Reserve Funds are a necessary part of an association. Part of your association dues goes towards this fund that will help pay for future repairs. This fund is typically used for roof replacement, deck replacement, siding, driveways, and other big ticket items. When you purchase a condo or a townhouse, you should pay special attention to the reserve fund and how much is in it.
What is a Reserve Study?
There are two parts to a Reserve Study. The first part is taking a look at the physical assets of the association, the roof, the sidewalks, the heating plant, the pool, etc. In the study, they will assess the condition of each of these components, and estimate the cost of replacement, as well as the time frame of when they need replacement. These costs are added up and put on a schedule where they can collect enough reserves to pay for them as they come up.
How Much Is Enough?
The second part of the study is how much is in the reserve fund, and whether an item may need replacing before the funding is there. Typically the amount that an association should have in the reserve fund is between 50% on the low side, and 70% on the adequate side. This all depends, though, on the condition of the physical infrastructure and the cost associated with replacement.
Additional Reserve Fund Resources
Budgets and Reserve Schedules - By the Florida Department of Business and Professional Regulation
Are your condo's reserves adequate? - By How Stuff Works
HOA Reserve Funds - Rebecca Law & Associates
Sample Reserve Study - AssociationReserves.com