Are low HOA dues really a win, or a warning sign? If you are shopping for a condo in Potrero Hill, the answer often comes down to reserve studies. You want a home you love and costs you can predict. Understanding reserves helps you spot hidden risk and avoid surprise assessments.
In this guide, you will learn what a reserve study covers, how to read “percent funded,” which projects are common in Potrero Hill, and how boutique buildings compare with larger properties. You will also get a practical checklist to use during due diligence. Let’s dive in.
What a reserve study covers
A reserve study looks at a building’s major shared components and the cash set aside to repair or replace them in the future. Professionals such as reserve specialists or engineers typically prepare these studies. Industry groups like the Community Associations Institute provide helpful overviews of the process.
The study has two parts:
- Physical inventory: components, their useful life, remaining life, and estimated replacement cost.
- Financial plan: a 20–30 year cash-flow projection and recommended annual contributions to keep the fund on track.
Typical outputs include an itemized component list, a “percent funded” snapshot, and a suggested annual contribution to reserves. You should review all three.
How funding levels work
Associations keep operating funds (for routine bills) separate from reserves (for capital projects). A key metric in a reserve study is percent funded:
- Percent funded = current reserve balance ÷ fully funded balance × 100.
- The fully funded balance is the ideal amount the HOA would have if each component was funded pro-rata by age.
Many associations aim for a healthy range, often cited around 60–100 percent, but there is no single rule for every building. Read percent funded together with the cash-flow projection and the timing of big projects.
Why reserves matter to you
When reserves fall short, boards usually have two levers: raise dues or levy a special assessment. That can change your monthly costs or require a large one-time payment.
Reserves can also affect financing and resale. Some lenders and condo approval programs review project financial health. Poor reserve funding or pending large assessments can make loans harder or reduce buyer demand.
Finally, insurance and earthquakes are separate issues to understand. HOA master policies vary, and typical policies do not cover earthquake damage. Seismic upgrades or earthquake insurance decisions can influence budgets and risk.
Potrero Hill projects to expect
Potrero Hill has a wide mix of condo buildings: early 20th-century wood-frame walk-ups, small boutique conversions, and newer mid-rise developments. Many associations are small, which can magnify per-owner costs when a major project comes due.
Common San Francisco capital projects include:
- Roof replacement and roof membrane work, generally on 20–40 year cycles.
- Exterior painting, siding, and facade repairs in our coastal climate.
- Deck and balcony waterproofing, which is crucial in foggy weather.
- Plumbing stack replacements and sewer lateral work in older buildings.
- Elevator modernization in mid-rise properties with lifts.
- Garage waterproofing and slab repairs.
- Window replacement and energy upgrades.
- Seismic strengthening, including soft-story retrofits in older wood-frame buildings.
For seismic items, check with the San Francisco Department of Building Inspection about any city retrofit programs or open orders tied to a specific building. Ask the HOA about status, estimated costs, and funding plans.
Boutique vs larger buildings
Small boutique associations often have simpler systems. No elevator, no gym, and fewer mechanicals can mean fewer things to replace. Decision-making can be faster with fewer owners.
But small buildings have fewer owners to share costs. A single roof, foundation, or seismic project can translate to a large per-unit assessment. Percent funded can also swing more dramatically in small pools, so do not rely on that number alone.
Larger buildings spread costs over more units and often engage professional managers and reserve specialists on a regular schedule. The tradeoff is complexity and bigger ticket items, like elevators and parking structures, which require higher ongoing reserve contributions.
Reading percent funded: a simple example
Here is a basic illustration:
- Fully funded balance (ideal) = $100,000
- Current reserve balance = $25,000
- Percent funded = 25,000 ÷ 100,000 = 25 percent
A low percent funded figure suggests the HOA is behind the ideal target. That does not automatically mean a special assessment is coming. Review the 20–30 year cash-flow projection. If contributions step up in time to cover scheduled projects, risk may be lower. If large projects are near and there is no plan, expect higher dues or an assessment.
Real-world buyer scenarios
- Small 8-unit walk-up with a shared roof: If the roof is near end of life, the reserve is modest, and there is no recent study, owners may face a one-time assessment per unit to fund the roof or a big dues increase.
- Mid-size 40-unit with elevator and garage: Dues are often higher to fund larger systems. If percent funded is reasonable and the reserve study is current, the risk of large one-time charges is often lower, though not zero.
- Older wood-frame with a soft-story order: Seismic strengthening can be a one-time major cost. Ask about compliance status, projected budget, and whether the HOA plans reserves, a loan, a special assessment, or a mix.
Due diligence checklist
Use this non-legal, practical checklist when you are serious about a condo:
- Most recent reserve study: who prepared it, when, method used, and planning horizon (20–30 years).
- Current reserve balance and recent financial statements, including operating and reserves.
- Percent funded figure and the 20–30 year cash-flow projection with planned contributions and expenses.
- Itemized major components with replacement timelines and estimated costs.
- Meeting minutes for the past 12–24 months for discussion of deferred maintenance, DBI orders, or assessments.
- History of HOA dues increases and special assessments for the past 5–10 years.
- Insurance summary: master policy coverages and exclusions, including earthquake coverage, if any.
- Status of any DBI retrofit or code enforcement orders.
- Reserve funding policy adopted by the board.
- Management structure: professional manager or volunteer board, and date of the last full reserve study update.
Positive signs include a recent professionally prepared study, steady contributions, and a cash-flow plan that avoids sudden spikes. Red flags include imminent projects with low reserves and no financing plan, or a history of frequent special assessments without a clear cause.
The regulatory backdrop
In California, homeowner associations operate under the Davis–Stirling Common Interest Development Act. There are disclosure requirements for sellers and HOAs, and buyers should request the full package of documents. For general background on these obligations, review reputable resources that summarize the Act, such as Davis-Stirling.com. For building-specific seismic or code items in San Francisco, confirm current status directly with DBI.
Financing and resale
Reserve health can influence mortgage approval. Lenders and some project review programs look at HOA finances, anticipated assessments, and deferred maintenance. If an association is underfunded and a big project is looming, plan for additional lender questions or limited loan options. On resale, well-funded buildings often attract more buyers and support stronger values because risk feels lower.
Bottom line for Potrero Hill buyers
Do not assume low dues mean lower ownership costs in the long run. In Potrero Hill, building age and systems vary widely. A small building with low dues and a new roof could be a smart buy. A similar property with deferred maintenance and a thin reserve could mean a large assessment later. The difference is in the documents.
Bring the reserve study and financials to your showings. Ask clear, practical questions. If you want a second set of eyes, lean on an experienced local team that understands San Francisco condo systems, retrofit programs, and HOA budgeting.
Ready to compare buildings or want help reviewing a reserve study? Connect with the team at Madison Hunter for calm, data-forward guidance on Potrero Hill condos. If new construction is on your radar, ask about our Urbane SF channel and available one-year HOA incentive for qualifying buyers.
FAQs
What is a condo reserve study and why it matters
- A reserve study estimates when major common components will need repair or replacement and how much the HOA should save so owners can avoid surprise assessments.
How to interpret “percent funded” in an HOA
- Percent funded compares current reserves to an ideal target but should be read with the 20–30 year cash-flow, component ages, and the timing of upcoming projects.
What Potrero Hill projects commonly drive assessments
- Roofs, waterproofing, facade work, plumbing stacks, elevators, garage repairs, windows, and seismic strengthening are typical cost drivers in San Francisco buildings.
What to ask about seismic or soft-story retrofits
- Ask the HOA and the San Francisco DBI about any retrofit orders, the project scope, cost estimates, and how the association plans to fund the work.
How often HOAs should update reserve studies
- Best practice is every 2–5 years, or sooner if major conditions change or a significant capital project is approaching.
Whether an HOA can borrow instead of a special assessment
- Many HOAs can take loans to spread costs if governing documents and lenders allow it, but loans add ongoing debt service to the budget.
What insurance usually covers in major repairs
- Master policies vary, but earthquake or deferred maintenance is typically not covered; request the insurance summary to understand gaps and exclusions.
