Reserve Payment Increase Formula

Started by WadeR • 4 replies • 1742 views

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WadeR (Oregon)
Posts: 1

Posted:

I am looking for a formula to calculate what our HOA reserve payments will need to increase by over 30 years to cover the reserve needs.

What I have:

Initial reserve contribution: $24,000 annually
Total costs over 30 years: $1,144,019

What I need
Constant annual increase in reserve contribution to cover all expenses.

I am looking for a formula not the answer that I can input into excel. I can get the answer by doing a “what if” calculation in excel but I need the formula so it will update with any variables which change the total cost.

Thanks,

TimB4 (Tennessee)
Posts: 21,059

Posted:

Wade,

I wish it was that simple. The best you can do is factor in inflation costs (which is a percentage). What ifs are always difficult to plan for. What if oil goes to 200, 300, 400 dollars a barrel? With roads, roofs, and gas (plus much much more) all being related to petroleum products no one can say how much those products will increase or how much the labor will increase in order to provide a salary to make a living.

Best thing I can advise is to collect enough funds for the reserves based on today's dollars. Then yearly factor in inflation and increase assessments as needed. Every 5 or 6 years redo the study to make sure your on track and adjust assessments (up or down) accordingly.

Tim

SteveM9 (Massachusetts)
Posts: 3,699

Posted:

That would be a custom formula based on the entire layout of your excel sheet. You will have to do more research on your own so the formula will fit your needs.

There is no generic formula that anyone can toss out there that will work for you.

DavidW5 (North Carolina)
Posts: 565

Posted:

It seems to me you are missing a critical piece - how the projected replacement expense requirements are phased over the 30 year period. It is not enough to have the correct total contributed to the reserves at the end of 30 years if a major item of common property has a useful life of 15 years.

TimB4 (Tennessee)
Posts: 21,059

Posted:

David,

I don't think Wade was looking at one item within the Reserves but at the Reserves as a whole which would include items that must be replaced at various times over the 30 year time frame.

However, it's a good point.

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