ARA-LLC *What is a Reserve Study?*

What is an ARA-LLC Reserve Study?

Reserves are an association's way of setting aside money for future repairs and replacements of community components or assets. A reserve analysis study is a long-term planning and budgeting guide that provides an assessment (payment) plan allowing the association to make smaller monthly contributions to their reserve account in order to have adequate funding available when each asset needs to be repaired or replaced. Special assessments, which are often substantial and usually unfairly apportioned, are rarely required when an asset needs replacement. In addition, there are expert estimates as to how long a component will last and how much it will cost.
In addition, the reserve study analyst should complete the following in the preparation of a study:

A comprehensive analysis of your operating guidelines and other governing documents that determines the full extent of your maintenance and reserve funding responsibilities.
A detailed and complete inventory of all assets for which the association is responsible.
A complete collection of detailed data for each asset showing placed in service date, useful life, adjustments, replacement year, quantity, unit cost, percentage replacement, current cost, future cost, accumulated reserves, salvage value, required monthly contribution to reserves, accumulated interest, net monthly allocation, and remarks detailing factors such as design, manufacture, quality, usage, exposure to the elements and maintenance history
A long-term budgeting guide providing the association with thirty-year projections listing total replacement costs in future; annual membership contributions, annual expenditures, projected and ideal ending reserves and yearly percentages of fully funded.
A reserve funding model ( payment plan) that allows the association to become ideally funded with the lowest possible monthly contribution to reserves. Two reserve funding models, the modified straight-line and cash flow when used together, provide the most helpful information for determining the actual fiscal condition of most associations.

ARA-LLC Reserve Study, Benefits to Clients.

With a ARA-LLC professional prepared reserve study, your homeowners, timeshare or other interest common development association will receive these benefits.

Following the recommendations of a reserve study performed by a competent professional consultant company, such as ARA-LLC, can protect the Board of Directors in a community from personal liability concerning reserve components and reserve funding.
A reserve analysis study is often required by your accountant during the preparation of the association's annual audit.
A reserve analysis study is frequently requested by lending institutions during the processing of loan applications, both for the community and, and many cases, the individual owners.
The reserve analysis study lists a detailed inventory of your association's major assets and serves as a management tool for scheduling, coordinating and planning these future repairs and replacements.
This reserve report is a tool that can assist the association's board in fulfilling its legal and fiduciary obligations for maintaining the community in a state of good repair. If a community is operating on a special assessment basis, it cannot guarantee that an assessment, when needed, will be passed. Therefore, it cannot guarantee its ability to perform the required repairs or replacements to those major components that the association is obligated to maintain.
Since the good reserve analysis study includes accurate measurement and cost estimates of the client's assets, the detail reports may be used to evaluate the price of contractors' proposals when assets are due to be repaired or replaced.
The reserve study is an annual disclosure to the membership concerning the financial condition of the association, and may be used as a "consumers" guide by prospective purchasers.