If you are a member of a homeowner association or condominium association, you should consider a capital reserve study as one of your key financial planning devices. These studies are essential in understanding the health of shared areas and in maintaining community wellbeing overall. A capital replacement study can tell you things you may not have noticed, as well as help you plan for long and short-term maintenance projects.
When you commission a capital reserve study, a professional firm will come in a document the condition of shared or commonly owned components of your condominium or planned community. The capital replacement study will allow you to get a professional view on the present condition of these assets. The professional firm you hire can then tell you when each asset will need to be replaced or repaired, and how much doing so will cost. Once you have that information, you can used the capital reserve study to plan a timeline for fund accumulation in order to make sure all repairs and replacements are done on time and as needed.
While the theory behind a capital replacement study is quite easy to understand, in practice things can get complicated quickly. The engineering behind your planned community shared spaces and your condominium may require that several expensive shared assets be replaced at around the same time. That means that your community may experience bursts of demand orchestrated by the capital reserve study. You may need to raise annual contributions more in some years than others, and much will rely on what you learn from your capital reserve study.
Once you have commissioned a capital replacement study, of course, your work really begins.
You have to understand how to use the information presented in the capital reserve study to gather funds that will respond to the timing of each repair or replacement as it comes due. You may have questions about the right way to balance the wants and desires of your membership with the needs of the board. Of course, you’ll also want to make sure your coffers have enough in reserve in case of a true emergency. There is so much work to be done after the capital replacement study, and what you may not know is that the same firm that offers you the study can help you avoid special assessments, work with your budget, and improve your procedures long term. With J. Hershey Architecture, you will find all your needs are met in one convenient place.