Some believe there is a "rule of thumb" for reserve contributions, such as annual reserve contributions must be 10% of an association's total budget.
No Rule of Thumb for Contributions. There is no rule of thumb for reserve contributions. Every association is different. They all have different common areas, different components, different ages, different manufacturers, different levels of deferred maintenance, etc. As a result, it would be impossible to establish a rule of thumb. Instead, all associations must conduct a reserve study and then establish a funding plan to meet the funding requirements established in the study.
Funding Levels. There is a rule of thumb for funding levels. Although 100% funded is ideal, if reserves are funded at the 70% level, they are considered healthy. As funding levels drop below 70%, the risk of special assessments increase. The lower the percent funded the greater the risk.
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