Mirror, mirror on the wall, is my paint peeling?
When living in a master planned community, I find it interesting to note the attention often paid to community reserves. I understand that this attention is more than warranted. The last thing a community wants is to have underfunded reserves. I just find this situation to be a perfect example of “Do as I say, not as I do”.Let me ask a question. How often do you take a critical eye to assess the reserve needs of your own home? Your home is no different than your community in terms of its replacement needs. Your roof, paint job, air conditioner and appliances, to name a few, will all most likely fail at some point during your home ownership. Let’s take a look at what this means financially:
Item Replacement Cost Longevity Recommended Yearly Reserve
Roof $15,000 20 years $750
Exterior Paint $2,000 7 years $285
Air Conditioner $2,000 15 years $133
Appliances $4,000 20 years $200
Total Yearly Estimated Reserve $1,568
I understand that purchasers of new construction may be thinking that these timeframes are too far out in the future to be concerned about. However, let me put it in perspective. If you buy a new home with young children in the house, you may find it interesting to note that these timeframes correspond fairly closely with the same timeframes that your children may be entering college. So, while you are also putting money away for that college fund, you may also want to set aside dollars for home reserves.
For those buying re-sale homes, the need for reserves becomes even more dramatic. After taking a good deal of your savings to put down towards the equity in your new home, you may find yourselves hard pressed to find required replacement dollars in a much shorter period of time. Setting aside reserves early will greatly help lessen that burden.
So, next time you are badgering your HOA board about whether or not your community has sufficient reserves for common elements, try to remember the saying that people who live in glass houses do not throw stones. Look to your own reserve needs as well.
Until next time…
Keep kicking the dirt!