Reserve Studies
What are “Adequate” Reserves?
“Adequate Replacement Reserves” is defined as a Replacement Reserve Fund and a stable, equitable multi-year Funding Plan that provides for the timely execution of the association’s major repair and replacement expenses as defined by National Reserve Study Standards, without reliance on additional supplemental funding.
How do you determine the remaining useful life of a common element?
Reserve Advisors’ engineer independently determines the remaining useful life of each common element. First, we meet with management and/or board members. Our dialogue enables the engineer to gather essential background information about the property. It’s also an opportunity for the property manager and/or board members to describe any problems the property is experiencing. After the meeting, the engineer conducts a property inspection to record, measure, and assess the current condition of each common element, identifying ‘outliers’ in condition. The engineer will pay special attention to problem areas. As part of the physical analysis, the engineer takes photos to document the condition of the common elements. Based on the physical analysis of each component, the expected life of each common element, and deviations from expected conditions, the engineer estimates the remaining useful life for each. When partial replacements and capital repairs are more cost-effective, our recommendations can save the community thousands of dollars.
How do you determine future replacement costs?
We base our replacement-cost estimates on privately sourced data, our proprietary database, the unique conditions of your property, and our unmatched cost-engineering experience. Our privately sourced data reflects only your prevailing local labor and material costs. These costs are individually researched using R.S. Means databases, an authority on local union and non-union labor and material costs. We further include premiums for demolition, disposal, and your unique existing conditions. We also apply information from our proprietary database of thousands of actual replacement projects, many specific to your area. Our engineering expertise and local contractor information further assure the accuracy of replacement cost estimates.
Do you include inflation for future replacement costs?
Our research on inflation for buildings, systems, and civil construction is a key element of Reserve Advisors’ comprehensive reserve study, ensuring an adequate and reasonable funding plan. We continuously research inflation for materials and construction labor in your location. We then monitor economic trends across multiple sources to derive a reasonable estimate of the near-term inflation rate for your community. Periodic reserve study updates will adjust the predicted rate, replacement costs, and other factors to keep your reserve study and funding plan accurate and reliable.
Do you inspect roofs?
We document observable defects across all roof types. Flat roofs are prone to numerous defects due to their inherent complexity. We will inspect flat roofs where safe access (stairs or ladder permanently attached to the structure) is available. Condition defects in sloped roofs are visually observable from the ground with telescopic cameras. Common factors we consider are age, color, discoloration, exposure to sunlight, observable defects in the roofing tabs, hail damage, pitting, dimples, and granular loss to the shingle.
Do you do invasive/destructive testing?
By definition, under the CAI National Standards, a reserve study is non-invasive and excludes destructive testing. Our comprehensive reserve study may recommend, as appropriate, invasive testing as part of a near-term future replacement project when the scope of the replacement project includes unknown conditions.
Do you recommend fully funding reserves?
There are four general funding strategies for reserves: baseline, threshold, full, and statutory. The full funding strategy is the most costly strategy of the four, as it identifies the fully funded balance for each component and the funding required to keep the overall reserve balance at or near 100% of the combined fully funded balance of all components. With this method, associations begin fully financing components that may not be replaced for several decades, which can result in carrying significant reserve balances year over year.
We recommend threshold funding for most associations. This strategy aggregates all future expenditures and calculates annual reserve contributions to ensure the reserve balance never falls below a minimum threshold. Maintaining a minimum threshold reserve balance each year minimizes the risk of additional assessments. Each reserve study is individually prepared and takes into account your association’s unique characteristics, ensuring our funding recommendations maintain an adequate, not excessive, reserve balance. In Florida, threshold or even baseline funding (allowing reserves to drop to $0) is considered “fully funding” the budget, as both methods provide a path (budget) for adequate funds for replacement of the reserve components, without maintaining excessive reserve balances. Fully funding the budget is often conflated with maintaining a fully funded balance, but they are two distinct concepts and strategies.
Does your reserve study comply with the CAI Reserve Study Standards?
Reserve Advisors fully supports the CAI Reserve Study Standards. As a National Corporate member of CAI, we participate in and support numerous local CAI Chapters. It’s part of our everyday commitment to more than 370,000 community associations. Our co-founders are founding members of CAI’s Reserve Committee that established CAI’s National Standards for Reserve Study providers. If you would like to read about CAI’s National Reserve Study Standards, click here.
Do you use subcontractors to perform a reserve study?
Reserve Advisors’ Core Values only allow us to use full-time dedicated engineers, not subcontractors, to conduct your reserve study. Professionalism and Accountability are key elements of our everyday commitment to each customer and to each other. Our reserve studies are a product of our attitude to see it, own it, and do it competently and professionally.
How do you determine what to include in the reserve study?
Reserve Advisors starts by listening to your goals in the context of our proposed reserve study and scope of common elements to include. After engagement, we request a copy of the declaration and bylaws, which define the common elements and homeowner property. Furthermore, our engineer reviews your maintenance budget and spending to determine which replacements are part of routine maintenance. Your Reserve Advisors comprehensive reserve study will list the common elements with remaining lives, common elements without definable lives, otherwise known as ‘ long-lived elements’, maintenance, and finally property maintained by homeowners.
How long does it take to complete the reserve study?
Reserve Advisors will work to complete your reserve study within the timeframe you specify. Absent a particular timeframe, our clients receive their reserve study within four weeks of our inspection and receipt of any necessary information to complete our service.
How much does a reserve study cost?
As a fiduciary of your community, we understand your duty to demand value for the money you invest in a reserve study. Rather than ‘spending’ money on a standard reserve study, a fiduciary’s goal is to ‘invest their resources to minimize long-term costs.’ That is our shared goal with each community association client, as we strive to save you money through our long-term approach to replacement solutions. Each reserve study is individually researched and written based upon the unique attributes of your community association. A quote for our reserve study service is without obligation, but it starts with us listening to your goals and understanding the unique nature of your property.
Do we have to follow your reserve study recommendations?
Your local jurisdiction will not require that the community follow the reserve study recommendations. Several state and local statutes require adherence to funding reasonable reserves or to disclosing the findings of a reserve study and the Board’s determination of its annual reserve contribution. We recommend that your community work with your management team, accountant, and attorney to determine the best way to meet the requirements of your state and local governing authorities.
Post Study Services
Can we make changes to the reserve study report?
Changes are easy when Reserve Advisors is with you every step of the way. There are two ways to make changes to your reserve study:
- Your engineer. We understand that you may need time to review and discuss our draft report with your board. We offer one set of complimentary revisions within 6 months of receiving our preliminary findings and recommendations. Our engineer will work with you through each requested change to ensure the report aligns with your community’s objectives and adheres to industry best practices.
- Excel spreadsheets. Your reserve study includes an enhanced Excel application for exploring different funding plans and replacement schedules. Make adjustments to annual reserve contributions. Increase or decrease interest and inflation rates. Adjust the timing of future capital repairs and replacements. Excel simplifies planning for the future.
Will you meet with the board?
Your Reserve Specialist, an engineer, is available in one of several formats: phone, web conferencing, and in-person, to discuss the results of the reserve study and to answer any questions you might have.
Will your engineer present the results of the reserve study?
Customized presentations to your needs are optionally available, typically at a special or annual meeting.
Reserve Study Updates
How often should we update a reserve study?
A reserve study update is an independent third-party health check of your common elements and available reserves. Our clients typically request a quote to update their reserves, property condition, and common elements. Often, clients successfully manage their communities for years without an update, but considering an update within a few years of the last study is a management best practice. A quote for a reserve study update is without obligation, but it starts with our listening to your goals and understanding how your property and reserve balances have changed.
Does a reserve study update cost less than the original reserve study?
An update within a few years of the last study costs significantly less than the prior comprehensive service. We identify and document changes in the condition of each common element, discuss them with your team at the appropriate level of detail, and update your component inventory accordingly. Your reserve study update will be individually researched and written based upon the unique changes in your community association since our last reserve study. A quote for our reserve study update service is provided without obligation, and it begins with us listening to your goals and understanding the unique nature of your property.
Other Services
What is an insurance appraisal?
An insurance appraisal from Reserve Advisors includes an on-site inspection and review of the insured buildings and structures. An ASA-designated appraiser evaluates each building or structure on the property to determine the cost to reproduce or replace it in new condition, in a single assessment. The appraisal certifies the insurer’s opinion of value. Special conditions and disclosures may apply, and, in all cases, an inventory of individual buildings and their replacement values is provided, along with photographs and supporting cost estimate documents.
What is a defect survey?
A Reserve Advisors defect survey is an optional service that may be offered in conjunction with your reserve study. Clients who request this add-on service want to engage in a conversation with their legal counsel and a third party (e.g., a developer/contractor) to remediate potential defects. Apart from the condition assessment included with your reserve study, the defect survey identifies possible defects with supporting photographs, a description of the possible defective situation, examples of locations of visually apparent defects, and guidance as to the merits of conducting invasive investigations.
About Reserve Advisors
Are you members of CAI?
Reserve Advisors is a National Corporate member of CAI and participates in and supports numerous local CAI Chapters. It’s part of our everyday commitment to more than 370,000 community associations. Co-founder John Poehlmann served on CAI’s national board of trustees, and both John and Ted Salgado are founding members of CAI’s Reserve Committee that established CAI’s National Standards for Reserve Study providers.
How long has Reserve Advisors been in business?
Reserve studies are all we do and have been doing since 1991. Our experience is founded on dedicated account managers, specialists, and management, as well as on individually researched reserve studies prepared by a collaborative team of engineers from multiple disciplines. Our experience is unique in the community association industry, demonstrating our commitment to you, the industry, and each other. We are the exception, fully engaged, 100% focused, from our first conversation to completion of the study and free support. Long-term thinking. Everyday commitment. That’s our company. That’s our promise.
What are the qualifications of your staff?
Reserve Advisors demands diversity in its workforce. We employ experienced, educated engineers, men and women, across diverse engineering disciplines. Our professional team in the ‘back-office’ is equally diverse and most have bachelor’s, several having master’s degrees, with a service-oriented passion. We also have the most CAI credentialed reserve specialists.
What industries do you serve?
Since 1991, we’ve inspected thousands of buildings – from six schools in the Daniel Boone School District in Douglasville, PA, to the 100-story John Hancock Center in Chicago, to DC Ranch, Arizona’s premier golf community. We primarily serve community associations but regularly work with clubs, non-profits, and investment properties. Contact us today to learn more about our experience and expertise with your property type.
Where’s your nearest office?
Reserve Advisors has numerous offices strategically located in four regions: West, Great Lakes, Northeast, and Southeast. Click here to contact us and see our locations.
What sets Reserve Advisors apart from the others?
Reserve Advisors’ technical competence is one of the pillars of its customer service. The need to produce reserve studies tailored to each client will always guide the evolution of our services. We go beyond traditional or standardized reserve studies, which are time-fixed. Our interactive reserve study platform is a cloud-based solution that delivers the industry’s most accurate, comprehensive report. Our clients receive effortless, state-of-the-art tools to use their reserve studies on demand in real time.