An Overview of

Reserve Studies

Reserve Data Analysisest. 1983

www.rdanorthwest.com

About Reserve Data Analysis

Since 1983 we have provided thousands of thorough and well thought

out catered reserve studies.

Reserve Study Topics

2

3

Brief History of Reserve Studies in WA1

What is a Reserve Study?

The Reserve Study Process

Brief History

Vocabulary

Funding Concepts

Disclosures

Report Contents

In 1998 the Community Association Institute (CAI) developed National Reserve Study Standards. These were developed to standardize:

Washington State Statutes - 2012

Washington State Condominium and Homeowner’s

Associations with significant assets, defined within RCW

64.34.020(38) and RCW 64.38.010 (19), are required to

conduct and disclose Reserve Study results annually.

At minimum every three years, the Reserve Study update

must be based upon a visual site inspection by an

independent Reserve Study Professional.

Washington RCW also clearly state what the minimum

requirements are for reserve study contents including

several required funding strategies.

Reserve Study – A Multi Purpose Tool

Management

• Timeline

• Prepare Community

• Obtain Bids

Bid Verification

• Accurate Measurements

• Verify Costs

• Negotiations

Marketing

• Buyer Confidence

• Financial Strategy

• Values Up

Budgeting

• Be Prepared

• Fairly Assess

• Minimize Dues

Financial

• Association Loan

• FHA, Fannie / Freddie Mac

• Buyer Loans

Disclosure

• WA RCW

• Community Goals

• No Surprises

Process - The Reserve Study

Step 1 Step 2 Step 4

Step 3

Component Analysis

Financial Analysis

Develop Funding Strategy

Completed Reserve

Study

Developing a reserve study report requires numerous important steps.

Step 1 - Component Analysis

Association Responsibility

Limited Useful Life

Predictable Remaining

Life

Above Minimum

Cost

Does the component meets the four part test outlined in National Reserve Study Standards (CAI).

Step 1 - Component Analysis

QuantifyUseful

LifeRemaining Useful Life

Current Replacement

Cost

Component List Fully

Developed

Step 1 - Sample Component List

Step 2 - Financial Analysis

Forecasting

• Determine Future Costs

• Determine Future Replacement Cycles

Review Accounts

• Review Reserve Account Balance(s)

• Review Reserve Account Allocation Rates

• Assessments, Loans, High Rate of Delinquent Dues, Etc.

Financial Strength

• Determine Current & Future Reserve Fund Strength (Percent Funded)

• Is it adequate? Is it in line with the Association’s risk tolerance?

Step 2 – Financial Analysis – Future Costs

Step 3 – Funding Strategy

Sufficient Cash

Stable Contribution

Rate

Evenly Distributed

Fiscally Responsible

Does the financial strategy follow the four basic principles outlined in National Reserve Study Standards (CAI).

Step 3 – Funding Strategy

Fairness to current & future members

Reserve allocation is to offset current deterioration of components, it’s not for future expenses.

Liability – we cannot leave out items that clearly should be included. The Board can decide to not fund for them but we need to include.

We need to follow Washington State RCW requirements for Reserve Studies

There are important concepts that a reserve study professional must take into consideration when developing a funding strategy.

Step 3 – Funding Strategy

There are many funding strategies to consider but typically only a couple will be appropriate for any particular Association.

The Completed Reserve Study

1. Recommendations 2. Expense Timelines

Condition Assessments4. Thorough Inventory

Step 4 – Completed Reserve Study

Recap – The Process

• Current cost

• Condition assessments

Component List

• Determine future cost & future replacement cycles.

• Determine financial strength.

Financial Analysis • What funding

method best matches the goals of the Association?

• What is the most fair and in the best interest of the community membership?

Funding Strategy

Do you have

any questions? ??