Reserve funds are a portion of the capital that is set aside for critical projects. But it is quite common to see the associations not funding adequately in the reserves or conducting special assessments to compensate for it. Generally, it happens when they don’t get a reserve study from the professionals and just follow guesswork.
Luckily, there are ways associations can improve their reserve funds.
Focus More On The Upcoming Reserve Projects
The prime goal of the reserve is to cover the unforeseen events that might occur during the project. Thus, prioritizing the reserve projects coming up more than the other things makes sense. Focus more on items, like paving or fencing the road, or roofing, etc., than renovating the recreation house.
While it seems like an obvious thing, you need to keep track of how much money is available for the most crucial projects. If the reserve budget is tight, you can schedule the non-essential projects for some other time.
A Bonus Tip- Though it is necessary to prioritize the essential projects, you should space these projects out with a couple of years. Doing so will allow sufficient time for the reserve funds to replenish.
Have A Reserve Study
Having a reserve study is probably the best decision an association can make to turn the reserve fund situation around. A reserve study conducted by professionals helps you foresee future projects. They can give you funding advice based on their key findings.
While reviewing a reserve study, you might see a sudden spike in the annual funding. Don’t worry! It is necessary to set increased funding in order to have sufficient funds for all the items on the reserve schedule. Just make sure to avoid any special assessments.
Add Operating Funds To The Reserves
Suppose your association didn’t use the budget from the operating funds this year, and there are enough funds in the operating maintenance account. In this case, it is advisable to move excess of these funds to reserves. Make sure to keep at least a couple of months of operating funds, though. Another smart tip is to cut down the expenses from the operating account and move the saved money to the reserves.
Review The Reserve Schedule
Keep an eye on the items you have added to your reserve schedule. While some items can cost lower than projected, others may cost you more than the projections. So, keep track of the cost of the reserve items.
Also, review the items you have added to the reserve schedule. A reserve study professional can give you an idea of what items could fare well as their projections but aren’t present on the list currently. Seek help from the professionals and alter the schedule accordingly.
Hire The Right Construction Professionals
When you are looking for a team to handle the construction project, get bids and quotes from many companies and settle for the one that suits your needs. An unskilled team can kill your current, as well as the future budget, and you will end up wasting a lot of money.
Don’t go for a company just because it is offering services at a low price. Instead, look for good workmanship. Vet the professionals you have chosen and go with the one who can show that they do a good job.
With these handfuls of ways, an association can improve the situation of its reserve funds. These tips will not only help you maintain an adequate budget for unforeseen projects but also help you make the most out of it.