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A good reserve fund study is one of the best financial predictive tools at your disposal. However, if you take the time to master reserve fund study management it can also help secure the success of your condo board’s performance.
Participate in the Process of Reserve Fund Study
The best way to master reserve fund study management is to actively participate in the process. At least one board member should escort the reserve fund study provider around the property, so you can ask important questions. You can also see how past investments have held up since the last study. Did the board make changes not listed on the reserve fund study? Perhaps repairing the front steps following an accident? Sharing this information as the study is performed helps the provider in his review. However, it also helps you gain a better understanding of how past investments have held up, for better accuracy in budget allotment for future maintenance.
How to Prepare for the Reserve Fund Study
Review the last reserve fund study and make note of any work that was completed in the last three years. Consider scheduled projects not completed, and why. What challenges did you encounter? Was it financial? Difficulty finding tradespeople? Maybe disputes that interfered with projects running on time? As well, create a list of questions for projects slotted for replacement or repairs in the next year. You can then ask the provider if the projects might hold up longer at the time of inspection. Understanding opportunities like this allow you to find more funds for other projects.
Review Previous Costs
Looking at how accurate the reserve fund study predictions have been to date provides the valuable insight you can share with your study provider. For example, if your financials indicate you faced higher costs consistently, you might want to discuss these concerns. Perhaps they are not including inflation or adding a contingency line in their studies. As well, your provider might even spot overcharges or questionable fees not common in the industry. Discuss advice from vendors regarding further work required. Was there a replacement missed at the last reserve fund study? Is the vendor misleading you to find more work for themselves? Open discussions about these issues can help avoid potential oversights, and investment in unnecessary work recommended by greedy tradespeople.
Discuss Board Decisions
It is not uncommon for boards to make decisions that differ with the reserve fund study recommendations. For example, opting for minor repairs where replacements were recommended due to reserve fund cash flow issues. Deferring replacements due to a shortage of funds can impact your budgeting and even end up costing you more in the long run. Is it advisable for example to continue to pay for parking lot patchwork, instead of completing the full project? When does your budget show you can have the funds to complete the work? When you share this information with the provider they can point out when it costs you more on patchwork, than performing the replacement. In this case your board might be better off applying for a loan. You can complete the work at a lesser cost, and then make payments on the loan instead of spending money on ongoing repairs.
Because you participated in the inspection, you will have a much better understanding of your reserve fund study. Your board can be more successful and avoid the need for special assessments.
CPO Management Inc, Toronto property management company specializing in condo management services, can help your condo board with reserve fund management. Reach out to us today.