Single Family Home Reserve Study

A Reserve Study tells you how much money to set aside monthly so that you won’t have to borrow money when something needs to be replaced in your home. While monies “in reserve” for replacement costs do not currently convey with a home, condos do. It was determined some time ago that that asking people for $10,000 all at once for a new roof did not make any sense for condos, and the time may have come to look at Single Family Homes in the same light.

Yesterday I posted a Reserve Study for a particular client’s home that will be closing next week. I also did a rough sample of a “quickie” Single Family Reserve Study that you can use to modify an offer price when purchasing a home.

In this post I will do a more generic version that you can use to prepare a Reserve Study for the home you currently own, and are not intending to buy or sell.

A Reserve Study is NOT about what you will SPEND ON your home each year, the same way that gas in your car is not counted when saving money toward buying a new car, or to repair your current car.

A Reserve Study is an EARMARKED savings plan to insure that the cost of REPLACEMENT (not repair or maintenance) is available when the item is ready for full replacement. A common rule of thumb for Reserve Studies is that you do not begin to reserve funds until and unless the item is within 35 years of needing to be replaced. Consequently if you have a 50 year item, as example, you may have to spend some money on maintenance during that 50 year period, but you will not begin saving toward it’s replacement until it is 35 years old. the remaining Useful Life is 35 years.

Single Family Home Reserve Study

While I tend to be fairly analytical, I have to say that chart (which I created) scared the bejeebies out of me! $94,300 for Replacement Costs of ONLY the “MAJOR” Components that have a relatively short “Useful Life”! Holy Caboly!

This is one of the reasons buyers are more and more looking beyond “current defects” when doing a home inspection, and rightly so.

Let’s break this down a bit, as a Reserve Study has a lot of subjectivity vs objectivity. I will give you the benefit of my thinking, so that you can adjust accordingly, if needed.

1) ROOF I used 25 years and $12,000. This assumes a 25 to 30 year composite shingle. This Reserve Study is for a five year old home, but covers most any home with a composite shingle. For the most part 20 year shingles went the way of the dodo bird in the late 1980s or so. Any home with a 5 year old roof, whether the home is new or not, likely used at least a 25 to 30 year shingle. I also don’t expect “lifetime warranty shingle” roofs to last more than 25 years. In the last 5 years, 80% of all homes sold regardless of age had this type of roof and 87% of all homes built in the last 5 years had this type of roof.

Once in awhile you see a 50 year shingle and more often a 35 year shingle. But most are 25 to 30 year shingles. If you have a tile, flat, torch down or shake roof, you will have to adjust the numbers to that style.

I used $12,000 as I have recently seen a very good roof on a large home done for that price, even though the next door neighbor paid $18,000 for his roof. I have also seen an owner put one on using experienced relatives for $4,500. Much depends on the size of the home, the type of roof and the size and configuration of the roof. But $12,000 should be doable for the average home with room to spare as to price.

(NOTE: STOP POWER-WASHING YOUR ROOF EVERY SIX MONTHS! YOU ARE DAMAGING THE SHINGLES AND VOIDING YOUR WARRANTY! There are other and better ways to remove moss from your roof and keep it off.)

$12,000 divided by 25 years divided by 12 months = $40 a month.

2) SIDING Most newer homes use HardiePlank siding, or a reasonable facsimile. This is a cement based product that can last up to 50 years, and normally has a 30 year warranty. If you have a home built in the 90s, especially the early 90s, you may have an inferior pressed wood product that looks similar, but likely has been replaced or needs to be replaced. Wood siding has about the same life expectancy as HardiePlank.

I’ve heard the number of $20,000 used often for Siding replacement to HardiPlank, but that varies based on the size of the home. If you have HardiePlank you may not need new siding at the same time as a new roof, and the siding may even last twice as long as the roof. I’m using $55 a month due to the higher cost of re-siding vs putting on a new roof, but there is some leeway there given I expect HardiePlank to last longer than the 30 year warranty by as much as 10 to 20 years.

3) PAINT EXTERIOR – If you have real wood siding, you likely need to paint it at least every 15 years. If you have HardiePlank siding and like the color, you may not need to paint it at all. Paint usually bonds differently to HardiePlank than wood, and style colors may change every 15 years or so. If you have vinyl siding, you only have to save for replacement cost, and not for painting at all, given you really can’t or shouldn’t paint vinyl siding. Lot’s of subjectivity here. If I were doing a Reserve Study for a newer HardiePlank house, I likely would have ZERO in the monthly here. If you have a brick exterior, you don’t have to paint it, but you do have to “re-point” it, which can be quite costly for large and older brick tudors here in Seattle.

4) WINDOWS Most newer homes have vinyl windows with a life expectancy of 20 years. Often people replace the glass vs the window due to a broken window seal. Some windows are better than others and rarely does someone replace all of their windows at the same time. Wood windows can last indefinitely with repairs vs replacement. Lots of variables here including how many windows do you have? For that reason I’ve skimped on the total amount in reserve for windows to insure that you have enough to do a room or two at any given time, with room to spare. Quality of windows can vary greatly, even when windows “look” about the same. Most homes have a sliding glass door or two as well, so $7,500 cap on reserves is likely about right for most homes and most people who have “newer” windows today.

5)SEWER PIPE You don’t often hear much about Sewer Pipes unless you have an older home. I have no Reserve Amount here given the life expectancy or a sewer pipe, but wanted to mention it because of Root Problems. Tree roots can damage most any sewer pipe, especially on an older home.

Roots in the Sewer Pipe are a significant issue for older homes in Seattle, and sometimes in Bellevue and other Eastside cities as well.

So while I haven’t cautioned to reserve money for replacement cost, this item is worth mentioning because a Home Inspector generally does NOT inspect the sewer pipe, and if you are buying a home you need to have a separate inspection done of the Sewer Line. If there are a lot of trees on the property and the home is 50 years old or more…having a Sewer Scope is pretty much an imperative “additional” inspection.

6) Heater/Furnace/AC The cost I used is for a pretty good furnace without air conditioning. Life expectancy of a gas heater is usually longer. Life expectancy of an electric heatpump that is used for both heating and central air conditioning is usually shorter. Many people buy a house with a $2,500 heater, but spend up to $4,000 (or more) to replace it. That has more to do with air quality in the home than heating it or cooling it.

7) HOT WATER TANK I find there is a huge variance in life expectancy of a cheap electric hot water heater and a glass lined gas hot water heater. Also the cost has skyrocketed recently due to a bunch of added bells and whistles.


Consider “resultant damage” from the tank blowing. If the tank is IN the home or in any finished and heated living square footage, just replace it when its time is up. If it is in the garage in an area that would cause little to no damage if it blows, maybe you can push the age to and past its limit. The main issue is what will be damaged if it leaks.

Often if you have an electric tank one of the coils will go before the tank itself. You can’t “see” that, but you will know if you are getting less hot water. Personally I don’t believe in replacing the coil. Just get a new hot water tank if one of the coils goes out. I’d rather see someone skimp on some of the costly bells and whistles than stretch the time to replace the tank by replacing a coil.

8 & 9) FLOORING Lots of variables here. Many homes have lots of wood and little carpet. Others have almost all carpet except in the kitchen and bathrooms. Many people replace carpet with a wood or laminate product instead of carpet. In some homes you can replace the heavily trafficked area, like the steps, without replacing all of the carpet. More people using the home shortens the life expectancy of carpet and fewer people in the home lengthens the life expectancy of carpet.

My biggest concern here is “wood” floors. There was a time when wood floors pretty much NEVER needed to be “replaced” as you just sanded them down and refinished them. More and more even very expensive homes have newer “engineered” wood products, that can’t be sanded at all or can only be sanded lightly a couple of times.

Most people prefer big, thick, wood floors that rarely, if ever, need to be replaced. But many people who THINK they have that type…do not.

10) APPLIANCES I used a fairly low amount here as “appliances” break into two categories. Built-in appliances are part of the home. Usually that is a stove and a dishwasher and a range hood or microwave. Sometimes a cooktop and one or two wall ovens. Then there are appliances that are “personal property” such as your washer, dryer and your refrigerator. Those you can move from house to house…or not…your choice. I am only including the appliances considered to be part of the “real estate” vs “personal property”. Lately people have been paying some insane amounts for Washers and Dryers! Since washers, dryers and refrigerators are personal items, they can vary greatly as to cost. Those are not counted in this Reserve Study.

11) DECKS Another tough one. I’ve seen decks cost as much as $20,000 for a fairly modest sized deck near the ground. Many homes in the Pacific Northwest, even new ones, have extensive decking. Due to rot issues in this climate, we are seeing Trex decking used more and more, but usually only for the flooring and not some of the other components. Once in a while I see a deck that should just be thrown away when it goes, and not replaced at all. I saw a particularly troublesome cantilevered balcony deck like that…just get rid of it! Decks vary to personal taste and lifestyle, and can add considerable maintenance and replacement costs to a home.

12) HOME WARRANTY This is a big catch all that can help with a lot of items not mentioned like ELECTRICAL and PLUMBING. Rarely do you replace ALL of your electrical components or all of your plumbing. Even when you see a home advertised as “all new electrical” or “all new plumbing” that is rarely, if ever, the case. In a new home, you wouldn’t expect to replace either, but a home warranty is likely a good thing to have for both of these and also includes heater, hot water tank and built in appliances. I did not eliminate the other items from the Reserve Study as who knows if warranties will be around in 20 years and rarely does an owner renew that warranty for more than a year or two. Not sure why, but many who get them the year they purchase the home, do not renew them.

As you can see, the total cost to replace these items can often hit during the same 5 year period when the home is 17 to 22 years old!

Preparing in advance, is recommended and warranted. If you are buying a 14 or 15 year old home, knowing what if anything has been replaced since it was built is important, as you likely need to have a lot more in reserves after closing if you are running into that 15 to 25 year period. While buying a 30 year old home might have these things replaced, you may spend as much or more on updating the kitchen and baths. I recently saw a home that needed a new roof that was only 14 years old, but that is rare. But maybe rare in the past tense vs the future tense, depending on the quality of the builder.

If you have any questions, feel free to ask, regarding why I did or did not include certain items. There is really no “guide” for A Single Family Home Reserve Study, as I don’t know anyone else who has done one before.

I think this one is fairly comprehensive and accurate as to the monthly of $400 for a newer home and $700 for an older home with some things already replaced, but that needs more updating in the next 10 years or so.

Condos – How much should be in reserves?

I have written posts in the past about this topic noting my chagrin that WA didn’t have a Law that required Condo Homeowner Association Boards to have a Reserve Study done.  Well I’m pleased to announce that such a law was passed.  Here’s a link to Elizabeth Rhodes of the Seattle Times article on the subject.  The law has no teeth yet, and has everyone confused for a lot of reasons, but it’s a step in the right direction.  Rome wasn’t built in a day.

condosThis is a subject that is near and dear to me, because I have witnessed too many times the long-term affect not having a Reserve Study, or a requirement to have a Reserve Study, has had on Seattle Area condo buyers and sellers.  I am so happy about this new law I could stand on my head and spit nickels.

If you are on a condo Board of Directors, this is a VERY important concept for you to understand and embrace.  Please post any questions you may have about the importance of a Reserve Study (not the law “requiring” it) and I will be more than happy to expound on the topic to the extent of my ability.  I’m a real estate agent, but I had the opportunity to manage several associations and help them with Reserve Study requirements in “a past life”.  I also understand the relationship of Reserve Study to setting accurate monthly dues.  And last but not least, how very important it is to buyers of condos to have a Reserve Study Summary Page in the Resale Certificate.


Honestly, no one can answer that question unless there is a Reserve Study done and the ability to review the Reserve Study.  Here’s why.  Condo Reserves are not about HAVING reserves.  In fact, having too much in reserves can be just as harming to an Association and condo values, as having too little.

Putting money in reserves is not like saving X% of your money for “a rainy day”.  Putting money in reserves is like saving for a new bike when you were a kid.  You want a bike.  It costs $100.  You know if you can earn and save $20 a week, it will take you five weeks.  If you buy the bike, but have the foresight to know that you want a new and better one next year, you might set the bogey at $250 for a new bike in 12 months and save $5.00 a week to that end.  When you have the $250, you get a new bike, or you stop saving for that particular item at that point.  Reserve Studies are THAT simple. 

In a Condo Association you are like a kid saving for a new bike for every “major component” of your property.  NOT ANNUAL MAINTENANCE ITEMS, but REPLACEMENT COST items.  So how much is enough and how much is too much to have in reserves?  If you don’t have $250 the day you are scheduled to go get the new bike…not enough.  If you still have $250 in the account the day AFTER you buy the new bike, you saved too much.  The danger of saving too much is that you have falsely created a monthly condo fee that is too high, and your property values may have been damaged as a result.


A FIRST TIME Reserve Study will cost a lot.  About $2,500 depending on the size of your Association.  A 20 unit complex with no amenities Reserve Study will cost less than a 700 unit complex with two pools, an exercise room, two lakes and 8 elevators 🙂  After the first one is done, the updates cost much less and usually no one has to come out and the update is “a computer function” of numbers adjustment.  You tell them you just replaced the mailboxes, and they do a reset of Useful Life for that item and spit out a new page and Reserve Study Summary.  A simplification, but you get my drift.

Someone comes out and makes a list of Major Components.  The Board of Directors normally sets the dollar amount of “Major Component”, though the Reserve Study Company will make a suggestion or have a standard you can follow.  If you have 10 units and need a $2,000 item, it costs everyone $200 to get it.  If the cost of those condos is $450,000, then maybe asking everyone to chip in $200 is not a big deal.  But if the cost of those units was $159,000, then asking everyone for $200 IS a big deal.  If you have 700 units, then everyone kicking in $2.87 is no big deal.  Maybe you call that a “minor component” and save for that only if you have all Major Components covered.

THAT IS WHY the definition of Major Component is left to the discretion of the Board of Directors of each Association.  Fees being too high hurts you as much as fees being too low.  There is more than a $15 difference between dues of $295 a month and $310 a month, than $250 and $265 when it comes to property values.  The Board has to be aware of pushing that fee beyond certain “keypoints” without GOOD reason.

New Roof, Exterior Painting, Replacement of Fences, Resurfacing the Pool, new mailboxes, are examples of Major Components for most Associations.  NEW ELEVATOR is a really good example of why one Association with $500,000 in Reserves can be BETTER than another with $750,000 in Reserves.  If the second has 3 elevators, or a very expensive many floor elevator, their Reserve Needs will be higher than an Association with no elevator and other similar Major Components excluding elevator.

(Kim asked about windows – no not windows or sliding glass doors or garage doors.  Almost always they are “owner responsibility” items as to cost.  The Association chooses the contractor to be used and type of product, but since the owner pays, these are not part of the Reserve Study.  Each Association is different, but as a general rule, know that these items are not part of what an Association pays for as to replacement.) 


Monthly dues are a combination of two numbers.

1) Monthly amount needed for Operating and ongoing Maintenance.  Landscaper (not replacement cost of trees but the cost of monthly service).  Property Management Fees.  Cost of electricity for lighting the common areas.  Regular pool maintenance and chemicals (not resurfacing or pump costs)

Let’s say Operating Costs are $5,000 a month and there are 50 units.  $5,000 divided by 50 equals $100 in dues for Operating Costs. Many Associations do not divide evenly by number of units, they do it by square footage or value of units, but I’m trying to keep this simple.

2) Reserve Needs.

A Reserve Study will spit out a final number and tell you what you need from each owner, each month, to have enough for replacement items. 

Let’s say they need $30 from everyone for an eventual new roof, $20 for new siding some day, $10 to repaint the place every 10 years to increase the life expectancy of the existing siding and $40 for all other major components combined.  Then the Reserve Study Summary will say you need $100 from everyone, every month, for “Reserves” and you must put that money in Reserves every month FOR THAT EARMARKED PURPOSE! 

IN THE ABOVE EXAMPLE, DUES SHOULD BE $200 A MONTH, NO MORE AND NO LESS.  $100 for monthly operating costs PLUS $100 to put into Reserves.


There is a RESERVE STUDY SUMMARY that IMNSHO should be in every Resale Certificate and submitted to every owner once a year at the AGM (Annual General Meeting) or Budget Meeting (often the same meeting).  It’s a few pages.  The actual Reserve Study is a big book with photos, and so usually not distributed out to anyone who wants to have it.  Though it is usually available for review and by appointment upon request.  Often every Board Member gets their own copy, but other Association Members do not.

The Reserve Study Summary will list all major components, their useful life, and their Remaining Useful Life. These will be shown in columns for every Major Component.  A quick glance of Remaining Useful Life Column will give you a feel for the health of the Association. If you see items with Remaining Useful Live ZERO, that’s a big red flag!  That means the item should have been replaced, but wasn’t.  Most reserve studies do not go into negative status like -5 years to let you know the item should have been replaced five years ago (I wish they did).  Most often they will say “0”.

This is a long topic, in fact it takes a chapter of a book to really explain it well, but hopefully the above offers some practical information you can use to comply with this new law.  It’s a good law.  Embrace it.  Don’t try to find the loophole to get around it. 

If you walk around an area with a lot of old condo complexes in disrepair, know that was caused by WA not having a Reserve Study Requirement, to some extent.  Know that a healthy Association is not only important to the owners of the condo units, the buyers of the condo units and the sellers of condo units, but everyone impacted by “an eyesore” in the neighborhood.