All the people, who have been associated with the field of real estate in a direct or indirect way are sure to have come across the term Reserve Study at some point or the other. As laymen who have not yet come across this concept it is important to know about it. Reserve study essentially deals with capital budget planning, the primary focus of which is to offset the current and ongoing deterioration.
On the other hand, this field of study narrows down its attention on long term gains so as to be able to face contingencies in a better manner in the days to come.
3 Pillars of Reserve Study:
You would have often scratched your head in order to ascertain as to why exactly the various entities out there direct a considerable amount of their precious time and effort towards carrying out the above activity. The answer to this question is an absolute cakewalk. Reasons listed below-
- First and foremost, let us understand that a reserve fund if absolutely crucial for the survival and success of quite a lot of bodies out there. The said fund can come handy in times of turmoil.
Hence, it is absolutely critical for one to ascertain the soundness of the fund in question. If the quantitative and qualitative component at hand is unsatisfactory, when the time to use the said fund arises, it will not be in a position to bear fruits equivalent to your expectations. Firms such as Facilities Advisors Inc can assist you with the same.
- Next up, comes the fact, which focuses its attention on multiyear planning as far as the aforementioned concept is concerned. Many a times, quite a lot of entities are ignorant about the importance of the said field of study.
However, one time engagement leads to strong recommendations, which make it mandatory for the said activity to be carried out on a yearly basis and that also in an in-depth fashion.
- Last, but not the least, criticality of the said fund is observed in the area, which elaborates proportionate distribution of the reserve to the various components that form part of the eventual property.
The basic idea of this study is to prioritize the various inputs that require monetary attention and eventually go about with its repair and maintenance. Certain concepts highlighted by a reserve study include the likes of future life of the component in question, its substitution costs and most importantly the period of time for which it can function in the coming days.
The said study is basically distributed under two heads. The first part revolves around physical analysis, while the second part talks about financial analysis in particular. However, all said and done, both the above mentioned agendas tend to act as two sides of the same coin and thus bear equal amount of importance. Hence, it is crucial that both these areas be dealt with identical level of seriousness.
Moreover, the concept of reserve fund involves a certain percent of contribution being diverted to the said fund. The percent rate tends to differ from one entity to the other.
All said and done, if you have remained uninformed about the above concept so far, then one look through the above write up is sure to bring an end to at least few of your queries regarding the said matter.