How to Read a Reserve Study Like a Pro (Board Member Edition)

Serving on a condo or HOA board comes with big decisions and few documents are more important than your reserve study. Yet many board members skim it once, file it away, and only revisit it when a major expense or special assessment looms.

This Board Member Edition is designed to change that.

In this guide, we’ll walk through how to read a reserve study like a pro, explain key sections in plain language, and show how reserve studies protect property values, stabilize budgets, and help boards plan with confidence.

Why Every Board Member Needs to Understand the Reserve Study

A reserve study is a strategic planning tool. For condo and HOA boards across Rhode Island, reserve studies help answer critical questions like:

• Are we financially prepared for upcoming repairs?

• Are we at risk of a special assessment?

• Are we funding reserves responsibly?

• How will today’s decisions affect owners 10, 20, or 30 years from now?

Well-read reserve studies help boards avoid surprises, protect property values, and make defensible financial decisions.

Step 1: Start With the Executive Summary (Your Big Picture)

The Executive Summary is where you should always begin. It provides a high-level overview of:

• Current reserve fund balance

• Percent funded status

• Recommended annual contributions

• Key upcoming expenses

Example

If your summary shows the association is 42% funded, that’s an early signal the community may be underfunded, even if cash flow currently feels comfortable. This directly ties to the question many boards ask: Is your HOA or condo association underfunded?

Step 2: Understand the Difference Between Reserve and Operating Budgets

One of the most common points of confusion for boards is the difference between reserve and operating budgets.

Operating Budget Covers:

• Utilities

• Landscaping

• Insurance

• Day-to-day maintenance

Reserve Budget Covers:

• Roof replacement

• Pavement and parking lots

• Siding, elevators, mechanical systems

• Major capital repairs and replacements

Pro Tip

If your operating budget is absorbing expenses that belong in reserves, it may artificially lower reserve contributions and increase long-term risk.

Step 3: Review the Reserve Studies Components Carefully

Every professional reserve study includes core reserve studies components, such as:

• Component inventory (what assets are included)

• Useful life and remaining life

• Replacement costs

• Funding plan projections

This section tells you what the association owns, when it will need replacement, and how much it will cost. This is the foundation to sound planning.

Step 4: Physical vs. Financial Analysis in Reserve Studies

Understanding the physical vs. financial analysis in reserve studies is critical for board decision-making.

Physical Analysis Focuses On:

• Condition of assets

• On-site inspections

• Remaining useful life

Financial Analysis Focuses On:

• Reserve funding models

• Cash flow projections

• Contribution recommendations

Example

A roof may have 5 years of remaining life (physical), but if reserve funding hasn’t kept pace (financial), the association may still face a special assessment when replacement time arrives.

Step 5: Look Closely at the 30-Year Funding Plan

One of the most valuable sections is the long-term projection, often referred to as creating a 30-year capital plan.

This timeline shows:

• When major expenses occur

• How reserves rise or fall over time

• Whether funding levels remain sustainable

Strong reserve studies in Rhode Island are designed to smooth expenses, not push costs onto future owners.

Step 6: How Reserve Studies Help Avoid Special Assessments

Boards often ask: “Can this really help us avoid special assessments?”

The answer is yes. Reserve studies help avoid special assessments by:

• Forecasting large expenses well in advance

• Aligning contributions with future needs

• Preventing sudden funding gaps

Example

An association that updates its reserve study every few years can gradually increase contributions instead of issuing a $5,000 per-unit assessment when a roof fails unexpectedly.

Step 7: Why Reserve Studies Protect Property Values

Well-funded reserves are a signal of a healthy association. Lenders, buyers, and real estate agents all look at reserve strength.

Reserve studies protect property values by:

• Reducing financial risk for owners

• Supporting mortgage eligibility

• Demonstrating responsible governance

For Rhode Island condo associations, this can be the difference between smooth sales and delayed closings.

Step 8: When to Update Your Reserve Study in Rhode Island

Many boards ask when they should update their reserve study in Rhode Island.

General best practice:

• Full update every 3–5 years

• Financial-only updates in between

• Immediate update after major repairs or unexpected changes

Updated reserve studies in Rhode Island ensure your numbers reflect real world conditions and current construction costs.

Step 9: Questions to Ask Your Reserve Study Provider

Board members should feel empowered to ask smart questions. Some of the most important questions to ask your reserve study provider include:

• Were all major components inspected on-site?

• How were replacement costs calculated?

• What assumptions were used for inflation?

• How flexible is the funding plan?

• What risks should the board be most aware of?

These conversations turn your reserve study into an actionable tool, not just a report.

Reserve Studies FAQ (Board Member Edition)

Do small associations need a reserve study? Yes. Size doesn’t reduce risk, it often increases it.

Are reserve studies required in Rhode Island? Requirements vary, but many governing documents and best practices strongly recommend them.

How often should boards review the reserve study? At least annually during budget planning.

Find more Reserve Studies FAQs here.

Final Thoughts: How to Read a Reserve Study Like a Pro

Learning how to read a reserve study gives board members clarity, confidence, and control. Instead of reacting to financial stress, boards can plan proactively, communicate transparently with owners, and protect the long-term health of the community.

At Hennessy Reserve Partners, we specialize in reserve studies for Rhode Island condo and HOA boards and in helping board members actually understand what the numbers mean.

If your board is reviewing a report now or planning to update one soon, we’re here to help you read it like a pro.