RESERVE STUDIES :
We always tell clients during our kick-off meeting before starting a capital reserve study that the cumulative remaining lives of your common area components represent the present value of your capital assets . The remaining life for a common area component is the expected service life minus its effective life . The source of expected service life might typically be the accepted standards of the construction industry . Well , almost . Clearly , the level of initial level of quality of the material is a determinant . You usually get what you pay for .
We naturally assume that premium products should be expected to last longer . Not so easy pinned down is the effective life . In reserve study work it ’ s defined as how long the component has functioned in a way that has provided the service for which it was intended . Here is where judgment comes into play .
How Do Reserve Studies Benefit From Value Engineering ?
How do we get the most for our condominium maintenance dollar ? Building siding for a condominium building is arguably the premier arbiter of its curb appeal . Like a first impression , it had better be good or perceived value suffers .
Condominium Siding Goes Green .
If you were to be asked what area of condominium building technology is seeing the most rapid and innovative development you ’ d be well advised to put your money on siding . The major players in siding production are doing some serious investment if the research and development of alternate siding products .
If a boiler has a forty-year expected service life but has been made to run more hours per day because it was undersized for the heating load , then it has provided its “ effective ” purpose ( service life ) in less than forty chronological years .
So its effective life is advanced beyond its chronological life . If it had been in place for twenty-five years , we might therefore assign a thirty-year effective life to it . The same rationale could apply to , say , pavements . If a pavement that normally lasts twenty years begins to exhibit cracking and movement from drainage issues we would advance its effective life beyond the chronological one to make sure it got replaced before total failure .
A well designed and executed condition survey will assign accurate effective lives to components which translates to accurate remaining lives .
Dividing replacement cost of a component by its remaining life tells you how much money to set aside each year to be able to replace the component at the end of its service life . It tells you when to be ready to go out for bids to re-surface the
RESERVE STUDIES CONT .
roadways or replace the clubhouse exercise equipment . And when things begin to get tight at budget time , it can give you an indication of whether the roof re-shingling project can be postponed another two years to allow more capitalization . Clearly then , the cumulative accuracy of the remaining lives of your common area components is directly related to the effectiveness of your reserve strategy .
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