Definition
The percentage of recommended reserve fund replacement costs that are currently funded by the HOA. A higher percentage means the community is financially healthy; lower means special assessments are likely coming.
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Funding percentages above 70% indicate healthy reserve planning, while below 50% suggests inadequate funding. Underfunded reserves require future special assessments or increased monthly fees. Professional management recommends 70-100% funding. Buyers should avoid communities with severely underfunded reserves.
Pro Tip
Avoid communities with less than 50% reserve funding. Special assessments will almost certainly be necessary soon.
Example
A community with 60% funding of reserve recommendations indicates moderate risk of special assessments.