Case Study: How Reserve Study Updates Can Adapt to Your Long-Term Financial Goals
Client Location: Minnesota
Number of Buildings: 3
Number of Units: 130
Year(s) Built: Mid 1970’s
First Reserve Study with Building Reserves: 2016
Number of Reserve Study Updates with Building Reserves: 2
Service Level(s) Received: Level I, Level II
Challenges:
Our Approach:
This midrise condo association completed three reserve studies with Building Reserves. A key objective changed between their 2019 reserve study update and their 2022 reserve study update: they wanted to dedicate more financial resources into upgrading interior common areas.
Their dedicated Building Reserves engineer completed an on-site inspection, assessed the condition of these interior spaces, cataloged all elements of renovation that the association would need to consider, and provided a renovation recommendation for their Fitness Center and Common Hallways. These renovation projects would occupy nearly 8% of all of their future expenditures.
In addition, new expenditures had to be considered, because their 2019 reserve study was now 3 years old. Some of their reserve components would reach the end of their useful life in the 30 year period between 2050 and 2053, years that were not considered in the 2019 reserve study update. The largest of these projects was 100 fan coil units that would reach the end of their anticipated useful life by 2051. This project was projected to be over $2 million that the association had not previously needed to consider.
With the desires of the community and the needs of the community in consideration, our engineer began developing their custom reserve funding plan. After further discussion with the board, the engineer recommended consistent increases in the reserve contributions over the next 4 years (2023-2026) and a decrease in contribution in 2027. Given the size of the contribution changes, the board could reallocate funds from operating for the next 4 years and cover renovation costs. Changing their total reserve contribution from around 25% of their total budget to around 30% of their total budget would cover the cost of the renovations, without any additional funding required from their homeowners.
This schedule benefitted the community in a few ways. First, it ensured that they were able to achieve their goal of funding a renovation project in the next 4 years that would greatly improve the look and feel of their interior common areas. Additionally, this funding plan allowed them to take multiple years to build up the fund for their renovations, find the best vendors for the work, and avoid an unexpected large assessment on their homeowners in a few years time. Finally, with a carefully calculated decrease in 2027, they have set their starting point for a 24-year build up of their reserve fund to cover their fan coil replacement project, their single biggest project in their reserve study.
Conclusion:
This midrise condo association did not want to prioritize interior renovations in 2019 and, with their 2022 update, they got the opportunity to see how new priorities could affect their reserve contributions. Our engineer came up with a tailored plan to ensure that they could allocate their funds to their wants and needs without applying unexpected special assessments on homeowners. This is just one example of how crucial reserve study updates are for maintaining your associations reserve fund health.
Ready to align your reserve fund with your community's evolving needs? Schedule a free consultation with a Building Reserves expert today.
