Capital Asset Management/Reserve Studies
Structural Technologies’ extensive involvement through the entire building restoration process not only ensures that your project is completed according to specification, it also gives you peace of mind.
A properly designed and implemented reserve study will establish the appropriate level of reserve fund contribution and accumulation of funds to achieve the association’s objectives for capital asset repair or replacement.
- Detailed onsite inspection of elements to be included in the study
- Photographic documentation of the elements & deficiencies
- Detailed written analysis of existing conditions including repair recommendations
- Financial reports & spreadsheets to facilitate budgeting & funding
Properly Designed Study
The Association / Association Board must determine the appropriate level of assessment of their membership to fund the required replacement or major repair of capital assets or understand that a “Special Assessment” of the homeowners will be required as capital items require major maintenance or replacement.
Why Are Reserve Studies Important?
A reserve study, for all intents and purposes, is to create a functional budget so that associations’ property owners, and building owners alike can ensure that monies collected are done according to necessity and area allocated to capital expenditures in the most cost-effective means possible.
To put this concept into context, say that Association A has amassed a reserve fund of $200,000. The board wishes to update the building/property in order to raise property values and as such embarks on a restorative effort/restoration project of the exterior façade elements; for the purpose of this example we will refer to it as a masonry project. The association is able to complete the restoration project for approximately $175,000. The project goes smoothly and the residents are pleased with the buildings new face and are pleased to know that their money has been well spent.
Unfortunately, unbeknown to the association, the roof of the building had already exceeded its functional life expectancy and was becoming saturated with water. Later that same year, the residents of the unit located directly beneath the roof have noticed what appears to be water stains, first at their ceiling level and later even their walls. Concerned that the contractor that had completed the repairs to the exterior façade had unintentionally created an issue (or had not completed the restoration in a manner consistent with best methods), the association elects to retain the services of a third party perform a comprehensive analysis of the building in order to accurately diagnose the source of the moisture/water infiltration issues. During this inspection, the consultant identifies that not only has the roof failed but is also the source of the leaks experienced by the residents. The analysis also concludes that the damage has become so severe that it is likely that the exterior wall had become damaged in the process and recommends that the association replace the roof and all damaged sections of the exterior masonry to prevent further damage.
Having already spent the balance of their reserve fund and without the ability to finance the project with the remaining amount, the association is forced to special assess the residents in order to raise enough money as collateral to receive a loan in the estimated amount for the project. The residents, irate with being required to spend additional money on yet another restoration project, seek legal representation against the board for the misappropriation of funds and find that the association does not have an updated reserve study on file.
As you can see, reserve studies serve such an important function for the association and the common-interest community as a whole, and given the recourse of having an inaccurate or incorrect reserve study performed, it is in the association’s best interest to have a comprehensive reserve study not only on file but updated regularly to ensure that the association to a reserve underfunding problem.
Structural Technologies Reserve Study Methodology
There are industry-specific qualifications awarded to firms who focus exclusively on the production of a “mass quantity” of reserve studies, unfortunately, there is no penalty for performing these studies and ultimately providing the client with inaccurate data. A reserve study, by nature, is an “estimate” of future costs as they relate to the repair and replacement of the Common Area Components at a property. Obviously, the more knowledge and experience a firm and an inspector has, the more accurate the study. The most accurate studies combine extensive on-site inspection with a thorough review of maintenance and repair projects, future projects and an understanding of building components and the real cost to repair or replace components. Obviously, the most accurate “cost estimates” would be the result of the solicitation of bids for various projects. This would provide “real” values for repair or replacement of building components. Costs for repair and replacement of building components vary considerably based on the building location, access/mobilization issues, permitting costs, engineering costs, material costs, labor costs and liability.
Any company or person performing a reserve study must have a comprehensive background and ongoing involvement with the construction industry; including developing specifications, bidding projects and supervising construction. Without this knowledge and experience, there is a very high probability that the “estimated costs” included in a reserve study will be inaccurate.
Throughout the industry, reserve studies have been largely treated as necessary “accounting” task. They have typically provided only immediate, short-term accuracy regarding on-site conditions, replacement/maintenance budgets and capital accumulation required to achieve repair/replacement in a timely manner. Structural Technologies, Inc. is committed to providing a more accurate and useful reserve study.
Our proprietary ProStudy software was developed to achieve the most comprehensive, detailed and accurate reserve study in the industry. It is the only program which accounts for major maintenance, cyclical repair or replacement, special assessments, construction loans, inflation and variable rates of return on deposited monies.
ProStudy has over 200 pre-loaded components, component definitions and useful life of the various components. The ability to enter prices relating to a specific property and degree of difficulty ultimately increases the accuracy of the customized study.
ProStudy allows for the import digital or scanned photographs, CAD drawings, Word documents, Excel spreadsheets, field notes, and observations in order to deliver the most comprehensive reserve study in the industry.
Combine this innovative software program with Structural Technologies, Inc.’s extensive knowledge of construction and related costs to restore, repair or replace property components and you can be certain that your reserve study will be accurate, effective and your annual budget will be based on reliable information.