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A Reserve Fund Study is a critical source of information that is often overlooked as time goes on and the reserve fund report ages. Analyzing their reserve fund study every year is a critical practice that all condominium corporations and strata should be doing.
Actively managing your Reserve Fund Study is key to maintaing long-term equity in your Condominium.
Traditionally, reserve fund studies are static documents that are created to give you the best idea of expenditures that need to be completed over a set forecast. In general, as a reserve fund study ages, the projected financial forecast begins to deviate from what the actual reserve financials are.
Magnum York recommends MYRPlanner
Magnum York has been working with Reserve Plus to bring this exciting solution for Reserve Fund management to your condominium. It provides tremendous value and redefines what it means to do reserve fund study management.
Scroll to the bottom of this blog post to see the full webinar. Please see our information “brochure” on Magnum York’s MYRPlanner:
Steven Laidlaw, President of Reserve Plus joined Magnum York Property Management as a special guest to discuss the MYRPlanner Software and how it helps Corporations with reserve fund management in Canada.
The complete webinar can be viewed on YouTube or at the end of this blog. Visit Magnum York on YouTube for more educational content. Click on the icon below.
Why Analyze Your Reserve Fund Study?
Although there are no provincial regulations that state when a reserve fund forecast should be recalculated or analyzed, it is in the best interest of the owners that the forecast be as accurate as possible.
Many provincial jurisdictions require the actual versus expected contributions, expenditures, and balance to be outlined in the annual general meeting documentation. Although this is a good practice, there is little context or analysis put into any difference in these numbers. This is why it is important to fully understand what is happening with your reserve fund through an in-depth analysis.
It is important to keep in mind that a reserve fund analysis is not always going to highlight areas of concern. In some cases, it can highlight areas of excess funding which would allow for a reduction in contributions and savings for owners.
The Importance of Reserve Fund Analysis
The reserve fund study is designed to help your property plan and prepare for the future. Managing an accurate reserve fund study is only the first step for ensuring that your most important asset is properly maintained and repaired when required. Constant analysis is the second step that will allow you to stay on top of the reserve fund financials and understand the impact of real-life changes that the static study cannot predict.
Continual reserve fund analysis is evidence to potential buyers that the property is in control of its financial future. This, in turn, makes your property more attractive to potential buyers.
How to get the most out of your Reserve Fund Analysis
During the analysis of the reserve fund study, the Board should be allowed to provide future expenditures they would like to be included in the analysis with the understanding that major changes to expenditures can result in significant cash flow issues. Upon updating the expected future expenditures, a financial analysis that projects the future closing balance of the reserve fund study should be completed.
Based on those projections, an updated contribution schedule may be required to account for increased spending that was not included in the initial reserve fund study. It is recommended that multiple contribution schedules be provided to give the property a better understanding of what is required and how they can get there.
Always remember that the key to any reserve fund analysis will be understanding
1. Where you are, currently
2. Where you are going
3. How you are going to get there
How Reserve Plus’ Solutions can Save Corporations Money
Condominium Corporations and Strata use Reserve Plus to help analyze the reserve fund study after the report has been generated. Reserve Plus provides this support through their software called MYRPlanner. The MyRPlanner dashboard allows condominium corporations and strata to analyze their reserve fund study through two methods:
5 Year Plan
The five-year plan allows property managers and Boards to change the expected cost and replacement/maintenance year of expenditures. Based on these changes the current reserve fund balance is used along with the contribution schedule outlined in the reserve fund study to update the forecast of the reserve fund study.
If deficiencies are found over the forecast, two funding scenarios are recommended to help the property avoid a special assessment or cash call. The five-year plan is expected to be updated annually which continually refines the forecast, allowing more informed decisions to be made.
The annual report is used to track reserve fund expenditures and actual financials. It compares the current financial forecast with the adjusted forecast, based on the actual inputs. The annual report can be provided to the owners during the AGM to give them a better insight into the reserve fund finances and the work that had been completed on the property over the current year.
Additionally, the annual report determines a special assessment risk for the property. In cases, where the assessment risk is low, properties can be assured that they can continue with the expectation of the reserve fund study. In cases, where the assessment risk is high, properties will need to take some time to understand what can be changed in the upcoming 5-year plan to help reduce this risk.
In addition to the 5 Year Plan Report and Annual Report, myRPlanner can help you with,
- Hosting and storing key documents
- Requesting quotations for work that needs to be completed on the property, allowing you to budget accordingly
- Ongoing support for the myRPlanner software and help with interpreting the results of your Annual Report and 5 Year Plan
Watch the Zoom Webinar on YouTube
Watch the complete zoom webinar below, on YouTube: