FEATURED EBOOK: The Complete Reserve Fund Handbook

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A successful homeowners' association (HOA) will need to address its major components, like elevators, clubhouses, and swimming pools, eventually needing to be repaired or replaced. The funding for this comes from the money set aside in the association's reserve fund.

An HOA reserve fund is cash saved by a community association for additions to components the association is obligated to maintain and future replacements and repairs that don’t happen regularly. While an appropriately funded reserve account is crucial to a well-run association, some studies estimate that nearly 70% of HOAs in the United States are underfunded. That means they lack the proper savings to pay for major projects or parts when they are needed.

As industry leaders, we at Associa know how essential reserve funds and studies are to a community’s financial well-being. In this ebook, we provide valuable answers to commonly asked questions about reserves, including:

Is your association properly funded
What's an HOA reserve fund?
Why do HOAs need a reserve fund?
What can HOA reserve funds be used for?
How much money should an HOA have in its reserve account?
What's a reserve study?
How often should a reserve study be performed?
How do you plan and budget for a reserve fund?
Are HOA reserve funds tax-deductible?

Download the ebook now!

Benefits of Well-Funded HOA Reserves

Creating and maintaining an adequate reserve fund is part of a board’s fiduciary duty, but some studies estimate that nearly 70% of HOAs in the United States have underfunded reserves. The following are four reasons to make sure your reserves are properly funded.

1. Proven Responsibility

Well-funded reserves demonstrate good stewardship of the association’s money. Homeowners will have peace of mind that the board is acting in their best interest, and their most valuable asset—their home—will be protected.

2. Guaranteed Preparation

Proper reserves allow the association to pay for unexpected expenses, like damage from earthquakes, hurricanes, and other natural disasters. If an unexpected event occurs and sufficient funds aren’t set aside, a special assessment may need to be issued.

3. Increased Lender Confidence

Lenders appreciate a well-funded reserve because that means an association is less likely to issue a special assessment to cover repairs and replacements or pay an insurance deductible for a natural disaster. Lenders are more confident that their money is used on actual costs, with a very small chance that a buyer will overextend credit lines or deplete cash. Some lenders also assess for indications of financial health when reviewing mortgage applications, and an association with inadequate reserves may be at risk for mortgage denials.

4. Buyer Attractiveness

The overall appearance of a community translates directly into its property value. With appropriate reserves, associations can cover unexpected expenses and community asset replacements, improving resale values, keeping current homeowners happy, and attracting new buyers.

Webinar: What You Need to Know About Reserve Funds & Studies

To learn more about HOA reserve funds and studies, check out our webinar, “What You Need to Know About Reserve Funds & Studies.” In it, we break down commonly asked questions and provide helpful tips and insight from experts.