Commissioning Reserve Studies
One of the most important ways to protect your investment and to make sure that you are able to keep up with the demands of a multi-unit property, even just as a single share investor, is to make sure that there is a proper study about the reserve needs in place before you invest. Reserve studies aren’t just for large properties and should be updated regularly to ensure that the needs of a property are being met under all possible circumstances. Failing to have a study done before you invest or join an HOA or similar group is one of the most common rookie mistakes that leads to stress, excess legal fees, and lowered profits down the road.
Commissioning a study is very simple and they can generally be undertaken within a week or less. Simply contact the company or individual that you want to complete the study, ask them what they need, provide them with the necessary information and documents, and then sign the contract. You will receive the information paid for in just a few weeks, allowing you to quickly understand the risks and make smart business plans.
Once you have the study in hand you then use it to set aside your reserve, making sure you keep the listed amounts in mind. Ensure that everyone involved in the investment is submitting their portion and outline the things that the reserve fund will be used to pay. When something needs to come out of the reserve fund you then pay it and keep the remaining funds in the reserve. If the reserve grows larger than intended investors can discuss were to invest the excess funds.
As you can see, reserve studies are easy to commission and easy to utilize. They are an important tool for anyone looking to protect a long term investment.