How Much Should a Condo Have In Reserves?

Understanding Funding Metrics for Financial Health

For condominium corporations, ensuring that enough money is set aside for future major repairs and replacements isn’t just smart financial planning—it’s essential.

But one of the most common questions from board members and property managers is:

How much should we actually have in our reserve fund?

The answer isn’t a one-size-fits-all dollar amount. Instead, it depends on several factors specific to each property—most importantly, the condition and age of its assets, projected replacement costs, and how much time remains before those replacements are due. This is where two critical concepts come into play: Percent Funded and the Fully Funded Balance.

What Is a Fully Funded Balance?

The Fully Funded Balance (FFB) is the ideal reserve fund balance at a given moment in time. It represents how much money a condominium should have saved today based on the age and cost of its common elements—such as roofs, elevators, windows, and mechanical systems.

The formula to calculate this for each component is:

FFB = (Age of Component ÷ Useful Life) × Replacement Cost

For example, if a $100,000 roof is halfway through its 20-year life, it should have about $50,000 reserved. Calculating this for all components provides the total Fully Funded Balance—essentially, the financial “target” your reserve should be aiming for at that point in time.

What Is Percent Funded?

Percent Funded measures how close your current reserve balance is to your Fully Funded Balance. It’s a quick snapshot of financial health.

Percent Funded = (Actual Reserve Fund Balance ÷ Fully Funded Balance) × 100

A property that is 100% funded is exactly on track. If you're at 50%, you’re halfway to where you should be. A high percent funded score indicates lower risk for special assessments or cash shortfalls, while a low score may be a red flag for future financial strain.

Here’s a general guide:

• 0%–30% Funded: High risk of special assessments or fee hikes

• 31%–69% Funded: Fair to moderate risk

• 70%–100% Funded: Healthy and financially prepared

• Over 100%: Possible overfunding, or a very conservative approach

  
  

So, How Much Should You Have in Reserves?

Rather than focusing on a fixed dollar amount, boards should use the Fully Funded Balance and Percent Funded to guide funding targets. These metrics adjust for the size, age, and needs of each property and offer a more accurate picture than blanket benchmarks.

For example, a small condo building might need only $300,000 in reserves to be fully funded, while a larger, more complex property might need over $1 million. What matters most is whether your actual balance aligns with the recommended balance for your specific situation.

Why This Matters?

Having the right amount in reserves not only protects your community from unexpected costs—it also promotes stable condo fees, preserves property values, and builds trust with current and future homeowners. Lenders and buyers also view healthy reserves as a sign of sound management, which can improve marketability and financing options.

Let Stampede Engineering Help You Stay on Track

At Stampede Engineering, we take a tailored approach to reserve fund planning. Our licensed engineers assess your property’s unique needs and provide data-driven reports that clearly outline your Fully Funded Balance and Percent Funded metrics—empowering your board to make informed, confident financial decisions.

If you're unsure whether your condo is on track financially, call us today at (825) 734-3944. We’re here to simplify the numbers and help secure your community’s future.