of the most valuable planning tools a community association board can use. It provides clarity about future expenses, supports responsible budgeting, and helps avoid financial surprises. With the right professional guidance and a clear funding strategy, your association can maintain its assets and financial stability for years to come.
About Community Association Management Services
In business since 1991, CAMS has grown to become North and South Carolina’s premier community management company. With experienced local managers in each of its nine regions, CAMS provides innovative solutions to the community associations it serves. To learn more, visit www.camsmgt.com/choose-cams.
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