“Our bylaws say we are supposed to do a reserve study every three years.”

When one of our members mentioned this, our 8 unit condo association was only 6 years old.  We had purchased our 2 bedroom, 1 bath condo right after a developer had converted old apartments into some really cool condos in the up and coming area of Portland, Oregon called Alberta Arts.

I remember attending a meeting with a lawyer from the firm that created the bylaws for the association, and vaguely recalled something about a reserve study, but hadn’t thought anything about it since.

We had a good group of people who always paid their monthly dues, and I knew we had been adding a couple thousand dollars to our savings every year, so I felt like we were good to go.

Turns out, we were getting to the point where we needed to start putting more money aside to plan for some large expenses coming up: painting the fences and the outside of the buildings, updating some plumbing, and then there was that far in the distance BIG expense – replacing the roof.

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I have some experience in business (I owned a couple gyms), so I volunteered to take on the job of:

1. finding out what a reserve study even is
2. figuring out what we would need to do
3. figuring out how much it would cost

As I started googling “what is a reserve study”, “HOA reserve study”, “Small Condo Association Reserve Study Requirements”, etc, I started thinking this was going to be a little bit more expensive than I had hoped.

I found a few local companies that specialized in reserve studies, but it was clear from their websites that they were geared more toward larger associations.

I found the state requirements for reserve studies, which basically said we needed to have some sort of a plan that took into account how much it would cost to fix and replace the commonly owned structures and systems in our association.

And I found a few sample reserve studies that were about 50 pages long, with charts and graphs, detailed explanations of different ways of looking at the budgets, pictures of an anonymous property, and a LOT of text.

But as I kept researching the requirements and looking through the samples, the marketing materials from the various firms, and reading some HOA forums, I started to realize that it was a lot simpler than some would make it out to be.

My interpretation was that all we really needed was:

• To know what condition everything was in, when it would probably need to be updated or replaced, and how much it would probably cost at the time it needed to be done.
• What kind of dues increases we would need to vote on and approve as a group to make sure we had enough money in the bank to cover all of the costs.

We had paid to have an inspector come and check out the buildings a few months before, so we had a good understanding of where we were. Since I had a bit of experience with profit and loss projections, I worked up a spreadsheet and plugged in the numbers.

And we came up with a solid plan that was easy to explain to our association that if we increased our monthly dues by about $30 next year, and raised them again every 3 years, we would be more than covered.

And that was it.

It’s nice to know that we have a solid understanding of what is on the horizon and how we’re going to get there.  It’s also nice to know that we probably won’t have to have any huge surprises or massive special assessments.

Also, we can now show any prospective buyers of our condos that we do indeed have money in reserves, both for common expenses and reserve funds.

If you have read this far, you are probably the person in your association who also volunteered to figure out what a reserve study is.

I’m not a lawyer or accountant, and none of this is meant to be or should be taken as legal advice, but I feel comfortable that our association has satisfied the requirements of a reserve study.  I also know that in 3 years, we’ll be able to easily update our numbers, get a new inspection if necessary, and know where we are financially.

If what I’ve described seems like something that might work for you, click on “How To Videos” at the top of the page to see how the spreadsheet works.  If it makes sense to you, I hope you’ll buy the full template with all of the formulas set, so all you have to do is plug in your numbers.  Even if you end up getting a professional reserve study done, it may still be a valuable planning document for your association.

If you don’t like it, or find that you don’t need it, just ask and I’ll give you a full refund – no questions asked.

CHECK OUT  OUR HOW-TO VIDEOS HERE