top of page
Magazine Header.jpg

Deciphering the Reserve Study: The Compass of Community Associations

By: Henry McKenna, Reserve Advisors Account Manager

In the vast ocean of community association management, imagine sailing a ship without a compass. The ship, in this analogy, represents your Homeowners' Association (HOA) or condominium association. The compass? The indispensable reserve study.

The Reserve Study: More Than Numbers

At its core, a reserve study is an elaborate capital planning instrument tailored for community associations. However, labeling it as merely an accounting tool would be an oversimplification. This essential document operates like a community's temporal telescope, peering three decades into the future. By diligently inspecting and analyzing a community's assets and reserve fund status, this study creates a roadmap for capital improvement projects and the subsequent financial strategies.

The Significance of a Reserve Study

Now, why is this navigational tool pivotal? Picture a scenario where you have ever-changing crew members and board members rotating. In this ever-shifting environment, the reserve study stands as a testament, a solid document elucidating the logic behind past decisions. Think of it as the ship's logbook for new decision-makers. Moreover, it's not a static, one-time document. Like a good captain revisiting and adjusting the ship's route, associations should update their reserve studies every 3 to 5 years. These periodic updates ensure the HOA remains on course, accommodating for changing winds and tides - unforeseen expenses and maintenance demands.

A Two-Tiered Analysis

Diving deeper, reserve studies encompass two critical analyses: Physical Analysis: A holistic inventory of the common areas – from that rejuvenating pool to the serene sidewalks. This part assesses the condition, expected lifespan, and the projected costs of repair or replacement. Financial Analysis: Here, the study delves into the association's reserve funds, proposing a fair funding strategy. Like a vigilant treasurer, it scrutinizes revenues, expenses, and fund balances.

​Did you know that in response to the Surfside Condominium collapse in Florida in 2022, Michigan has taken proactive steps to enhance the safety and financial stability of its community associations? Lee Powers, COO of KS Management, has played a pivotal role in this effort. Serving on the board for the Community Associations Institute and as a Michigan Legislative Action Committee delegate, Lee has been instrumental in putting into place the new Reserve Study amendment. This amendment aims to ensure that condominium associations have the necessary tools to assess their infrastructure's condition and adequately fund essential repairs. By actively participating in legislative advocacy, Lee Powers and KS Management are dedicated to elevating industry standards and safeguarding Michigan communities.

The Method Behind the Reserve Study

When seeking a reserve study company, associations should prioritize those that boast multi-disciplined engineers with distinguished industry credentials. This ensures a blend of expertise, ensuring the study's robustness

However, it's not enough for a study to merely adhere to the Community Associations Institute (CAI) standards. A top-tier reserve study should be comprehensive yet user-friendly, merging detailed data with visual aids. Tables, graphs, and explanatory graphics aren’t mere decorative elements – they are the backbone of a transparent and understandable report.

A Final Thought

A reserve study isn’t merely a tool; it's an investment strategy. For community associations, understanding long-term expenses and preparing for them is vital. A reserve study offers clarity, guiding associations in safeguarding and enhancing their assets, ensuring the ship remains resilient, navigating both calm and turbulent waters. As we sail into the future, may every association have their compass in hand, charting a course towards stability and prosperity.


Why KS Management?



hoa and condo association video library