The reserve study, explained for a volunteer board

Somewhere in your community, a roof, a pool deck or a stretch of paving is wearing out on a schedule nobody wrote down. A reserve study writes it down. It lists everything the association will have to replace, says when, prices each one, and works out how much to put away each year so the money is there when the bill comes.

Most small boards have never had one, or have one in a drawer from a board that has since rotated off. Here is what a study contains, what it costs, how to read the number that matters most, and what to do with it once you have it.

What is in a reserve study

A study has two halves.

The physical analysis is a list of what the association maintains: roofs, siding, paving, fences, the pool and its equipment, mailboxes, the entrance sign. For each one, the specialist records how long it lasts (its useful life), how many years it has left (its remaining life), and what it would cost to replace today.

The financial analysis sets that list against the money. It says how much of the wear so far the reserve account has covered, and lays out a funding plan, usually thirty years long, of what to put away each year.

Not everything belongs on the list. The national standard uses a three-part test: the association has to be responsible for it, the need and the timing have to be predictable, and the cost has to be big enough to matter, commonly more than half a percent to one percent of the annual budget. That keeps out light bulbs. It also keeps out storm damage, which is what insurance is for.

The three kinds of study

Reserve specialists follow national standards that name three levels of study, and the level is printed on the cover.

The usual advice is a review every year and an update with a site visit at least every three years. Some states write that into law. California, for one, requires most associations to have a site inspection at least every three years and a review every year.

What one costs

Less than most boards expect. Published prices put a full study for a community of under fifty homes at about $1,500 to $3,500. An update with a site visit runs about half to three quarters of that, and an update without one is often under $1,000. The price climbs with the number of components, so a community with a clubhouse, a pool and private streets pays more than one with roofs and fences.

When you hire, look for a Reserve Specialist (RS), the designation from the Community Associations Institute, or a Professional Reserve Analyst (PRA), from the Association of Professional Reserve Analysts.

Percent funded, the number that matters

There is no single dollar answer to how much an association should have saved, because a community with new roofs needs less in the bank than one whose roofs are twenty years old. (We wrote a whole guide to that question, with the rules of thumb, the state laws and a worked example.) The measure reserve specialists use is percent funded: the money in the reserve account, divided by the part of everything's life already used up, priced at today's costs. That second number is called the fully funded balance.

Here it is with three items:

The worn-so-far figures add up to $70,000, which is the fully funded balance. If the reserve account holds $35,000, the association is 50 percent funded.

Reserve specialists read the result in three bands:

• Under 30 percent: weak. Special assessments and put-off repairs are likely.
• 30 to 70 percent: fair. Some risk.
• 70 percent or more: strong. A special assessment is unlikely.

A second check takes a minute. Divide each item's cost by its life and add the results. In the example that is $3,000 a year for the roofs, about $1,670 for the pool and $1,600 for the paving: about $6,270 a year, or $522 a month. That is what wear costs the association every year, whether anyone writes a check or not, and the yearly contribution should be in the same range.

Reading the study you already have

Studies run forty to a hundred pages, most of it cash flow tables. Five things carry the meaning.

1. The component list. Check it against what you know. If the study says the roofs have three years left and half of them were replaced in 2019, the study is wrong, and the specialist will want to hear it.
2. Percent funded, on the summary page in most studies, with the date it applies to.
3. The recommended contribution for the first year, next to what the board budgeted. The gap between those two numbers is the conversation for your next budget meeting.
4. The funding goal. Full funding aims to keep the account level with the wear. Baseline funding aims only to keep it above zero. Anything between the two is threshold funding. Association Reserves, one of the largest firms, says baseline plans average 10 to 15 percent less a year than full funding, which is not much to pay for a margin of safety.
5. The assumptions. Most studies grow costs with inflation, such as 3 percent a year, and credit interest on the balance. A recommendation built on those will not match arithmetic done in today's prices, and neither one is wrong.

If you have never had one

Georgia, where our community is, does not require a homeowners association to have a reserve study, as of this writing. Check your declaration and bylaws, which sometimes do, and expect a lender or a buyer's agent to ask. Georgia's Property Owners' Bill of Rights, most of which takes effect on January 1, 2027, also gives owners a right to inspect the association's financial records, so the question of reserves will come up at more annual meetings, not fewer.

You do not need a study to start. Write down the year the homes were built, list what the association maintains, and note what you have paid for each kind of job. With roofs and paving at twenty to twenty-five years and wood fences at fifteen to twenty (the ranges are here), that list tells you which bills are coming in the next five years. If the total is large, you have your answer about whether to pay for a study.

How we handle this

The Big repairs ahead page in neighborPOP does that arithmetic. It counts what is due on every home from the build year and any replacements you have recorded, prices each item from what your association has paid, and adds what is not on every home, like the pool or the entrance sign. Type in the reserve balance from the bank statement and it answers in one sentence: how much to put away each month, and what that is for each home.

If you have a study, upload the PDF and its component list comes in, checked against the study's own totals before anything is saved. Then ask it questions the way you would at a meeting: what if dues go up $25 a home, what if the roofs wait three more years. It is arithmetic, not a reserve study, and the page says so. What it tells you is whether a call to a reserve specialist is overdue. More on how the planner works.