Reserve Study - DIY or hire a professional

I saw an older post about this from 5 years ago but decide to start a new one.

I am on our Board and we are discussing the need for a Reserve Study. We are small, 14 units, no amenities - just parking, garages and units/property. We have never had a reserve study done - we were built in 1985. Colorado does not require them for HOA's (yet).

Please help me with the pros and cons of hiring a professional vs. DIY by the Board. As usual it comes down to time or money. I also truly wonder what kind of time commitment this is to get a finished product completed - how many hours a month, say to reach a deadline of 6 months for completion.

Also - if any have hired a service recently - if comparable to our HOA size - what was the cost of the Level One reserve study?

Any help or guidance is appreciated.

Thanks,

KP

I agree with Mark.

In addition to engineering qualifications and assessment, most Reserve Studies include a recommended assessments schedule.

If nothing major occurs, and the assessment schedule is solid, then a small association such as yours can probably skip 5 years, maybe even 10 ... as long nothing affects the basis.

I agree with Mark and George and Cathy. You're small enough that it shouldn't cost a fortune. As for timeframes, I've seen literature recently from several reserve study firms and they all say you should allow 3 months for it to be completed once you've signed the contract.

Thanks for the feedback folks.

I have read that as well about the time frame for the hired pro - which kind of indicates to me the amount of time required to put all the components together - both long term maintenance and long term finances.

For those who did their own Level One Study thru committee or Board- what kind of time commitment and deadline did you invest in?

Colorado had an odd approach - no reserve study is required BUT once one has been done it then becomes mandatory to do follow ups every 3 years. But i don not think it's mandatory to hire a professional. So Board could potentially do the follow ups internally, I believe.

Kyle

As you consider which way to go, maybe my stats can help you assess your needs.

We are a townhouse community with no amenities. Our HOA is not responsible for roofs, driveways, or siding. Our HOA is responsible for exterior painting of homes. I know that some HOAs fund painting through reserves - We don't.

We have 2 water meters for the entire community - one for domestic use and one for fire hydrants. We own our own streets, and consequently we are responsible for curbs and storm water systems. We do not have sidewalks.

Here's a list of the components on our reserve study:
- Asphalt paving
- Curbing
- Entrance Sign
- Street Signs
- Storm/Sewer System
- Storm Water Basins
- Street Lights
- Water Mains & Pits

Our property is around 17 Acres.

For us, the big expenditures are the first and last items on the list.

We spend $2-3k for a reserve update every 5-6 years.

We are an HOA of small patio homes. 40 duplexes (adjoining side, one story), 32 singles (one and two story) for a total or 112 owners. We have no amenities. Our streets are public (but we are a dead end neighborhood), and we are on city water and sewage. We have a $94K per year budget, if all pay on time......LOL

Now the bad/tricky part. The HOA is responsible for all outside landscaping, home shell maintenance (roofing and house exterior), some fence repair (each house has a small, privacy fenced backyard), and sprinkler repairs.

We did not need a paid for reserve study as the builder left us with a shell of a one. We estimate we will need to re-roof beginning in 2027 and extending over a 7 year period at a total cost of about $600K. We had this verified by a local roofing company.

We estimate we will have to start replacing siding (brick and vinyl) in about 2035 (7 year project) at a cost of about $250K. We had this verified by a local siding company.

Sprinkler repairs are ongoing and running about $2500 per year and we have budgeted for it.

Fences (wooden, 6ft, shadowbox) we estimate are good for another 15 years before we must replace. The HOA is only responsible for any side of your fence that faces common ground which is typically on the rear section. Owners are jointly responsible for replacing sides they share with next door neighbors. We have estimates of $450 per side, This will be a 7 year project and cost the HOA about $60K.

We have fountain in our retention pond and so far it seems it needs to be replaced every 5 years at a cost of about $3K. We cover this under landscape repairs. This item was not in the study.

I am posting this to show we did not need a professional study but had we not been left with a shell of one, we would have needed at least one professional study to get us on track. Thus my bottom line recommendation is most HOA's will need an initial study done by a professional.

Anybody else have advice or experience to share about this?

Is there anyone who thinks a Reserve Study, either DIY or Hired out is not needed or a good idea?

Trying to get as much feedback as possible and present it to the Board. I really appreciate those who have responded - your info is valuable and appreciated.

Kyle

At the end of the day, you are likely to find that your reserves are underfunded, especially if this is your first reserve study. Someone is going to have to tell the folks in the hood that fees are going up.

If you use an outside professional, no one can point at the BOD members and say that - you don't know what you're doing - you've inflated the figures - you never liked me - etc.

If it's a DIY reserve study, you run the risk of intentionally or unintentionally understating the amount needed because your BOD doesn't want to raise fees more than X%. The truth is that you are not neutral and you are likely to get push-back regardless of the quality of the study. The last thing you want is a reserve study that people don't trust.

Geno,

Is your association one of those covered by FS 720 that requires a note be in the annual financial statement, per the below?

While not specifically addressing a requirement for a reserve study, it does address the requirement to have reserve accounts/funding ... or, one of the statements shown - so that everyone knows the community is likely not funded appropriately.

(c)1. If the budget of the association does not provide for reserve accounts pursuant to paragraph (d) and the association is responsible for the repair and maintenance of capital improvements that may result in a special assessment if reserves are not provided, each financial report for the preceding fiscal year required by subsection (7) must contain the following statement in conspicuous type:
THE BUDGET OF THE ASSOCIATION DOES NOT PROVIDE FOR RESERVE ACCOUNTS FOR CAPITAL EXPENDITURES AND DEFERRED MAINTENANCE THAT MAY RESULT IN SPECIAL ASSESSMENTS. OWNERS MAY ELECT TO PROVIDE FOR RESERVE ACCOUNTS PURSUANT TO SECTION 720.303(6), FLORIDA STATUTES, UPON OBTAINING THE APPROVAL OF A MAJORITY OF THE TOTAL VOTING INTERESTS OF THE ASSOCIATION BY VOTE OF THE MEMBERS AT A MEETING OR BY WRITTEN CONSENT.
2. If the budget of the association does provide for funding accounts for deferred expenditures, including, but not limited to, funds for capital expenditures and deferred maintenance, but such accounts are not created or established pursuant to paragraph (d), each financial report for the preceding fiscal year required under subsection (7) must also contain the following statement in conspicuous type:
THE BUDGET OF THE ASSOCIATION PROVIDES FOR LIMITED VOLUNTARY DEFERRED EXPENDITURE ACCOUNTS, INCLUDING CAPITAL EXPENDITURES AND DEFERRED MAINTENANCE, SUBJECT TO LIMITS ON FUNDING CONTAINED IN OUR GOVERNING DOCUMENTS. BECAUSE THE OWNERS HAVE NOT ELECTED TO PROVIDE FOR RESERVE ACCOUNTS PURSUANT TO SECTION 720.303(6), FLORIDA STATUTES, THESE FUNDS ARE NOT SUBJECT TO THE RESTRICTIONS ON USE OF SUCH FUNDS SET FORTH IN THAT STATUTE, NOR ARE RESERVES CALCULATED IN ACCORDANCE WITH THAT STATUTE.

Quoting all of this in case others are in Florida 720 covered neighborhoods and don’t realize the requirement.

I think the core issue is that FS 720 requires reserve accounts and a reserve allocation process, but not a reserve study?

Not sure if FS718 has same language.

Some really great points made.

I really like the idea of disclosure of sorts to the homeowners and potential buyers about our HOA's financial and reserve status. I think that helps everyone have a clear picture and the info they need - I'll bet savvy buyers pay attention to HOA Reserve funds or savvy Real Estate agents might point them out as well as something to be concerned about.

As mentioned before Colorado has no Statute requiring Reserve Studies be done. HOA's do have to have a policy about Reserves and funding which we do. Ours basically says we have never had or desire to have a Reserve Study, we are not required to have a Reserve Study, but Board can consider one - hired or internal and that can be done without any financial analysis. Board can fund the HOA from monthly assessments and Reserves and should we need more funding - Special Assessments or bank loan can be done.

I am reading that 30 states now have some type of legislation about Reserve Studies and also financial disclosures - that's a good thing I think - to protect homeowners. Also reading FHA loan officers are starting to inquire about reserve funding as well - for buyers they maybe working with.

Here's another question - has anyone who does the Reserve Study consistently and worked to correct funding issues still needed to do a special assessment for something that was overlooked in the study?

You might want to run that by Melissa to see if she feels the same as you?

You hit submit three times. Sometimes it takes time for the message to post because of connection speeds.

I wish this bloody thing had an edit feature.

Chapts. 718 & 719 require reserves for associations (These accounts must include, but are not limited to, roof replacement, building painting, and pavement resurfacing, regardless of the amount of deferred maintenance expense or replacement cost, and any other item that has a deferred maintenance expense or replacement cost that exceeds $10,000.), -- quoted directly from statute.

Chapt. 720 doesn't have the requirement for reserves, but does state that if reserves are established then the same statutory restrictions for condo and coop reserves apply the HOA.