Having a detailed reserve study is a great way to protect the financial strength of your association and secure the market value of your units for many years to come.
A reserve study is a report/plan that addresses each major component in the community that will need to be replaced sometime in the future. The study will detail each component’s lifespan, the monies needed to replace it at that time, and financial plan to attain those monies when needed.
Savvy buyers are looking closely at the financial fortitude of the associations where their prospective units are located. Associations with frail financial strength are negatively impacting the market values of their units and limiting the resale viability against similar units in other associations where the financials have been properly addressed. Having a strong financial base, closely adhering to your reserve study will attract buyers and will attain higher resale values for your members.
Major components of the association’s infrastructure have a finite lifespan and their replacement will need to be financed, in some fashion. Adhering to the reserve study will apply a pay-as-you-stay process that will enable you to address these replacements and forego emergency financing, such as an additional assessment or loan, both of which are a pay-since-you-are-here-now process. The latter will also catch the attention of that savvy buyer and may deter them from purchasing in your community.
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