What exactly is a Reserve Study?
A Reserve Study determines the annual funding that should be set aside to fund the association's replacement reserve account for the replacement of the various components that comprise the common elements when they reach the end of their useful life.
How is the Reserve Amount established?
The reservable components encompass just those items anticipated to wear out before the end of the useful life of the building or site. Generally, this includes items with a useful life of between 4 to 30 years.
Click here to see an example cash flow analysis chart
Click here to see Cash Reserve Basis Overview
How are the Replacement Costs determined?
To determine the cost of the various reservable items, we begin by determining the quantities of each item. This we accomplish by actual field measurements or quantity take-offs from the construction drawings (if available). After the quantities are determined, cost can be determined from our cost data bases or from quotations made by local industry sources.
Cost variances will occur based on the project's size, location, schedule and difficulty of work. Costs of replacement will also vary due to fluctuations in the cost of materials, status of the economy, inflation and contractor's overhead and insurance at the time the work is done.
Click to see an illustration of reservable components