Kevin Leonard: 0:00

And most special assessments don't have a 100% payment rate, meaning not all homeowners pay their HOA due so why would they pay a special assessment? So special assessments are not the easy fix that some people may think it is. It is much more appropriate to plan responsibly, budget responsibly, and be able to, like California Civil Code says to protect, maintain and enhance the common areas of your association.

Announcer: 0:33

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Robert Nordlund: 0:48

Welcome back to HOA Insights: Common Sense for Common Areas. I'm Robert Nordlund, and I'm here today for episode number 113 for conversation with Kevin Leonard, reserve specialist and one of our key project managers here at Association reserves, who's the driving force behind our book understanding reserves, its second edition was just published, and I look forward to having the opportunity to hear from Kevin in a few minutes, so he can share all about the book and how and why it's been revised. Well, last week's episode number 112, was another of our board hero episodes, appropriately titled An unfortunate story. The truth is that sometimes bad things happen at your association. And from our perspective, we've seen the cycles that some associations go through, some troubled years followed by some recovery or turnaround years. So what I want to say is neither good years or bad, years are permanent. The good news is that we've already recorded next week's episode 114 so you can hear our follow up to that episode 112 so stay tuned if you missed episode 112 and don't know what I'm talking about or any other prior episode, take a moment after today's program to listen from our podcast website, Hoa insights.org watch or watch on our YouTube channel, but better yet, subscribe from any of the major podcast platforms so you don't miss any future episodes. And those of you watching on YouTube can see the HOA insights mug that I have here. Let's see if I get the focus. It's talking about budgeting, one of my favorite subjects, and you can get a hold of that from our merch store, which you can browse through from our Hoa insights.org website or the link in the show notes, and you'll find that we have some great free stuff there, like board member zoom backgrounds and some specialty items for sale, like this mug. So go to the merch store, download a free zoom background, take a moment, look around, find the mug you'd like and email yet. Podcast at reserves, a.com with your name, shipping address and mug choice mentioning episode 113, mug giveaway, and if you're the 10th person to email me, I'll ship that mug to you free of charge. Well, we enjoy hearing from you responding to the issues you're facing at your association. So if you have a hot topic, a crazy story or a question you'd like us to address, you can contact us at 805-203-3130, or email us at podcast at reserve study.com now this episode was prompted by Lynette from Knoxville, who asked if we could do an episode on reserve studies. And that was actually a pretty easy ask, because I'm in the reserve say business, and I think you know that. So we thought the best response was to get Kevin on the program to talk about this great resource we have. It's a nice desktop reserve study answer book called Understanding reserves. It's just been revised and released in its second edition. Got a copy here again for the YouTube viewers. You can see it's a nice paperback book, and it's a great opportunity to have Kevin on the show to tell you all about it. So Kevin, welcome to the program. Thank you, Robert, so glad to be here. So tell me. When did the initial book, the first edition, come out?

Kevin Leonard: 4:11

The first book came out in early 2021 after about a year and a half of writing and compiling the material. And as you know, the material has been around since since the early 1990s and we finally were able to compile it into a single resource that is digestible for our board member and manage your clients. And since 2021 I'm proud to say that we've sold over 2000 copies of the book which is which is amazing. And the response from from readers has been more incredible than I could I could really believe they are loving the. Book. They are, they are finally grasping this concept that they've, they've, they've been, they've been thinking about for for so long. And a few of my clients actually have the book as required reading for any new board members. So you get elected to the board, and their first, their first order of business is to read understanding reserves, which I think is, is fantastic. It may not be necessary for every Association across the country, but I think it's a valuable resource. And clearly many, many boards and associations think so as well.

Robert Nordlund: 5:36

Yeah. Well, obviously we were hoping, when you said the first thing, I was saying, Well, maybe the second thing, hopefully they read the governing documents first. But I like it being up there. Kevin, I'm not sure if I told you, but yes, for years and years, we've had training materials at Association reserves, documentation, National Reserve say standards came out in 1998 and so there was those guiding principles that shape the industry. And still, and even to this day, we have board members asking, what are some very fundamental questions. You know, we have a regular webinar series, but when you said you're going to compile all this information and put together in a book, I was actually pretty nervous, like, Oh, gee. What is this going to be a Franken book, where it's a compilation of articles to different audiences with different tones and technical things, and I read your first draft with gritted teeth, and you had me by the first chapter, and I just it Just, I was so relieved, right? And you can read, yeah, go ahead.

Kevin Leonard: 6:44

And you can tell by the the comments on on Amazon, the comments underneath the the Book link page, 99% of them are five star, fantastic recommendations and all that, I got one negative response and tell me about that. And the negative response was, this book is too elementary. We need we need more advanced topics. And I'm thinking to myself, that is the exact point of this book. Is distilling the complexity of a reserve study and reserve funding and make it as simple as possible, so that anybody can read it and understand it and and help guide their associations to a successful financial future. So if that's the only negative comment I get, I can live with that, yeah,

Robert Nordlund: 7:33

you've you've hit the bullseye, because that's what you're trying to do. That's like, Well, yeah, that you don't have to concern yourself with those kind of problems. Tell me a little bit more. But your wife is a published author. Was that also a factor in you wanting to put this stuff together?

Kevin Leonard: 7:50

Absolutely. One of her books is called a far cry from yesterday, and it's about her travels around the world as a 19 and 20 year old woman, which sounds fun, but to me, it seems extremely reckless and dangerous, but it clearly has shaped who she is as a person, and through that, she was able to help me realize that I can reach a wider audience through a different type of communication. So our job as reserve specialists is again to help guide associations into a successful financial future. And by writing this book, I can help 1000s of communities at a time where as doing one reserve study helps helps one community. So I understood, and I still understand, that reserve studies are an extremely niche category, like, if you're going into a bookstore, I don't know, I don't even know what category understanding reserves would be, is it real estate? Is it engineering? Is it budgeting? Is it prints? Is it business? You could put it in any of those categories or none of those categories. So I I was not expecting to become a New York, New York Times bestseller, and I'm okay with that. I'm fine with that. I just wanted, yeah, I just wanted everyone to come to the to the same understanding that I had, which is reserve funding and reserve planning is extremely important for the millions of people that live in community associations. And so I was able to put those words on paper. And I'm not gonna lie, man on my wife, she was able to do all the editing, formatting, publishing with respect to the Amazon platform. And so, so, of course, yes, she was a big help.

Robert Nordlund: 9:41

Yeah, but, and I'm glad you're not waiting for Oprah to call, right? Because what you're talking about is the real deal that we're talking about, the opportunity with the podcast to reach 1000s of people, and the opportunity with the book to reach 1000s of people, and that's very different from meetings. Someone at Starbucks and having a chat or doing a reserve say, for one particular association, whether it's 33 units or 333 units, it's an opportunity to say, Hey, folks, it's not all that complicated. And my wife reminds me that, Robert, it's just adding and subtracting. So,

Kevin Leonard: 10:20

right? I mean, reserve studies is what we do. I'm happy to do reserve studies. That's, that's, that's our job, and that's what we do for a living. But doing a reserve study is sort of like giving a man a fish to eat, whereas educating boards through books or through podcasts is teaching boards how to fish and being able to sustain their associations or their life moving forward with respect to reserves,

Robert Nordlund: 10:48

yeah, I like that word sustain when we hear in conversation, sustainability, usually, I think the average person thinks a recycle bin and they'll throw their plastic water bottle out and in the recycle bin. When I think about sustainability, I think of sustaining an association. It's new at the start, and we want it to be a nice place to live at the 10 year point 20 year point 30 year point 40 year point 50 Year point and that happens when you are putting up a good fight against ongoing deterioration, and that happens when you're setting the funds aside. Otherwise you get into again you talked about the book came out in 2021 when I think 2021 I think of Champlain tower south, and just the tragedy there, and how that awakened, awakened us to the reality that the kind of decisions board members make have some very serious consequences. And so we want board members to appreciate that just do a little bit of planning along the time that you're a board member. And if you take care of your fair share, whatever your term is, one year, two years, three years, or if you repeat, the future is going to take care of itself, is it? Is it really that simple?

Kevin Leonard: 12:03

Yeah, it is. And that's that's the whole point of reserve funding. There's many ways to pay for a large project or a reserve expense, as we say, and so you could special assess, you can get a loan, or you can budget appropriately, put it into a reserve fund and earn interest, even interest aside, it's still a good decision to have the money on hand so that you can complete these projects on time. Some board members think that a special assessment is is the easy answer to anything that happens that will cost more money that they than they have on hand. But in reality, most special assessments are put into the budget for the next fiscal year. Most special assessments are not all paid upfront. They're paid over a couple of months, six months, or even 12 months, and most special assessments don't have a 100% payment rate, meaning not all homeowners are going to pay the special not all homeowners pay their HLA due. So why would they pay a special assessment? So and if you need the special assessment for something like a roof that is leaking and needs replacement, if you wait another 12 months before you have the money on hand to be able to do that, you've already incurred another 20 to $30,000 worth of damage from water intrusion. So special assessments are not the easy fix that some people may think it is. It is much more appropriate to plan responsibly, budget responsibly, and be able to, like the California Civil Code says, to protect, maintain and enhance the common areas of your association,

Robert Nordlund: 13:50

and you come back to it and the homeowners are going to pay the bill one way or the other. So it's not like you're saving the homeowners any money by keeping their reserve funding amounts low, because you're just going to have to pay for the roof with a special assessment. So it's, it's, they're going to pay the money one way or the other. I was talking to who was it a board Yeah, it was a board member, and I think it was yesterday or the day before, who was talking about their experience that they came up and needed a special assessment. First thing they do was it took a month or two to get clearance from their attorney that how to do the special assessment, how to structure it. Then they presented the special assessment. They needed to get the vote on it. So there's months that go by before you can even get the yes or no, and if it fails, then you have to start over again. And, you know, enlist, you know, to get the 17 more votes that you were short on the first vote. So that's just not a, not a good solution. And everything we can do, whether here our webinars the book, you're going to hear that everyone. Paying their fair share over time. As you said, Kevin, with the budgeted funding, that's just the right way to do it, and that's

Kevin Leonard: 15:09

equitable, right? So if Yeah, so a good example of this is a 20 year roof that costs, say, $200,000 everybody should or each year the community should be saving$10,000 a month, so that at the end of 20 years, they have$200,000 to replace that roof. Now imagine if years one through 10 they're like, this is a brand new roof. Why are we saving money for it? It's going to last forever. Someone else's problem. I'm going to move by then they don't contribute anything to reserves for the first 10 years. Now the homeowners in years 11 through 20 have to contribute$20,000 over 10 years, or double their fair share to be able to pay for that roof. So the burden of that reserve expense was inequitably shifted from the prior owners to the most recent owners, and that is what we are trying to avoid when we are planning so far out in advance for they may seem like random expenses because they're happening every 510, 25, years, but they are inevitable, and they are reasonably predictable, and when you can put that in a reserve analysis, we can, like you said, add and subtract, do a little bit of division to be able to equitably distribute those expenses over all homeowners over the course of the association's lifespan, so that everybody pays for their own fair share.

Robert Nordlund: 16:37

Yeah. Another thing we need to start talking about the book sometime. But another thing that I came to mind when you were talking about that was people say, Well, how can you predict the future? And I think when you think about it, we all do maybe every day. How long does it take me to get ready? How long does it take me to brush my teeth? How long does it take to prepare dinner for me if I'm got a flight at the airport? For me, it's lax. I know I need to leave three hours and 15 minutes before the flight, or I'm going to be in a time problem. And so I can predict the future. I can predict it. I'm going to be anxious and in jeopardy of not getting a good parking spot, missing my flight if I don't hit that three hours and 15 minutes mark. And there's so many things in our life that we know and we may that roof may last 21 years, it may last 19 years. It may be, as you say, $200,000 it may be 210 but it's gonna happen, and it's gonna be around then, and we might as well face that reality now exactly. So

Kevin Leonard: 17:44

like you said, it's reserve. Planning is not an exact science, but it is a reasonable estimate about the future, and it's about and it's about boards beating being being prudent and not sticking their heads in the sand. They need to understand what's coming, plan responsibly and act in the best interest of the association. So back to the book.

Robert Nordlund: 18:09

Yeah, I like that. Okay, back to the book. Books here, and it is full of 27 chapters, but organized into 1234, areas. The four areas are reserve fund basics, reserve study basics, understanding a reserve study, key results and general reserve topics. And I noticed that you did not go deep into laws and legislation, because those are kind of always changing. I think the internet is a better resource for that, but you've made this so easy to read, and it's, as you suggested, the kind of information a board member needs to help guide their association forward,

Kevin Leonard: 18:56

right? And, yeah, we don't go too deep into laws and legislation, because that differs and varies based on which state you're in. So we wanted this book to be accessible by anybody and everybody, and we don't want to focus on California legislation versus Florida versus the state of Washington and so on. But you're right. So the first part of the book is all about reserve fund theory. We need to understand why we're doing what we're doing, why we're reserving funds, why we're doing a reserve study, before we get into how it's done and why it's important. So which is kind of what we were talking about these last couple of minutes. We were just talking about why we reserve funds, and once boards and managers and homeowners alike, they understand we should be reserving funds. That begs the question, how much should we reserve? And that is one of the answers that the reserve study aims to provide. So a reserve study essentially answers three main questions, what are we reserving for? What. So how strong is our reserve fund today, and how much do we need to budget for reserves next year and into the future so that we can maintain our community and maintain adequate reserves. So what we are reserving for is the component list, and it's the first result, because it's the foundation. If we don't have an accurate component list, which is the scope and schedule of your predictable reserve projects over the next 30 plus years, then the financial part of the analysis is going is is not going to be useful. This needs to be as accurate as possible, right? Exactly. So once we know our reserve expenses over the next year, or, sorry, the next 30 years, 30 plus years, then we can compare that to what we have in the reserve fund, and that can measure our reserve fund strength, which we call percent funded. A lot of board members that have been active in the industry for a long time know that 70% funded is an important number, because 70% funded and higher is considered strong, and 30% funded and lower is considered weak. And that comes directly from our own company's data, which suggests that at 30% or lower associations are needing a special assessment or have insufficient cash 50% of the time. So it's a coin flip of whether or not you're going to be special, assessing your homeowners at 30% funded or lower, 70% funded or higher, that that risk of of meeting additional funds drops to below 1% so that's why that's an important number. But as a as a board member recently pointed out to me, which I agree with, is that percent funded doesn't always tell the whole story, and that's one of the chapters in the book, and that's why it's so important that the term adequate reserves was defined just a few years ago because lawyers have been going back and forth debating what adequate reserves are. But adequate reserves is is two pronged, right? Robert, yeah.

Robert Nordlund: 22:02

Well, let me take you back. Well, lawyers have been talking about that because isn't adequate reserve funding required in so many governing documents?

Kevin Leonard: 22:10

Exactly, okay, and so and so. Boards say adequate reserves are, are literally just making sure there's at least $1 in the bank account at the end of the day, or is it being 100% funded? But the way we've defined it, and the way national reserve study standards has defined it, is is two pronged. One, do we have enough money to cover our reserve obligations today, and do we have a a reasonable funding plan going into the future to make sure we are we have enough funds to meet our reserve obligations into the future. So that's your percent funded and your reserve fund today, and then your funding plan moving into the future. And that brings us to the third result, which, of course, is the is the reserve funding plan. And that is ultimately, after all, the work of putting the component list together, measuring reserve fund strength, the funding plan is the answer that boards are looking for, because that is our recommendation of what they need to be budgeting for their reserve fund in the upcoming fiscal year.

Robert Nordlund: 23:16

You've done this before. All that just rattled right off. You and I know we've got some people listening in their car, and they're thinking, Okay, that was good stuff. So let me just summarize. There's three main results. It's, what are you reserving for? Number two, how strong is our starting point? In other words, are we going to have to hustle, or are we doing okay? And number three, based on that, how much do we really need to set aside? And that key definition of what adequate reserves actually are, it's a combination of cash and the funding plan that's going to provide into the future. And I will make sure those get into the episode show notes and on the website for you to reference in the future. But I'm looking at the time here, and we need to take a midpoint sponsor break, so we'll take a quick break at this time to hear from one of our generous sponsors, after which we'll be back for more common sense for common areas, and we'll be hearing from Kevin about the book understanding reserves.

Paige Daniels: 24:16

Are you part of a homeowners association or condominium board? Making the right financial decisions for your community's future is crucial. At Association reserves, we're proud to serve communities nationwide, specializing in reserve studies tailored to your community's unique needs. Our expert team helps you accurately assess your property's assets, forecast future expenses and develop a solid funding plan, whether you're a small HOA or a large condominium association, we've got you covered. Visit reservesteady.com to learn more and get a proposal for your association, and we're

Robert Nordlund: 24:47

back. Well, Kevin, tell us what drove the reason for this second edition, the revision to the original book.

Kevin Leonard: 24:56

The second edition was necessary because. As national reserve study standards have recently been revised. National reserve study standards have been in place since, I think, 1988 1998 1998 sorry, excuse

Robert Nordlund: 25:12

me. Yeah. Okay. Now you're making you're challenging my memory here and long time ago, you're

Kevin Leonard: 25:16

right. And and they have. They had remained unchanged for what is it? 2025,

Robert Nordlund: 25:22

years? Yeah, largely unchanged, a few words here and there, but just tweaked because

Kevin Leonard: 25:27

they are national reserve study standards and they didn't need to be changed. Yep, that all changed at the really tragic collapse of Champlain towers south down in Florida, it obviously very unfortunate and hopefully doesn't repeat again into the future. But what that event caused was a rethink of how we do reserve funding, how we can spend reserves and and how we can help save these aging buildings before another tragedy happens in the future. So this only getting older every day, right? So this event caused a lot of new legislation in Florida, which hopefully we don't need to get into on on this podcast, nope. It also required a fresh look at national reserve study standards. One of one of the main changes that came about from this is the four part test to the three part test of what defines a reserve component, meaning describe

Robert Nordlund: 26:36

that a moment ago as that's the foundation for the entire reserve city,

Kevin Leonard: 26:41

exactly. And a reserve component is what you can spend your reserve money on. And it used to be a four part test, which really limited the scope for which boards could spend reserves on various reserve projects. And within the four part test, these things usually, typically had to be a physical component that you could see deteriorating. It had to be a common area. You had to know exactly when it might need to be replaced, what it's going to cost above a certain threshold cost. And so that kind of limited the association with respect of spending reserves, the new three part test removed those the scope of of those requirements. So now not only, let's just say the three part test, it has to be your common area, the scope and schedule of the project has to be reasonably predictable, and

Robert Nordlund: 27:41

that's an important word in there, reasonably predictable, reasonably perfectly, but reasonably

Kevin Leonard: 27:45

Exactly. And and the cost of the project, not only does it have to be above a certain threshold, but the cost also has to be reasonably, reasonably predictable. And so you notice how the Tweak and verbiage of those standards, it now allows for certain things like balcony inspections to be included as a potential reserve expense. In California, for example, balcony inspections are required every nine years, and of course, there's there's a predictable cost to it as well. So we know there's going to be a significant cost. We know when it's going to happen, and just because it's not a physical asset at the community, we should still be able to plan for it through reserves, because you don't want your HOA dues from going to from 250 to 350 every nine years and then back to 250 just because of one balcony inspection. That's exactly what a reserve fund is meant for. Is for those non annual but fairly predictable reserve projects. Reasonably predictable,

Robert Nordlund: 28:56

yeah,

Kevin Leonard: 28:56

exactly. And the second part of the new, updated reserve study standards is the is, how far into the future are we willing to look for reasonably predictable reserve projects? And I think there was a, there was a misconception prior to the updated reserve study standards, because a reserve study is, is is supposed to detail the income and expenses of your reserve fund over the next 30 years. And that did not mean you couldn't plan for projects beyond that 4050, years away. Think plumbing, electrical, some other types of foundational issues, a side wall or boat launch, exactly. So you could still plan for it. It's just It wouldn't show up on paper. In the analysis, you'd still be reserving funds for it, but it just wouldn't show up on paper until it was within that 30 year mark. And the 30 year mark is it's, it's arbitrary. We could show 150 years of income and expense. Expenses for a reserve funding plan. But then your reserve fund, your reserve study, is 100,000 pages long, and yeah, and the details of that become even more insignificant, and no one's gonna read it, so you need to have a cut off at somewhere. And the national reserve study standard committee has decided 30 years is appropriate. And so what these new, updated standards have correctly pointed out is that you're not limited to only planning 30 years ahead. If you have pvc piping underground, or if it's copper in the walls, or whatever it may be, that lifespan might be 50, it might be 75 it might be 100 years, but we know that it's going to fail at some point, and we should be planning to foresight in little bit, in some in some, yeah, in some condition. And that's when it becomes appropriate to start working with various experts and your and your on site and your vendors that are on site on a frequent basis, because when we come out to do a reserve study site inspection, it's a visual inspection for budget purposes. And so we're not digging into walls. We're not taking up asphalt or taking off tile roofs to check the underlayment. We rely on various experts to give us the detail necessary to to work up a long term budget. So again, with the updated national reserve study standards, you can pay for these ongoing inspections, say every five years or every 10 years through the reserve fund, and then incorporate their findings into the reserve analysis if needed.

Robert Nordlund: 31:43

So you're ready to get that inspection done and get that fresh information, and your budget just slides through the year. You say, Oh gee, we have a elevator load test, we have a boiler inspection, we have a balcony inspection. We have in Florida, the and I'm it's sir, structural integrity reserve study, yeah, well, not specifically reserve say, but the there's a structural element to that, and I'm sorry I should have that the tip of my tongue, but all those things you can say, Oh, darn, that's gonna be a$10,000 a $20,000 expense, but you realize it's in our reserve site, because spend reserve funds on that and your budget goes smooth through the year. And

Kevin Leonard: 32:24

I love that. And one, one important thing to mention is that although some of these large, long, lasting components, 5075, years, 100 year components, we could plan for the complete replacement of those systems, which you might intuitively think we should but most likely when it comes to that point in time, 5075, years from original construction, a lot of those components have been repaired and Partially, partially replaced over time, so that when you're working with your various experts and vendors, they can describe to you, no, we don't need to be reserving for a $5 million re plumbing project. We need to be reserving for $50,000 every other year for these ongoing partial repairs and replacements. So it's not always intuitive saying we have all this piping or all this electrical that is going to cost millions of dollars. We don't need to overburden our homeowners with high HOA dues and reserve contributions. Now we can closely monitor and identify the specific needs of the association and then budget budget appropriately

Robert Nordlund: 33:30

thereafter. Yeah, I like your word of specific needs, because a reserve study is a custom document for your budgeting and cash flow purposes, and it's going to try to take the health and the well being of your community now, and help you model that and care for that building, almost like it's alive and needs special care in this area it's doing well in this other area. And custom and help move that building forward. And I just remembered, it's a milestone inspection in Florida. The Milestone That's it. Okay. Well, tell me, Kevin, who should read or use this book,

Kevin Leonard: 34:08

right? So, and going back to your previous topic, that's why we had to write a second edition. Is because, although there was, there was minute changes to national reserve study standards, it created a very big outcome and difference from what was previously written before. So we didn't we did need to revise the book and and make sure we were clear on that topic. Who should read this book? Managers, community managers, board members. We need to be speaking the same language so that when I say fully funded balance, the manager understands what I'm saying, the board member knows what I'm saying, and we can have a high level conversation about what needs to be done at the association to move them successfully into the future. I think, like my clients, I said at the at the top of the podcast, it honestly should be required reading, and I know I'm saying that I'm the author. I. Um, but it's, it's, it's so important, and that's why I say, in a perfect world, every homeowner that lives in a community association, an HOA condominium, high rise, low rise, PUD, every homeowner should read this book. Yeah, it's, it's such an important topic I was

Robert Nordlund: 35:21

going to say, or have a board who understands it and is able to communicate it. Now, I like the idea of the homeowners also getting it, because they're going to be the future board members of the world. So having that pipeline of information, the board who is not phased or eyes glaze over when they talk about reserves, but a board who is able to communicate that, yeah, it's just a matter of taking care of our building. We're doing our fair share over time, commuting that, communicating that to the homeowners, and that way everyone's on the same page. And when the board says we've had another year of inflation, we need to raise the homeowner assessments. The homeowners are aware that, yeah, the costs go up on all levels, the daily, weekly, monthly costs are going up, and the cost of the roof and the asphalt and the paint are going up. Who's surprised?

Kevin Leonard: 36:10

I live in an HOA, and I get together with my neighbors. And I mean, you shouldn't be surprised, but I would say roughly half of half of our conversations usually end up complaining about the HOA and our and dues going up. And I'm not gonna, I'm not gonna, you know, I'm not gonna sacrifice myself by defending the HOA. Well, I do, but that's another point. So if everybody had a book like this, or understood the concept a little bit better, we wouldn't be getting commercials on TV from some insurance company demonizing the HOA and board members. The HOA is not the bad guy. They're easy to complain about because it's almost a nameless, faceless entity that's costing you money. But board members on the HOA, they have a responsibility and duty to act in the best interest of the Association of all the homeowners. And if they're not doing that, then they are. They can be voted out of the board. And I wasn't going to say that, because we don't like seeing that. But

Robert Nordlund: 37:19

well, and we're not attorneys, so we, we,

Kevin Leonard: 37:21

they have a responsibility and a duty to act in the best interest of the association. So when they are increasing dues, when they're saying, You know what, you should probably trim those hedges, they're getting a little bit long. They're acting in the best interest of the association because they're protecting, maintaining and enhancing the common areas with the goal to protect, preserve your property values. Yeah, if your HOA dues go up 1020 bucks, you know, a year over the next five years, you know that's maybe costing you a couple of $1,000 but in the meantime, if you have a$600,000 home, your your home probably appreciates over the next five to 10 years, maybe, maybe 10% to $660,000 whereas, if the HOA is not doing their job, you know, your $600,000 home stays at $600,000 or possibly even, even goes lower. So I think a lot of homeowners should realize the importance of the HOA and and think of the long term rather than than the day to day, you know, parking violations that you might get a letter from from the HOA. Yeah.

Robert Nordlund: 38:34

Well, here on this podcast, we love board members. We are 100% behind you. We sympathize with you. We understand that you're trying to do your best job, and we want to give you the words, the tools, the arguments, the discussions that you can help communicate to your homeowners that this is how we're taking care of your property. We don't want our your property and my property to lag the market. It may cost a couple$1,000 over the next five years, but that should jump our home values by 10s of 1000s of dollars.

Kevin Leonard: 39:04

I personally don't think board members get paid enough, to be honest,

Robert Nordlund: 39:08

yeah, but I do well, of course, they're volunteers. They're volunteers. But I remember when I was president to my association, I thought, Jesus waste how much time I'm spending doing this. And then I looked at how much more my condo sold for three years after I bought it, and then I could multiply that by 71 different homeowners. I realized that was the most valuable work that I had done. Over those past three years, I had elevated 71 homes. I forget what the number was. Now I don't want to do the math while being recorded at that point time, compared to what my salary was. I was making more money for the association than I was in making salary, right? And to

Kevin Leonard: 39:55

kind of bring it all home, you can maintain your association by having and. Adequate reserves so you can get these projects done on time when they need to be done. In doing that, or to help you do that, you can read understanding reserves, the Complete Guide to Understanding your reserve fund and reserve study, so that the board, the manager, the homeowners, can be all talking the same language and be working together towards a successful financial

Robert Nordlund: 40:21

future. I like that, Kevin, I started thinking about the time. It's so easy for you and I to talk about reserve studies, but we have a 30 minute podcast that we have exceeded our budgeted time on. Thank you, Kevin. It's been great talking with you about this book. It's value to the industry, and so glad to have an opportunity to talk to you about a book and not a particular reserve study that is going sideways on us. So any closing thoughts to add at this time?

Kevin Leonard: 40:47

No, just thank you. Thank you for having me. As you can tell I can I can talk about reserves all day long, and as boring as it sounds to write a book about reserve studies, it was actually an enjoyable experience. And the feedback that I've gotten from from again, board members and managers, is that they've found it enjoyable to read as well.

Robert Nordlund: 41:10

Yeah, and I gotta reiterate that the first time I read it, my accountant has changed. It was enjoyable. It was an enjoyable read. It was easy to dive into I was so pleased with the time that you put into it and what you crafted. As we close the episode here today, I want to let everyone know that we'll have, in addition to some show notes on some of the high points that Kevin gave today, I'll have a link to a free download of chapter one so you can get a feel for the book. Otherwise, of course, you can simply order the book understanding reserves on Amazon, and I do have a book right here. And earlier in the program, I offered a mug for free. And let me tell you, if you're the 10th person to email me with free book giveaway for episode 113 I'll sign the book and I'll send it to you email, podcast at reserves, a.com with your name, address and episode 113, book giveaway, and I'll, I'll send you a book. Kevin looks lives in a different city than me, so it'll have my signature on it, not both of ours. But

Kevin Leonard: 42:14

you're okay with that. That's totally fine with me. Ballot work,

Robert Nordlund: 42:17

hey, well, we hope you learned some HOA insights from our discussion today that helps you bring common sense to your common areas. We look forward to having you join us for another great episode next week.

Announcer: 42:30

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