replacement reserve

Replacement Reserve

In real estate accounting, money set aside to purchase new materials that are expected to be bought as older materials wear out and need to be replaced. The replacement reserve may be listed on a financial statement as a phantom expense, and may be credited back if it is not actually spent.

replacement reserve

An amount of money set aside because building components or equipment will wear out in a relatively short time and need to be replaced.Replacement reserves can be a mere accounting entry as a phantom expense item reducing net operating income each month, or it can be money actually deposited into an account and earmarked for replacements.If the money is set aside into a separate account,any contract for the purchase of that property or business should include a clause addressing who gets the money—the purchaser or seller.When purchasing a condo or co-op,or a home in a planned unit development,the buyer should make sure there are adequate cash replacement reserves for the future.If not, then repairs will not be made or they will be made only after assessments against all owners.

References in periodicals archive ?
Fitch expects liquidity to continue the growth observed over the past few years (1,579 days cash on hand for fiscal 2017), as capital needs are limited and the district plans continued funding of its renewal and replacement reserve.
Contract: Gb-high wycombe: act/04637 - provision for the delivery of replacement reserve parachutes to the robson parachute centre
In addition, the financing provided the ownership team with low-rate, non-recourse financing for a 15-year term, and part of the proceeds will be used to fund repairs and a replacement reserve account.
Worrall was in for the injured Lewis Kerr at number one position, but despite top Tiger Nick Morris suffering exclusion under the two-minute rule he found himself behind Tigers' replacement reserve James Sarjeant in a shared 3-3.
A smaller HVAC system made possible by leveraging the thermal mass of the building and the ambient environment via passive heating and ventilation results in lower maintenance costs and lower replacement reserve requirements.
XLD Group had previously purchased the Torrance Marriott from XLD in late 2013 for proceeds of around USD 74m, including credit for the hotel's replacement reserve.
There are two types of reserve: an operating reserve that must be available within 10 minutes or so, and a replacement reserve which takes over within an hour.
"The purpose of this report is to have a tool for the town to adjust and plan for the budget, to update the capital assets, to update the capital replacement reserve and to use the sewer information to establish the sewer rate," Mr.
* A new reserve fund study--condominium corporations which existed in September 2000 and new corporations since then had two years to complete a mandatory reserve fund study, adopt a plan to create and fund a capital replacement reserve fund, and share the report/plan with the owners.
For a new project, the replacement reserve is funded by directly expensing approximately $225 to $250 per unit per year.
Owners eligible for debt restructuring may choose not to restructure if they and HUD believe they can successfully operate the project and meet current debt service and replacement reserve requirements with market rents.
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