Reserve Study
What is a Reserve Study?
At its core, a reserve study is a financial projection of income and expenses over a pre-determined period of time. However, dozens of factors make up a reserve study which have a compounding effect on those expenses.
Here is a brief list of key items that make up a reserve study and how this affects your financial plan:
A physical inspection, evaluation and analysis of physical assets which the business or community maintains, repairs or replaces.
A review of reserve (“savings”) balance(s), contributions and financials (where appropriate).
The development of a comprehensive list of maintenance and replacement items (“component list”), over 30 years and the schedule and time frames (“Useful Life”) for which they are to be maintained.
The creation of a Funding Model which outlines the need to contribute to reserves in order to maintain the components listed, as well as a determination of the current financial status and well being of the current finances.
A formal handoff and any communication necessary to transition the report and knowledge therein to the board of directors, property manager, executive or other assigned point person. We want you to be successful and USE the study.
What You Should Expect From Your Study Professional:
He or she should spend the time with you to lead, guide and ultimately hand the study and its operating to you. This is best done with a degree of consulting. It is not just a list of replacement costs, it is a powerful tool that, if used properly, can guide the community to financial security for decades.
North Star leans to the side of “too much”, and not simply the minimal or “what is required”. We ensure all components are included which sometimes forces conversation about components that may need to be excluded or left entirely to the operating budget. We have found that by doing so, each component is considered and the study is tailored to the needs of the governing body.
Measure and challenge your custom tailored reserve study against state statutes and laws related to reserve studies. North Star will include the law in the study itself as well as spend the time to educate you on the fine points that affect your study.
Be available and accessible to discuss, review and PROPERLY hand off the reserve study to the current governing body or person. Moreover, aid in the transition of future management by orientating new board members, managers or executives to the current study and its findings. This cohesiveness in the transfer of management and their individual agendas or interests is essential to the good use of a reserve study and long-term solvency of the financials!
