Between the pandemic and ongoing digital transformation across multiple industries, the world has taught us that we live and work in real time moments. Our digital devices and access to information has also changed expectations. Let’s face it, no one wants to wait a minute anymore for a response. And, can you blame them?
With that in mind, our managed community environment also must change with the times and elevated expectations about all aspects of our business. Recently, one of our partners, SmartProperty, published their findings on why it makes sense to move from a traditional, static reserve study to a living reserve study.
A traditional reserve study can still be considered as a planning tool. It does help to establish an initial budget and provide a long-range understanding of the potential end-of-life point for your community’s buildings, amenities, and equipment.
However, in many ways, it’s become an outdated planning tool, especially when you consider some of the unexpected situations in our industry. Here’s why it may be time to change your approach.
Long-term planning may work for certain situations, but it does not work for something like an aging building. It only gives you a single point of time and looks at the end of life for your community’s assets.
The Surfside building disaster illustrated to our industry the critical nature of having a strategic plan in place that provides regular analysis of aging assets. Waiting to do a reserve study means that you may not be adequately prepared for those ‘surprise’ expenses.
You could potentially avoid those expenses and assessment increases by doing a more regular accounting of your community’s financial standing and the state of your community’s structures, equipment, and amenities. Also, the longer you wait to investigate and track critical maintenance projects, the worse the situation may get in terms of liability, costs, and potential loan terms should you have to seek outside funding.
In the meantime, your community’s assets begin to decrease rapidly along with your credibility and the community’s value to prospective home buyers.
It’s not just about doing a reserve study; it’s more about what you can get out of it in terms of data that helps you make decisions that determine the health and wealth of your managed communities.
You will need to have a process and system to get to the best data possible. Within that system, it’s important to have a way to collect, track, and manage the information you are able to get with each study. And, aging data that tells you what happened a year ago may not be relevant to what’s going on with your properties today. That’s why you need to add speed to your reserve study process.
In returning to the Surfside case, time was not on their side as they delayed the data collection process and deferred maintenance only to realize disastrous results. They chose homeowner satisfaction with no assessment increases over safety as well as relied on outdated planning information.
Unlike the traditional reserve study, the “living” reserve study is updated monthly based on exported expenses from the management software that’s used. Therefore, the study evolves based on financials and funds that were put towards anticipated expenditures.
In using a tool that provides ongoing data updates, you will be able to:
In the process, you will be more likely to not have those “surprise” costs that diminish trust with your residents and increase animosity within your community due to special assessments, additional fees, insurance loss, and lower property values. They will see that your proactive approach to using data to continually assess risk and inform preventative maintenance serves as a way to protect the community and residents.
The reason it is called a living reserve study is because its dynamic and constantly evolving. It’s a collaborative platform where your team can log in, look at current data, and add more information as soon as you get it. You will be able to develop a sustainable plan that focuses on extending the life of your community assets.
Innovia is here to help you evolve your strategic planning and leverage a system that continuously updates your plan to be relevant and proactive about the quality of living standards and fiscal health of your communities. To learn more about how our co-op can support your organization, contact us here.