How Reserve Studies Impact Your Annual Budget and Dues

For condo associations and HOAs, annual budgets directly affect homeowners’ trust, property values, and long term financial stability. One of the most important tools influencing those numbers is a reserve study.

At Hennessy Reserve Partners, we often work with boards who ask: Why did dues increase? Are we underfunded? Could we have avoided that special assessment? In almost every case, the answers tie back to how reserve studies are used (or ignored) in the budgeting process.

Below, we break down how reserve studies impact your annual budget and dues, using real world examples and Rhode Island specific insights.

Reserve Studies vs. Annual Budgets: Understanding the Difference

One of the most common points of confusion we see is the Difference Between Reserve and Operating Budgets.

• Operating Budget

  • Covers day-to-day expenses (utilities, landscaping, snow removal, insurance, management)

  • Resets every year

• Reserve Budget

  • Plans for long-term capital repairs and replacements (roofs, siding, paving, mechanical systems)

  • Funded gradually over time

Reserve studies bridge these two budgets. They tell your board how much should be allocated annually to reserves so future projects don’t disrupt operations or require sudden dues hikes.

How Reserve Studies Directly Affect Monthly Dues

Reserve studies don’t just sit on a shelf. They actively influence:

• Annual contribution levels

• Monthly dues calculations

• Long-term financial planning decisions

Example:

A 40-unit Rhode Island condo association had kept dues flat for years. Their reserve study revealed:

• Roof replacement needed in 7 years

• Pavement replacement needed in 10 years

• Reserves only funded at 32%

Without adjusting dues, the association faced a projected $6,000-$8,000 special assessment per unit. With the reserve study, the board instead phased in modest annual increases, protecting owners from a financial shock.

This is a clear example of how Reserve Studies Help Avoid Special Assessments.

Reserve Studies in Rhode Island: Why Local Matters

Reserve Studies in Rhode Island require a strong understanding of:

• Coastal weather exposure

• Freeze-thaw cycles

• Aging condominium infrastructure

• Local construction and labor costs

That’s why Rhode Island Condo Association Reserve Studies benefit from local expertise. National, template-style studies often miss region specific cost escalations and lifecycle assumptions.

Physical vs. Financial Analysis in Reserve Studies

A high-quality reserve study includes both components:

Physical Analysis

• On-site inspection

• Component inventory (roofs, siding, decks, elevators, mechanicals)

• Remaining useful life estimates

Financial Analysis

• Current reserve balance

• Funding models

• Inflation assumptions

• Contribution recommendations

Understanding the physical vs. financial analysis in reserve studies helps boards confidently explain budget decisions to homeowners.

The Role of Inflation and Cost Escalation in Reserve Planning

One of the biggest budgeting mistakes we see? Ignoring inflation.

Construction costs rarely stay flat. A roof that costs $400,000 today may cost $550,000+ in ten years.

A proper reserve study accounts for:

• Annual inflation assumptions

• Cost escalation trends

• Timing of major projects

Failing to do this often leads boards to believe they are “fully funded” when they’re not. This is why the Role of Inflation and Cost Escalation in Reserve Planning is critical to accurate dues planning.

Creating a 30-Year Capital Plan

Reserve studies are about Creating a 30-Year Capital Plan.

This long-range view allows boards to:

• Forecast cash flow

• Smooth dues increases

• Coordinate large projects

• Maintain lender and buyer confidence

Over time, this planning is a key reason Reserve Studies Protect Property Values.

Is Your HOA or Condo Association Underfunded?

Many boards want to know the answer to: Is Your HOA or Condo Association Underfunded?

Common warning signs:

• No recent reserve study

• Reserves below 50% funded

• History of special assessments

• Deferred maintenance

• Large upcoming projects with no savings plan

A current reserve study brings clarity and options.

How to Read a Reserve Study (and Use It for Budgeting)

Boards don’t need to be financial experts, but knowing how to read a reserve study is essential.

Key sections to focus on:

• Executive summary

• Funding status (% funded)

• Component replacement schedule

• Recommended annual reserve contributions

• Assumptions (inflation, interest, project timing)

Reviewing a Sample Reserve Study Report with your reserve professional can help boards confidently tie reserve recommendations into annual budgets.

What Rhode Island Law Says About Reserve Studies

While requirements vary by association type, What Rhode Island Law Says About Reserve Studies increasingly emphasizes fiduciary responsibility and financial transparency.

Boards that proactively plan:

• Reduce legal exposure

• Improve disclosure quality

• Strengthen governance

• Build homeowner trust

  
  

Choosing the Right Partner for Your Reserve Study in Rhode Island

Not all reserve providers are the same. Choosing the Right Partner for Your Reserve Study in Rhode Island means working with professionals who:

• Understand local construction markets

• Communicate clearly with boards

• Provide usable, decision-focused reports

• Offer guidance, not just numbers

Before hiring, consider reviewing Questions to Ask Your Reserve Study Provider, such as:

• How do you account for inflation?

• How often should the study be updated?

• Do you perform on-site inspections?

• How do you tailor recommendations to our dues structure?

  
  

Reserve Studies FAQ: How reserve studies impact your annual budget and dues

Reserve studies are not an added expense. They are a financial planning tool that directly shapes:

• Annual budgets

• Monthly dues

• Long-term property health

• Owner satisfaction

When used correctly, reserve studies in Rhode Island help boards move from reactive budgeting to proactive leadership.

If your association hasn’t reviewed its reserve study recently or if budget conversations keep getting harder, it may be time to revisit the foundation behind your numbers.

Hennessy Reserve Partners specializes in reserve studies that support smarter budgeting, sustainable dues, and confident decision making for Rhode Island associations.