A Reserve Study is an in-depth assessment of a property’s physical components that may be required by Fannie Mae or HUD for residents to get a mortgage. Many times these are condominiums, or properties that have multiple owners. They are performed by licensed engineers, finance and legal experts that can analyze the budget. The inspection includes the roof, mechanical systems, recreational assets, and the financial status of the property. Recently they are becoming more popular and are sometimes required on real estate purchases. Inspectors go on location to do a reserve study and they outline antiquated replacements and repairs to common areas of a property. They also recommend annual reserve funds that will cover long-term capital expenses. They are beneficial because they can help maintain a property’s value and the owner’s investment by ensuring that adequate funds are reserved to cover anticipated costs of keeping common areas safe and maintained. Reserve Studies help board members and community association managers anticipate expenses for the future. One should be completed when a building is built, and on a reoccurring basis as determined by the length of the study. The study will be relevant for about 6 weeks and it covers a 10-30 year period.
A reserve study knowledge is required today.Having a reserve study prepared allows the governing board to determine if they are collecting an amount of money, or whether their reserves are being over-funded or under-funded. All physical assets deteriorate over a period of time.