AlB1 (California)
Posts: 12
Posts: 12
Posted:
190 units, total annual budget 1,000,000.
What would be an appropriate threshold level?
$1,000 3,000 5,000 10,000 ?
What would be an appropriate threshold level?
$1,000 3,000 5,000 10,000 ?
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threshold level for Reserves
Started by AlB1 • 18 replies • 2286 views
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JohnC46 (South Carolina)
Posts: 14,265
Posts: 14,265
Posted:
Al
The answer will be that without more information, no one can correctly answer your
question.
That said, 15% of annual dues set aside for Reserves ($150K of your $1M per year) is a good ball park/starting figure.
I have also heard 6 months of dues (in your case $500K or 1/2 $million) presently in the Reserves is a comfortable figure.
Did I carry the decimal places properly.......LOL
Again, there is no formula.
The answer will be that without more information, no one can correctly answer your
question.
That said, 15% of annual dues set aside for Reserves ($150K of your $1M per year) is a good ball park/starting figure.
I have also heard 6 months of dues (in your case $500K or 1/2 $million) presently in the Reserves is a comfortable figure.
Did I carry the decimal places properly.......LOL
Again, there is no formula.
GlenL (Ohio)
Posts: 5,491
Posts: 5,491
Posted:
Threshold for what? Minimum monthly addition?
You should have a Reserve study done and follow their suggestions to fund the reserves. It's not a one size fits all game, every HOA is different in what they need to set aside for reserves. Some need to periodically resurface roads while others only have to worry about replacing the entrance marker.
You should have a Reserve study done and follow their suggestions to fund the reserves. It's not a one size fits all game, every HOA is different in what they need to set aside for reserves. Some need to periodically resurface roads while others only have to worry about replacing the entrance marker.
Studies show that 5 out of 4 people have problems with fractions
AlB1 (California)
Posts: 12
Posts: 12
Posted:
Sorry, I was not clear.
About half of the homeowners monthly assessment is for operations and about half goes to fund the reserves.
By threshold we need a policy for components indicating their minimum value.
Only if they are that value or more do they belong in the reserve study.
We can consider amounts from $1,000 to $10,000
What would you consider the best amount for an association with a total budget of $1,000,000.?
About half of the homeowners monthly assessment is for operations and about half goes to fund the reserves.
By threshold we need a policy for components indicating their minimum value.
Only if they are that value or more do they belong in the reserve study.
We can consider amounts from $1,000 to $10,000
What would you consider the best amount for an association with a total budget of $1,000,000.?
AlB1 (California)
Posts: 12
Posts: 12
Posted:
Sorry, I was not clear.
About half of the homeowners monthly assessment is for operations and about half goes to fund the reserves.
By threshold we need a policy for components indicating their minimum value.
Only if they are that value or more do they belong in the reserve study.
We can consider amounts from $1,000 to $10,000
What would you consider the best amount for an association with a total budget of $1,000,000.?
About half of the homeowners monthly assessment is for operations and about half goes to fund the reserves.
By threshold we need a policy for components indicating their minimum value.
Only if they are that value or more do they belong in the reserve study.
We can consider amounts from $1,000 to $10,000
What would you consider the best amount for an association with a total budget of $1,000,000.?
RichardP13 (California)
Posts: 1,767
Posts: 1,767
Posted:
Quite frankly, it wouldn't be responsible to base your contribution into reserves based solely on the annual budget. Generally, lending institutions look for a minimum of 10%, but only a complete study will determine what is truly needed.
TimB4 (Tennessee)
Posts: 21,062
Posts: 21,062
Posted:
Alb,
Every Association is different and the cost of repairs vary from region to region. Therefore, there is no rule of thumb as to how much money would be an appropriate level for Reserves.
To accurately determine the amount of money to be placed in Reserves each year and the amount of money needed in the Reserve Funds at any given point in time, a Reserve Study needs to be completed.
For more information on Reserve Studies see this thread on the forum:
http://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/103517/view/topic/Default.aspx
Depending when the Association started placing money into the reserves is also another determining factor. For example, my Association is over 30 years old. Our first reserve study was done in 2010 (when the Association was 30 years of age). That study indicated that we needed to set aside over $22,000 per year just for milling and paving the roads in 2021. Once the milling and paving is done, this amount will drop to approx half that amount. This is because we will have a longer period of time to set aside money for that job.
Hope this helps,
Tim
Every Association is different and the cost of repairs vary from region to region. Therefore, there is no rule of thumb as to how much money would be an appropriate level for Reserves.
To accurately determine the amount of money to be placed in Reserves each year and the amount of money needed in the Reserve Funds at any given point in time, a Reserve Study needs to be completed.
For more information on Reserve Studies see this thread on the forum:
http://www.hoatalk.com/Forum/tabid/55/forumid/1/postid/103517/view/topic/Default.aspx
Depending when the Association started placing money into the reserves is also another determining factor. For example, my Association is over 30 years old. Our first reserve study was done in 2010 (when the Association was 30 years of age). That study indicated that we needed to set aside over $22,000 per year just for milling and paving the roads in 2021. Once the milling and paving is done, this amount will drop to approx half that amount. This is because we will have a longer period of time to set aside money for that job.
Hope this helps,
Tim
DavidW5 (North Carolina)
Posts: 565
Posts: 565
Posted:
Seems like everyone misinterpreted his question. I think he is asking - What is the appropriated threshold value for an item to be included in the reserve inventory?
At my previous HOA we started with a threshold of $5,000. Over a few years we found that too many significant items were being left off of the inventory. When we had our next reserve study update done, we changed the threshold to $1,000. Our overall reserve inventory had a 1 time replacement value of approx. $7,000,000.
BTW for folks who have seen me post here before about my HOA in Virgina, we moved this week to a similar community in North Carolina so I have a whole new set of statutes, CCR's, bylaws and rules and regs to get familiar with. This new community just transitioned from developer control last year so the board is still finding its way. I will be getting involved soon.
Dave
At my previous HOA we started with a threshold of $5,000. Over a few years we found that too many significant items were being left off of the inventory. When we had our next reserve study update done, we changed the threshold to $1,000. Our overall reserve inventory had a 1 time replacement value of approx. $7,000,000.
BTW for folks who have seen me post here before about my HOA in Virgina, we moved this week to a similar community in North Carolina so I have a whole new set of statutes, CCR's, bylaws and rules and regs to get familiar with. This new community just transitioned from developer control last year so the board is still finding its way. I will be getting involved soon.
Dave
TimB4 (Tennessee)
Posts: 21,062
Posts: 21,062
Posted:
Quote:
Posted By DavidW5 on 11/17/2014 6:24 AM
Seems like everyone misinterpreted his question. I think he is asking - What is the appropriated threshold value for an item to be included in the reserve inventory?
Seems like everyone misinterpreted his question. I think he is asking - What is the appropriated threshold value for an item to be included in the reserve inventory?
Well, I think that this too would vary from Association to Association. I also think that it would vary from HOAs to COAs.
I believe that the study should include all capital components and storm water management systems. it would be a choice to include other natural components (like trees). Once the study is done, then the Board can make a decision if they want to remove items that can easily be covered under the operating fund (street signs come to mind).
BobD4 (up north)
Posts: 1,002
Posts: 1,002
Posted:
Is "threshold" - as here instead of "degree of adequacy" of the Reserve Fund - much relevant to sorting out between capital & operating items other than to make management look better or worse ?
KerryL1 (California)
Posts: 14,550
Posts: 14,550
Posted:
How many components do you think you have, AlB1?
I ask because it sounds like you many be in a condo, high rise or townhome project. How old is it?
Have you never had a reserve study done? If not and agreeing with others, you need to have one completed.
We have a few low cost components in our reserves study that I don't think belong, e.g., management and our engineer's computers.
Reserves analysts say that nothing that'll last fewer than two years should be included.
Visit davis-stirling.com, Main Index, Reserves for plenty of info about reserves in CA.
I ask because it sounds like you many be in a condo, high rise or townhome project. How old is it?
Have you never had a reserve study done? If not and agreeing with others, you need to have one completed.
We have a few low cost components in our reserves study that I don't think belong, e.g., management and our engineer's computers.
Reserves analysts say that nothing that'll last fewer than two years should be included.
Visit davis-stirling.com, Main Index, Reserves for plenty of info about reserves in CA.
TimB4 (Tennessee)
Posts: 21,062
Posts: 21,062
Posted:
Per Reserve Study Guidelines for Homeowners’ Association Budget, by California Department of Real Estate:
The board should establish criteria for determining common area major components. Many professionals suggest that items be placed on the list of components for the reserve budget if they meet all of the following criteria:
The item is the responsibility of the association to maintain or replace, rather than the responsibility of the individual homeowners;
The item costs over a certain amount to replace (amount to be determined by the board); (One possible guideline is to include items that cost 1% or more of the total annual association budget. Another possible guideline is to include items that cost over $500 or over $1000 to replace, including groups of related items (e.g., all gates in the development) that cost over $1000 to replace. The dollar amount or percent age to use as the guideline should be discussed and adopted by the board. Items costing less than this amount may be included in the annual operating budget rather than funded through the reserve budget. )
The estimated useful life of the item is greater than one year; and the estimated useful life of the item is less than thirty years at the time of the study
The board should establish criteria for determining common area major components. Many professionals suggest that items be placed on the list of components for the reserve budget if they meet all of the following criteria:
The item is the responsibility of the association to maintain or replace, rather than the responsibility of the individual homeowners;
The item costs over a certain amount to replace (amount to be determined by the board); (One possible guideline is to include items that cost 1% or more of the total annual association budget. Another possible guideline is to include items that cost over $500 or over $1000 to replace, including groups of related items (e.g., all gates in the development) that cost over $1000 to replace. The dollar amount or percent age to use as the guideline should be discussed and adopted by the board. Items costing less than this amount may be included in the annual operating budget rather than funded through the reserve budget. )
The estimated useful life of the item is greater than one year; and the estimated useful life of the item is less than thirty years at the time of the study
KellyM3 (North Carolina)
Posts: 2,239
Posts: 2,239
Posted:
We're saving 29% of our total annual budget into Reserve Funds and we're re-investing into our aging property at a regularly scheduled clip.
Depends on your property condition, length of time that Reserve savings have been adequate, etc.
If you're near 30% - you'll be fine unless your property is in dire maintenance stress.
Depends on your property condition, length of time that Reserve savings have been adequate, etc.
If you're near 30% - you'll be fine unless your property is in dire maintenance stress.
AlB1 (California)
Posts: 12
Posts: 12
Posted:
We have hundreds of components
190 units and $1,000,000.total annual budget. About 35 years old
We have a full study every 3 years and minimum study in between.
The question was the threshold amount for a component to be included in the Reserve Study.
A senior member of an HOA specialist suggested $5,000 or $10,000
What do you all think?
190 units and $1,000,000.total annual budget. About 35 years old
We have a full study every 3 years and minimum study in between.
The question was the threshold amount for a component to be included in the Reserve Study.
A senior member of an HOA specialist suggested $5,000 or $10,000
What do you all think?
TimB4 (Tennessee)
Posts: 21,062
Posts: 21,062
Posted:
Well, since $10,000 is 1 percent of $1,000,000 it appears to be keeping with the standard suggested by the California Department of Real Estate (quoted earlier in this thread).
$5,000 was probably suggested in case the Board thought there were items under $10,000 that should be included.
Our opinion would likely be based on what our Association is doing. Since Associations vary (by size, type of capital components and condition of capital components), your Board is really the only one that can make an informed decision (as you know your Association and we do not).
$5,000 was probably suggested in case the Board thought there were items under $10,000 that should be included.
Our opinion would likely be based on what our Association is doing. Since Associations vary (by size, type of capital components and condition of capital components), your Board is really the only one that can make an informed decision (as you know your Association and we do not).
SheliaH (Indiana)
Posts: 6,964
Posts: 6,964
Posted:
You haven't listed those "hundreds of components" so the question really can't be answered. Read your study carefully and then discuss this with the reserve study specialist. In addition to a dollar amount, you might also want to consider how often the component needs to be replaced, which may be a better criteria (e.g. something that requires replacement every 5 years).
If you insist on a number, you might try using $5000 to start and perhaps change it, if necessary, when the next study is done
If you insist on a number, you might try using $5000 to start and perhaps change it, if necessary, when the next study is done
If it is not right do not do it; if it is not true do not say it. Marcus Aurelius
AlB1 (California)
Posts: 12
Posts: 12
Posted:
Many thanks
AlB1 (California)
Posts: 12
Posts: 12
Posted:
Many thanks
KerryL1 (California)
Posts: 14,550
Posts: 14,550
Posted:
AlBi, when you say you have "hundreds" of components, are you counting every individual exterior light fixture, every individual piece of furniture in your common areas??? Usually, in the three studies by different firms in the past there years at my HOA, the list of components will say something like 48 step lights @ $100 apiece, their remaining est. life., etc.
So we have 211 residential condos and 2 large commercial lots in our 2 high rise towers. We have about 170 component groupings, e.g., 211 interior sconces at front doors. XX sf. of carpeting in our residential tower hallways, etc. I'm trying to understand how yours is set up.
So we have 211 residential condos and 2 large commercial lots in our 2 high rise towers. We have about 170 component groupings, e.g., 211 interior sconces at front doors. XX sf. of carpeting in our residential tower hallways, etc. I'm trying to understand how yours is set up.
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