reserves are for more than a rainy day fund. They're also for saving up for predicted maintenance needs. For instance, say the HOA is responsible for the roofs of all the residences (like if the residences are condos). It's a somewhat predictable and high expense that you can map out to 10 years down the line or something. Then you save up for it in your reserves.
Exactly. Many HOAs are now required to get periodic reserve studies that calculate predicted maintenance costs going out sometimes 30 years. Association Reserves did our study (<300 homes) and calculated we needed $1.4M to be 100% funded. Our HOA policies require only 60%, which we think reduces the risk of special assessments to a very low level, but that's still a lot of money. Association Reserves believes that property values in HOAs with high percentage reserves can be 5-10% higher than low percentage (<40%) reserves.
