Tutorial – Component Life and Cost Estimates

Tutorial Introduction
Physical Analysis of Property
Financial Analysis
Reserve Funding Strategy
Calculating Balance

Once the reserve items have been identified and established as the “Reserve Component List”, the following information will then be determined for each item by the professionals outlined above:

  • Project Description (Fence – Paint or Fence – Replace)
  • Description/Quantity (including measurement basis such as Linear Ft, Sq Ft, etc.)
  • Useful Life (Yrs)
  • Remaining Useful Life (Yrs), where 0 is the initial planning year
  • Current Replacement Cost (includes installation, salvage, disposal, etc.)

Any assets that is worth more than 1% of the annual budget must included in the reserve study or noted why its not included.

Additional useful information such as:

  • Cost Basis (current cost by square yards, linear feet, each, etc.)
  • Freight and labor (costs to receive and install)
  • Salvage (estimated value of the item when replaced, if any)
  • Date placed in service or the date last maintained or replaced

After this information is recorded during the site inspection, it is verified or refined through research with the association’s vendors or other experts. Once all of an association’s reserve components are identified and their life and cost estimates determined a financial analysis can be performed.