How much should HOA have in reserve?

[Parizade]

I own a townhome and pay dues like everyone else, and I look at the financials. The reserve amount seemed very high, but I really don't know what it should be or how to discover that.

I recently asked at a much smaller association what their reserves were and was shocked to hear they only had $200 in reserve. That seems like no where near enough.

What are the guidelines? Anybody know?

[iamlindoro]

Most HOAs determine reserve needs by funding a periodic reserve study.  The amount of appropriate reserves will vary widely by what services the HOA offers, and how much responsibility they take for structural issues.

An HOA for a condo complex that is responsible for deck safety, parking areas, structural walls, pools, and roofs will have much higher reserve needs than an HOA covering detached single family homes where virtually no services are provided.  This first HOA must collect enough to fund the replacement of each of these items by the end of its useful life-- so a new roof every 20-30 years, new decks every 15-20 years, new asphalt parking every 10ish years, etc.

If you really want to see how well funded the reserve is, what you actually want to be looking at is the reserve study.

[Parizade]

Thank you, that was very helpful!

[Mr. Green]

Most HOAs determine reserve needs by funding a periodic reserve study.  The amount of appropriate reserves will vary widely by what services the HOA offers, and how much responsibility they take for structural issues.

An HOA for a condo complex that is responsible for deck safety, parking areas, structural walls, pools, and roofs will have much higher reserve needs than an HOA covering detached single family homes where virtually no services are provided.  This first HOA must collect enough to fund the replacement of each of these items by the end of its useful life-- so a new roof every 20-30 years, new decks every 15-20 years, new asphalt parking every 10ish years, etc.

If you really want to see how well funded the reserve is, what you actually want to be looking at is the reserve study.

+1. I recently joined my HOA board and it's interesting to see all the data that goes into building up these reserves. Highly dependent on your specific community and what's provided by the HOA. I believe all that documentation is public so you could ask to see the data. We just had a reserve study done and it's quite extensive, more than I'd care to see without some sort of summary if I wasn't on the board. Some communities that are large enough and provide extensive services can end up with reserves that are so large that some of the money gets invested because it's not really in the best interest of the community to have seven figures sitting in savings accounts for a decade or longer.