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Syndicated Analytics' latest report titled “Skimmed Milk Powder Manufacturing Plant Project Report 2024 Edition: Industry Analysis (Market Performance, Segments, Price Analysis, Outlook), Detailed Process Flow (Product Overview, Unit Operations, Raw Materials, Quality Assurance), Requirements and Cost (Machinery, Raw Materials, Packaging,…
ContinueChoosing a governed community to live in has a lot of advantages. It can be either a high-rise condominium or gated community of single-family homes. One thing you want to be sure of before moving is the maintenance of the property. Living in such a community, you have the luxury of carefree living as the HOA is responsible for maintaining the property's common areas. That's said, it's time to get to know how much an HOA reserve should have?
How Much is Supposed to be in your HOA Reserve Fund?
Your HOA reserve fund should be 70% or higher of the property calculated deterioration. This level's gated community or condo reserve fund meets the National Reserve Study Standard.
A metric known as the percent funded is used to determine whether your HOA Reserve Fund is funded adequately. The calculation computes the current strength of your HOA reserve fund. The percent funded is where 100% financed means that sufficient cash is on hand to match the deterioration fraction of your reserve components. However, if your reserve is 70% funded, it's considered strong. Therefore if your condo reserve fund is under 70%, it's considered underfunded, and under 30% is said to be extremely weak.
The lower your reserve funding is, the more you will need from outside to perform reserve projects. Just because you have a weak reserve fund doesn't mean you don't meet adequacy requirements. Even underfunded, you can achieve adequacy requirements by endorsing an aggressive financing plan that doesn't involve outside funding sources.
Note the reserve fund depends on the common areas the association is responsible for repairing and maintaining. For instance, if the association has many common area amenities such as a sauna, pool, tennis court, and gym, it needs a higher reserve fund balance. If you have few common amenities, your balance for repairs and maintenance will be lower.
So what are the good practices to ensure you have enough money in your Reserve Fund?
Get a reserve expert to help do a reserve study to ensure the funding computations are accurate and the funding plan is adequate. Ratios are always meaningful in measuring, so focus on the percent funded calculation to determine the strength of your reserve fund.
Ensure your percent funded calculation is done at the beginning of every financial year. Give homeowners the information on the percent funded and balance available in reserves and provide regular updates.
Do your reserve study updated annually and on-site updates every 3-5 years. Your Hos must set aside 15%-40% for the assessment towards the reserve fund.
A reserve study is essential for the homeowners association. It helps them calculate and estimate how much money they have in their fund for the repairs and maintenance of common areas. You should get an expert to get accurate figures and adequate funding plans for the best results.
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