Foundations

Funding/Risk/Decisions

ReserveScore™

Types of Studies

Process

Strategy

FOUNDATIONS: UNDERSTANDING RESERVE STUDIES

  • A reserve study is a long-term plan that identifies what your HOA is responsible for maintaining, when those components will need repair or replacement, and how to fund those costs over time.

    Today, it also plays a role in risk management. Insurers and lenders increasingly look at reserve studies to evaluate how well a community is maintained and financially prepared. A current study signals stability and planning—not guesswork.

  • A reserve study should be prepared by a qualified professional with experience in construction, component lifecycles, and financial modeling.

    The quality of the study depends heavily on the person preparing it. A well-prepared study gives your board confidence in decision-making, not just numbers on a page.

  • A Reserve Specialist (RS) is a designation from CAI that indicates specific experience and qualifications in reserve study preparation.

    For boards and managers, it’s a reliable baseline that the preparer understands both the physical and financial sides of reserve planning.

    The Community Associations Institute (CAI) is the leading international authority on community governance, providing the professional certifications and industry standards that ensure an association follows the highest level of management and ethical best practices.

  • Because major components wear out, and replacing them is expensive.  A reserve study allows you to plan and fund those costs over time instead of reacting when something fails. 

    It also demonstrates that your community is being managed responsibly, which matters to insurers, lenders, and future buyers.

  • No. It supports your budget, but its real value is in planning and risk management.

    It helps your board make informed decisions today that reduce the likelihood of special assessments, deferred maintenance, and financial surprises later.

  • A reserve study plans for major repairs and replacements. A maintenance plan focuses on ongoing upkeep.

    Both are necessary. Maintenance extends the life of components, while the reserve study ensures you’re financially prepared when replacement is unavoidable.

  • No. Reserve funds are for repairing or replacing components the HOA already maintains—not for adding new assets.

    If the association takes on a new asset, it must plan separately for funding its future maintenance and replacement.

  • It starts with your CC&Rs, which define what the HOA is responsible for maintaining.

    From there, the study includes components that are significant in cost and have a predictable lifecycle. Getting this right is critical—missing items creates hidden financial risk.

  • Traditionally, reserve studies projected about 20–30 years. Today, many extend much further—often 40, 50, or even 60 years—to account for long-life components like plumbing, electrical systems, and structural elements.

    Including these longer-term items helps avoid major surprises and gives a more complete picture of future obligations. It’s not just about the next project—it’s about understanding the full lifecycle of the community.

  • It’s the estimated time before a component needs replacement, based on its current condition—not just its age. 

    This directly impacts timing and funding, which is why accurate assumptions matter.

Every building has a story, and most of it is written in maintenance. A reserve study just reads ahead a few chapters.

FUNDING, RISK, AND DECISION-MAKING

You can pay a little on purpose, or a lot by surprise. The math always picks the same winner, so you might as well pick it first.

  • The study compares what you have to what you should have based on your components and timelines.

    More importantly, it shows whether your funding plan can reliably cover upcoming projects without disruption.

  • You increase the likelihood of special assessments, deferred maintenance, or loans.

  • It spreads costs over time so owners contribute gradually instead of all at once.

  • Because future costs are already approaching, even if everything feels fine today.

    Steady, predictable funding is more manageable for owners—and viewed more favorably by insurers and lenders than sudden corrections later.

  • Inflation increases the future cost of projects every year.  If funding doesn’t adjust, the association can fall behind even without any change in condition.

  • Because costs, conditions, and timelines evolve.  A study that reflects current reality is doing its job—static numbers usually mean it’s outdated.

  • Costs typically increase, and the issue often spreads.  Delaying work can turn a manageable project into a much larger one.

  • No, but the board is expected to make informed, defensible decisions.  Ignoring the study without a clear rationale may increase both financial and legal risk for the board.

  • Well-funded communities are more attractive to buyers and lenders.  Underfunded communities often face financing challenges, which can directly affect resale value.

  • There isn’t a single “right” number for every community. Percent Funded is a helpful snapshot, but it doesn’t tell the full story on its own.   Higher funding generally means lower risk, but what really matters is whether your reserve plan can fund projects reliably—and how your funding is trending over time.

    That’s where the SMA Reserve Score comes in. It looks beyond Percent Funded to evaluate overall strength, direction, and risk—giving a clearer picture of where your community stands and where it’s headed.  Insurers and lenders are looking for that broader story, not just a percentage.

    This is something we help boards evaluate every day.

  • They evaluate funding levels and financial stability when reviewing loans.  A well-prepared study supports smoother transactions and buyer confidence.

  • More closely than ever.  A current study shows that the association is proactively managing maintenance and financial risk.

  • Because more stakeholders are paying attention—insurers, lenders, and buyers.  A current study signals that the community is organized, proactive, and well-managed.

  • In most cases, no.  Outdated studies often create larger financial and credibility issues later.

TYPES OF STUDIES & UPDATES

  • A full study (L1 or L2) includes a site inspection and condition assessment. An update (L3) adjusts financials and timelines.  In California, under California Civil Code §5550, HOAs must conduct a full reserve study (including a visual, on-site inspection) at least once every three years. The board must also annually review and update the study to ensure proper funding for major repairs/replacements. It is a mandatory, legally binding process, not a best practice.

  • It updates costs, timelines, and funding without reassessing physical condition.  It’s an efficient way to stay current when conditions are stable.

  • When it’s been 3 years since the last one, or when there’s been significant work, visible deterioration, or uncertainty about condition.  A site visit provides clarity when assumptions are no longer reliable.

  • At least annually for financial updates, with triennial site inspections.  Staying current is more valuable than simply meeting minimum requirements.

  • Yes.  Costs and assumptions still change, so updates remain important.

  • Very accurate financially, assuming component conditions haven’t changed significantly.  If they have, a full study is more appropriate.

Three kinds of study, one right answer for your year

PROCESS & PRACTICAL QUESTIONS

A reserve study is equal parts clipboard and calculator. We measure what is there, then map out what it will cost to keep it.

  • Current financials, reserve balance, and recent project activity.  Clean inputs help ensure speed and accuracy.

  • Costs are based on a combination of your association’s historical data, recent vendor proposals or invoices, industry cost data, and our proprietary database built from similar communities.

    These are planning-level estimates—not exact bids. The goal is to ensure the association is financially prepared overall when projects occur. Because costs change, regular updates keep those estimates aligned with reality.

  • Typically we can meet client timelines once complete information is received.  The biggest factor is how organized the input data is.

  • The components are updated or reset in the study, and the funding plan adjusts.  This keeps the study aligned with actual conditions.

  • We reconcile differences and adjust forward.  Accuracy moving ahead is what matters most.

  • It should guide reserve contributions and support overall budgeting decisions.  It provides long-term context for short-term planning.

  • Outdated costs, unrealistic timelines, or assumptions that don’t reflect reality.  If it doesn’t evolve, it’s not useful.

  • Treating the study as a formality instead of a decision tool. The value comes from using it consistently.

  • Pricing varies, and is calculated based on the size of the HOA (number of units, amenities, etc.). 

STRATEGY & REAL-WORLD APPLICATION

  • Focus on safety, legal/code requirements, structural integrity, and cost escalation risk first.  The study helps guide those decisions logically.

  • Maintenance extends component life.  The reserve study ensures funding is ready when replacement is needed.

  • It shortens component life and increases costs.  Delaying maintenance often leads to larger financial impacts later.

  • Sometimes, depending on scope and risk.  The study can help model different approaches.

  • With clarity and transparency.  When owners understand the plan, they’re more likely to support it.  SMA Reserves strives to produce reports that are easy to read and understand.  That’s the “expertly prepared, simply presented” difference.

  • It provides a structured, forward-looking framework.  It helps boards move from reactive to proactive decision-making.

A reserve plan is less about predicting the future and more about refusing to be ambushed by it.

SMA RESERVESCORE™

Percent funded is the score at halftime. ReserveScore tells you how the game is likely to end.

  • A simplified way to understand the strength and direction of your reserve funding.  It helps boards quickly assess risk and stability.

  • Percent Funded is a snapshot of one metric.  The ReserveScore™ evaluates trends and trajectory based on multiple metrics.

  • To provide a clearer, more meaningful view of reserve health.  Boards need more than a single percentage to make decisions. 

  • Yes.  Funding decisions and planning directly influence it.

  • We focus on clarity, not complexity.  Our goal is to deliver a reserve study you can actually use—one that supports decisions, reduces risk, and holds up under real-world scrutiny.