It’s difficult to plan a budget for your building—and, more importantly, to stick to it—if problems arise that your board/management team haven’t anticipated. Maintenance issues and structural crises aren’t just inconvenient surprises; if you haven’t planned adequately, they can decimate your community’s bank account.
Capital reserve studies are one way to prevent surprises from popping up. These assessments are performed by engineers and/or architects who go over your building with a fine-toothed comb: making note of the age, condition, and possible trouble spots of the various components of your physical plant. Data gathered from this study goes into a report that is then submitted to the board and management, who can then use the information to better plan for their building’s financial long-term.
Planning for a Reserve Study
Once your board and management team decides that a capital reserve study is the thing to do, you’ll need to figure out how often you should have one performed. According to experts, you should consider having one done about every five years.
“Conditions to the physical plant can change more—or less—than originally anticipated and costs can also change dramatically,” points out Victor Rich, a veteran CPA with Manhattan-based RSM McGladrey.
According to Rich, costs for a study like this will vary depending on certain factors, including the size and age of the property, demand and competition for similar services in the area, and the quality and depth of study desired by the board.