When it comes to business, any information that could provide more info about the state of a location can be immensely valuable. A reserve fund study (or depreciation report in BC) can do just that. These studies or reports provide condo or strata owners with insight into the property itself. However time can be important for many condo owners, so how long is a site visit for a commercial appraisal like this?
Typically a reserve fund study at least one month to complete since there are plenty of details that are important. Because depreciation reports and reserve fund studies are required by law in most provinces the process is important to do properly and with attention to detail.
Aside from the legal requirement, what is the benefit of this document and what is actually contained in it? We explore that below.
What a Reserve Fund Study Contains
A reserve fund study is a report that provides condo company owners with the following insight:
- Clarity on what condo corporations actually own
- The number of funds they have
- The timing of potential replacements for major housing system components
- Anticipated future costs
- How future replacements will be paid for
Basically, the report will provide guidance on planning budgets through a business approach to condo ownership.
The report itself contains:
- A complete physical inventory of all common property (this includes roof systems, pavement, landscaping, etc.)
- A detailed breakdown and analysis of the observed condition, actual and effective age, remaining economic life, and current and future replacement costs for each component of common property
- An assessment of the extent of funds required to match anticipated future costs
- An analysis of the current balance of the reserve fund and the amount the condo corporation has been contributing to it in the past
- Development of funding models to assist the strata in reaching its financial goals
The Benefits of a Reserve Fund Study
Like we mentioned previously, although it’s required by law in most areas, reserve fund studies give condo corporations many pieces of valuable information into the financial aspect of their investment.
It can also help condo corporations to plan for replacements in advance and ensure they are prepared with the proper funds in the event systems and structural components like pavement or roofing need to be installed.
Additionally, a reserve fund study can save time during the annual budgeting process for the property managers and the board of directors/strata council.
Overall, reserve fund studies or depreciation reports are valuable to any condo corporation and can provide an essential understanding of many financial planning preparations for the future and preparation for replacements or repairs that may need to be done.