Here at Cedar Management Group, we strive to keep our communities aware of the most effective ways to avoid unexpected costs, in particular with maintenance. Reserve studies and historical trends are two very helpful tools that can be used when planning maintenance costs in your budget. The Reserve study can be used to look at the future costs of planed maintenance repairs and replacements while the historical trends can be used to look back at the past for the costs of maintenance repairs and replacements. When both the past and the future costs of maintenance are considered, you will be able to paint a pretty good picture of what needs to be budgeted for your current maintenance costs.
The Reserve Study is a very beneficial tool when planning the future costs of the replacements and for assessing the useful remaining life of the assets that your community maintains. A Reserve Study is typically conducted by an engineering firm, and used to project when a particular asset will need to be replaced and what the projected cost would be. For example, the roofs in your community may already be 15 years old, and there is, currently, not a reserve budget for replacing them. The Reserve Study would take into account how old the roofs are, and given the condition of the roofs, how much longer the remaining useful life of the roofs would be. This would be used in order to project what the replacement cost would be for the new roofs in about 10 years when the roofs would need to be replaced. So, the community would know how much they should be budgeting for their reserve funds each year for the next 10 years, in order to be able to afford the new roofs when it is time to replace them. This will reduce the need for special assessments and it allows the community to wisely plan replacements and budget for the future. The Reserve Studies are typically tailored for each specific community and can cover most building maintenance replacements such as siding, roofs, gutters, streets and sidewalks, pools, tennis courts, and a variety of other assets that may need a replacement budget for the future. In some states it is mandatory for certain communities to have a Reserve Study done every few years to ensure the community meets its fiduciary responsibilities. Although the Reserve Studies are not a requirement of the States of North and South Carolina, you may want to consider having one done for your community if you do not have one already.
The historical trends are what most associations look at when planning their maintenance budgets. You simply look at the maintenance and the costs of maintenance from the past year or even better the past few years, and then use that data to project what you should expect to spend for your current budget. If you have a Reserve Study in place already, then most of you larger maintenance replacement costs have already been accounted for, and budgeted for, and you will be using the historical trends to budget mostly for the Routine, Preventive, Requested and Emergency maintenance and upkeep of your community’s physical assets . You will want to keep in mind that as the cost of living goes up so does the cost of maintenance and materials. It’s probably going to cost you more this year than it cost you last year, and if it has been several years, there is the possibility of a significant difference in the previous costs in comparison to the new costs. Therefore, we urge everyone to think ahead and keep the ever increasing costs in mind as you are using these historical trends to plan for maintenance budgets.