The Decision That Happens Before Every HOA Project: Is Your Reserve Study Actually Working for You?
Most of what I write about—bid leveling, contractor interviews, closeout—happens after a board has decided to do a project. But there's a decision that comes before all of it, and it quietly determines whether your community is ready when that roof, those roads, or that pool finally wears out.
It's your reserve study. And if it's sitting in a drawer getting dusted off once a year at budget time, it isn't doing its job.
Here's the uncomfortable backdrop: an analysis of more than 100,000 reserve studies found that roughly 74% of HOAs in the U.S. are underfunded. Rising material and labor costs are part of it, but just as often the problem is that boards treat the reserve study as a compliance checkbox instead of a planning tool. Let's fix that.
1. Know which kind of study you actually have
There are three recognized types under the national standards, and they are not interchangeable. A Full study includes an on-site inspection and a fresh inventory of your components—you generally want this every few years. An Update with site visit revisits the numbers with eyes on the property. An Update with no site visit is a desk review of the math. If your board has been quietly renewing "no site visit" updates for six years straight, no one has actually looked at your buildings in six years. Costs and conditions drift. Get a full study back on the calendar.
2. Understand your "percent funded"—it's a health score, not a grade
Percent funded compares what you have in reserves against what you should have at this point in your components' lives. The rough bands the industry uses: above 70% is strong, 30–70% is fair, and below 30% is the danger zone where special assessments become likely. The number itself isn't pass/fail—a community at 45% with a steady funding plan can be in better shape than one at 65% that's about to face three big projects at once. What matters is the trend and the plan behind it.
3. Read the funding plan, not just the component list
The most valuable page in the study is the one most boards skip: the funding plan. It tells you whether your current contributions keep you on track or quietly dig a hole every year. If the study assumes annual increases you've never actually passed, your real funding level is worse than the report's headline number. Pull that page out and ask your reserve analyst one question: "If we keep doing exactly what we're doing, where are we in ten years?"
4. Update it after every major project—not every several years
This is where the study and everything else I write about connect. The moment you complete a roof replacement or repave the roads, two things changed: you spent reserve dollars, and you reset that component's clock. A study that doesn't reflect your last three projects is feeding the board stale numbers at exactly the moments you're making the biggest financial decisions. Make "update the reserve study" the final line item on every project closeout.
5. Use it to time projects, not just fund them
A good reserve study is a calendar as much as a budget. It tells you the asphalt and the roof are both due in 2029—which is your cue to not schedule them in the same year, or to start sequencing and bidding early to avoid a cash crunch. This is the upstream version of the scheduling discipline I always preach: the boards that avoid emergencies are the ones reading their reserve study two and three years ahead, not reacting when something fails.
The bigger point
A reserve study isn't a document you have. It's a tool you use. The boards that stay out of special-assessment territory aren't the ones with the fattest reserves—they're the ones who actually open the study, understand the funding plan, and let it drive when and how they take projects to bid.
If your study is more than a couple of years old, or you're not sure what your percent funded even is, that's the place to start. Happy to walk through yours and help you read between the lines.
Sean Davis, PMP | Civil Engineer | Current HOA Board Member (12 years) | DHA Construction Management | Broomfield, CO
Next up: how to read a pay application without a finance degree.
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