Condo Media - December 2024 - 42

The Region VERMONT
Planning Strategies
Boost Your Reserve Funds [By Andrew Dudka]
Do you remember " Carnac the
Magnificent? " Carnac was the brilliant
character played by Jonny Carson on
the Tonight Show from 1962 to 1992.
I always enjoyed his bit with his co-host
Ed McMahon where Carnac would
predict the answer to the question
in the envelope and then open the
envelope to read the question.
The importance of well-funded
reserves cannot be overstated as we
approach 2025, and as I was thinking
about Carnac, for no particular
reason, while doing my research for
this month's issue, I could not, unfortunately,
create a funny punchline when
it comes to reserve funding.
ANSWER: Financially stressed,
high community strife, injured owners,
expensive special assessments,
and falling condo market values.
Q:
What do you call an HOA
with an underfunded
reserve account?
42 CONDOMEDIA December 2024
ADDRESS UNDERFUNDED
RESERVES
When I ask HOAs why they are
knowingly underfunding reserves,
the number-one answer I hear is,
" The community cannot afford it. "
After probing this question further
with the HOA boards, I also learned
that they don't want to be the bearer
of bad news, and the board members
don't want increases either. After all,
the board lives in the HOA community.
It is time to rip off the band-aid and
just do it. It hurts in the beginning,
but over time, the shock will heal, and
the community could have the shortterm
potential to upgrade buildings,
improve safety and reduce liability
(think insurance), improve energy
efficiency, improve property values,
and look gorgeous, just like the
beautiful mountains of Vermont.
l Conduct a Study: The foundation of
any successful reserve fund strategy is a
thorough and up-to-date reserve study.
In preparation for 2025, HOAs should
engage professional reserve analysts
to conduct a comprehensive study.
This study should assess the current
condition of all community assets,
project the remaining useful life of
each component, estimate future
replacement costs (factoring in inflation,
building science, and market
trends), and recommend appropriate
funding levels to meet future needs.
l Implement a Funding Strategy:
Secondly, HOAs must implement a
funding strategy that aligns with
the timing of future expenditures.
Examples may include percentage
funding (aiming to maintain the reserve
fund at a specific percentage of the
fully funded balance, typically 70% or
higher), threshold funding (setting a
minimum reserve fund balance and
adjusting contributions to maintain
this threshold), or full funding (working
towards achieving 100% of the ideally
funded balance over time).

Condo Media - December 2024

Table of Contents for the Digital Edition of Condo Media - December 2024

Contents
Condo Media - December 2024 - Cover1
Condo Media - December 2024 - Cover2
Condo Media - December 2024 - Contents
Condo Media - December 2024 - 2
Condo Media - December 2024 - 3
Condo Media - December 2024 - 4
Condo Media - December 2024 - 5
Condo Media - December 2024 - 6
Condo Media - December 2024 - 7
Condo Media - December 2024 - 8
Condo Media - December 2024 - 9
Condo Media - December 2024 - 10
Condo Media - December 2024 - 11
Condo Media - December 2024 - 12
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Condo Media - December 2024 - 14
Condo Media - December 2024 - 15
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Condo Media - December 2024 - 18
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Condo Media - December 2024 - 48
Condo Media - December 2024 - Cover3
Condo Media - December 2024 - Cover4
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