What is a reserve study?

A reserve study a long term capital replacement budget.   The end product is the RS report, which is supported by a site observation and component condition assessment.


The purpose of the report is to create a financial forecast - a funding plan for the association that estimates the timing and cost a future major repairs and replacements to the association's common area components. The homeowners association industry has coined the term reserve study, which, outside of this industry, is generally referred to as a long-term capital replacement budget. The association uses this reserve study report to determine the annual member assessments necessary to provide funding for the estimated future expenditures.

The site visit is a limited scope visual observation of the association's common area components.  It generally does not include invasive or destructive testing. The purpose of the site visit is to identify common area components, evaluate their condition, determine useful life and remaining useful life, and estimate the major repair or replacement cost.

 

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