Should You Do Your Reserve Study Early In The Year?

Keeping with our theme from last month’s article on proactive goal setting and planning for the New Year (Jump Start the New Year), we would like to discuss the benefits of re-thinking the entire Reserve Study process and its associated time cycle over the course of an HOA fiscal year. Getting a jump start, which for the majority of HOA’s is January 1, 2015, has numerous benefits that can make a Manager’s life less stressful. Staring early gives you more time when you need it most...during budget season.

For those of you who are too busy to read this entire article (you know who you are), here are our bullet points for why it’s a great idea to get your Reserve Studies done now:

• Reserve Preparers have more time to spend on your inspections and reports
• Reports can achieve maximum accuracy
• The best funding plan can be achieved by exploring multiple scenarios and options
And most importantly…

• Managers get more time during the “usual budget season” (Yay!)

It’s pretty commonly known that Reserve Preparers are typically less busy during the early part of the year since most HOA’s have a FYE of December 31. This makes it the best time for accessibility and communication, and allows maximum flexibility to schedule site inspections with key board members who want to participate in the process. Moreover, the reserve inspector is allowed extra time to evaluate and inspect any given project due to the generally lighter workload earlier in the year. This adds to the accuracy and usefulness of your final Reserve Study.

The accuracy of the final report is of supreme importance and is achieved when more time is allowed to dot the i’s and cross the t's. When the Reserve Preparer and Manager are less under the gun to produce a final product in the last quarter of the fiscal year, it leads to an environment where quality rules over quantity. Both parties can participate with full attention and eyes on the details.

The extra time also allows the Reserve Preparer and Manager to work together with the Board to achieve the best funding plan option for a particular association. Without a workable and reasonable funding plan the value of any Reserve Study is greatly diminished. As the saying goes, there’s more than one way to skin a cat (sorry PETA members…but I have two cats that I love so I can use that ol’ saying), and with additional time to analyze potential scenarios the best possible funding plan can be achieved, even if it takes several iterations to get there.

While it is common practice to wait later in the fiscal year before engaging a Reserve Preparation firm, I would argue that it is not necessarily the best way to go. Some Managers prefer to wait because it seems that the information will be more up to date and fresh for the final HOA budget. However, I would submit that jump starting the process early in the FY gives all parties involved more time to flesh out the specifics involved in a particular project. I can’t count how many times a Reserve Study site inspection revealed issues that ultimately were critical components on the following year’s fiscal budget. When items are discovered late in the cycle, there's a rush to figure out the scope and associated costs which will need to be budgeted for.

It’s a much better approach to prepare the draft report early in the year and update that report with the latest and most accurate information. In this way, the Manager who prefers to wait can have precisely what she/he was after in the first place…the most accurate and current data reflected in the Reserve Study…but without the year end rush.

So consider the benefits of getting your Reserve Studies done early in this New Year as one of your first goals, and see if you are not pleased. Why stress yourself out unnecessarily if there is a clear alternative? Be bold, be a maverick, and gloat a little to others as you flaunt the extra breathing room you get during what will be no doubt be crunch time for everyone else!

This is how we suggest you re-think the Reserve Study cycle and we at SMA Reserves are here to assist in that process and hopefully make your year go a little easier!

Best wishes for a healthy, happy, and successful 2015!

Erik Sundquist, RS