Replacement Reserves
Replacement reserves are essential for maintaining a property's long-term value, ensuring sufficient funds for future replacements and repairs. Learn about valid expense categories, calculation methods, and a case study from Pioneer Valley Cohousing in Amherst, MA. Presented by Lyons Witten, this insightful presentation sheds light on the importance and intricacies of replacement reserves.
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Presentation Transcript
Replacement Reserves What, Why, Where, and How? Presented by: Lyons Witten, Chair of Buildings & Grounds An Example from: Pioneer Valley Cohousing, Amherst, MA Welcome! Lyons@cohousing.com November 7, 2020
What is a valid RR expense? NO: YES: permanent items Kitchen appliances Painting (per IRS rules) Furnace, water heater, solar systems Monthly utility bills Paving, sidewalks New Capitol Projects Lawn tractors, truck, sander, plow Routine maintenance expenses Roofing Major repairs to existing buildings
How are RRs Calculated? Example RR item: Community Truck The numbers Original cost. Year Purchased. Estimated length of service (years). Estimate rate of inflation. Calculates cost of item at time of replacement (2019). $30,630 2005 14 years 3% per year $46,314 Returns the future value of an investment, based upon periodic, constant payments, and a constant interest rate. =FV(0.03,$A20-B$3,1,-B$2) FV(rate, nper, pmt, pv, type)
Case Study Pioneer Valley Cohousing Cherry Hill Condo Assoc.
Replacement Reserves What, Why, Where, and How? Presented by: Lyons Witten, Chair of Buildings & Grounds An Example from: Pioneer Valley Cohousing, Amherst, MA Thank You! Lyons@cohousing.com
