Reserve studies comprise two parts – a physical inspection of your association’s common property, and a financial analysis including a deep dive into your current reserve fund status and a long-term capital plan. During the physical inspection, a reserve consultant determines the useful life of each reserve component and a cost estimate for its replacement. Here are some commonly asked questions about how we determine cost estimates and useful lives.
Where do you get your useful life data?
Our engineers collaborate to determine the remaining useful life of each common element and have extensive experience in cost engineering. We meet with management and/or board members to gather important information related to repair history and maintenance activities. Afterwards, our engineer conducts a comprehensive condition assessment of each component; documenting the condition of each and evaluating the rate of deterioration. From there, current maintenance practices are taken into account and the remaining useful life of the component can be deduced.
Do you base your useful life on the manufacturer’s warranty?
The remaining useful lives are our independent opinion of when a project should be on the association’s radar and are reasonable for calculating an appropriate annual reserve contribution. Our opinions and recommendations are based on actual experiences gained by our engineering leadership team and full-time engineering staff having conducted over 29,000 studies. The replacement timing will depend on the component’s actual condition at the time of our on-site condition assessment.
Warranties are an indication of product quality and are not a product guarantee. For example, asphalt shingle product warranties vary from 20- to 50-years and beyond. However, the scope is usually limited to only the material cost of the shingles as caused by manufacturing defects. In short, yes we consider the manufacturer warranty if provided and if it applies. However, we prefer to base our useful lives on our experience of actually observing a component in the field (i.e. our extensive inspection experience). We also do not utilize national standard useful lives as we prefer to cater the useful life to what we are seeing occur in a city.
How do you come up with your cost estimates?
We base our estimates of replacement costs on privately sourced data, our proprietary database of client project costs, the unique conditions of your property, and our cost-engineering experience. Our privately sourced data reflects only your prevailing local labor and material costs. Additionally, we consider costs related to demolition, mobilization, and your unique existing conditions. We also apply information from our proprietary database of thousands of replacement projects sourced from client projects, many of which are specific to your area. Our goal is to include reasonable cost estimates for calculating sufficient reserve contributions.
Do you factor geography/weather into the lifespan?
Yes. Climates that experience frequent freeze/thaw cycles may result in shorter useful lives for masonry, concrete, pavement, etc. due to water expanding into ice and contracting during melt repeatedly, which accelerates cracking and subsequent deterioration. On the other hand, coastal climates with higher salt content in the atmosphere can result in accelerated steel corrosion at exposed piping, railings or door handles to name a few. Our recommendations account for the specific nuances of the climate in your area.
If you have questions regarding how Reserve Advisors gathers cost estimates and useful life data, don’t hesitate to reach out.
