If you’ve ever wondered what is a depreciation report/reserve fund study, you’re not alone. Many strata councils and property owners know they’re required to have one or should have one but aren’t quite sure what it actually is, or what makes one “good.”
A Depreciation Report, also called a Reserve Fund Study, is a long-term financial planning document for a property. It forecasts when major components like roofs, boilers, and parkades will need repair or replacement, and how much those projects may cost. It also provides funding models that help owners plan how to save for those expenses over time.
In most Canadian provinces, DR / RFS are mandated for most strata/condo corporations. Some American states have adopted related requirements over the past years, but it remains mostly voluntary. Beyond being a legal requirement, a well-prepared report is an invaluable tool for responsible property stewardship.
At OurCastle, we view DR / RFS not as a compliance checkbox but as a strategic roadmap for your property’s future.
What Is The Purpose Of A Depreciation Report?
The purpose of a Depreciation Report / Reserve Fund Study is to give property owners a clear, data-driven understanding of their building’s long-term capital needs and financial health.
Think of it as a 30-year roadmap. It answers three essential questions:
- What do we own?
The report inventories all the major physical components of the property—roofing systems, windows, elevators, mechanical equipment, and more. - When will it wear out?
Each component has a typical service life. The report provides an opinion of condition and estimates when replacements or major repairs will likely be required. - How much will it cost and how will we pay for it?
Future renewal costs are projected using current market rates and inflation factors. The financial section then models several funding strategies such as steady annual contributions, special levies, or a mix of both.
In short, the purpose of a DR / RFS is not just to predict expenses, but to help real estate owning organizations plan ahead, minimize surprises, and even optimize spending.
At OurCastle, we emphasize usable models that can be easily understood, discussed, and acted upon by owners and managers alike.
Key Components Of A Depreciation Report
A complete Depreciation Report / Reserve Fund Study usually contains two main sections: the Physical Analysis and the Financial Analysis. Together, they create a bridge between building science and financial planning.
1. Physical Analysis
This section is essentially the property’s inventory. It involves:
- A site inspection to visually review each major building system (structure, envelope, roofing, interior finishes, mechanical and electrical systems, site works, etc.).
- A component list that describes each major item, its current condition, and its estimated remaining life.
- Observations and recommendations, often including maintenance advice and upgrade considerations.
At OurCastle, we pay close attention to the level of detail in this section. Too often, reports either oversimplify or overwhelm the reader. We aim for clear, concise descriptions that owners can actually use for budgeting and maintenance planning.
2. Financial Analysis
The financial analysis converts all those component timelines into dollars and years. It includes:
- Cost projections for each renewal or replacement, adjusted for inflation.
- Funding models (typically three or four) showing how the reserve fund balance will evolve under different contribution scenarios.
- Reserve adequacy indicators, comparing projected needs with available funds.
The financial section is what transforms a depreciation report from a building science document into a strategic financial plan.
3. Appendices and Supporting Data
Most professional reports include appendices such as:
- Inspection photos
- Summary tables of components by category
- Financial assumptions (inflation rate, interest rate, contingency, etc.)
How A Depreciation Report Is Prepared
Preparing a Depreciation Report / Reserve Fund Study is a multi-stage process that blends technical assessment, financial modeling, and client collaboration. At OurCastle, we typically follow these stages:
Stage 1 – Data Collection
We gather existing building documentation: drawings, previous reports, maintenance logs, and financial statements. This background information helps us understand the property’s age, construction type, and maintenance history.
Stage 2 – Site Inspection
A certified reserve planner visits the property to visually inspect major systems and components. We note observable conditions, visible deterioration, and any apparent risks. The inspection is non-invasive but systematic, ensuring no major element is overlooked.
Stage 3 – Lifecycle Analysis
Each component is assigned an expected total service life and a remaining useful life. This determines when renewals should occur within the 30-year planning horizon.
Stage 4 – Cost Estimation
We estimate future replacement costs based on current market data, unit costs, and industry benchmarks. Inflation factors are applied to express values in future-year dollars.
Stage 5 – Financial Modeling
We build funding scenarios using the property’s current reserve balance and annual contributions. Our models project reserve fund adequacy and highlight shortfalls or surpluses.
Stage 6 – Report Delivery and Review
The final report is presented to the client, typically the board or council, along with recommendations and a summary of key findings. A good DR / RFS should be clear enough for non-technical readers to understand and use for decision-making.
At OurCastle, we often accompany delivery with a presentation or Q&A session, helping clients interpret the findings and integrate them into their budgeting process.
Importance Of A Depreciation Report
A Depreciation Report / Reserve Fund Study is much more than a formality. It’s a cornerstone of responsible property management.
1. Financial Stability
Without a clear plan, real estate owning organizations often resort to special levies when major components fail. These surprise costs can be stressful, disruptive, and costly (yes, special levies sometimes have a cost to raise). A DR / RFS helps smooth out funding, spreading costs fairly over time.
2. Informed Decision-Making
The report empowers owners and managers to make informed decisions about maintenance priorities, funding strategies, and long-term investments.
3. Market Confidence
Buyers, lenders, and insurers increasingly look at the quality of a building’s depreciation report as a measure of its governance and financial health. A detailed, current report signals that the property is well-managed.
4. Preventative Maintenance
Identifying components nearing the end of their life allows for proactive maintenance or staged renewals, extending the life of assets and saving money in the long run.
At OurCastle, we see the Depreciation Report / Reserve Fund Study as a planning instrument that balances technical building reality with financial prudence. A good report builds trust, not only between board members, but also between current and future owners.
Frequently Asked Questions
Here are the most common questions we get from owners and property managers.
Who Needs A Depreciation Report?
Your province/state may require your organization to obtain a DR / RFS at a set frequency. Commercial businesses benefit from DR / RFS to ensure optimal lifecycle of their property. REITs typically conduct a portfolio-wide approach to reserve planning that tie many DR / RFS together. Co-operatives, non-profits, and other multi-unit property owners also benefit from similar studies, even if not legally required.
Can I Prepare A Depreciation Report Myself?
Technically, an owner could attempt to prepare the report, but it’s rarely practical or compliant. Applicable legislation may set out requirements for a qualified person, such as a Certified Reserve Planner (CRP), engineer, or other professional with expertise in building systems and financial forecasting.
OurCastle’s analysts hold the CRP designation and specialize in producing professional, defensible reports.
What Information Is Included In A Depreciation Report?
A standard depreciation report includes:
- A list of major components and their remaining life
- Budgetary cost estimates for future renewals
- At least three funding scenarios
- Photos and supporting data
- Assumptions and inflation rates
The final report is typically 50–200 pages, depending on property size and complexity.
How Often Do I Need A Depreciation Report?
Applicable legislative requirements may set out required frequency of update or renewal. We recommend renewal every 4 years to account for changes in cost, property condition, and owner goals.
How Much Does A Depreciation Report Cost?
Costs vary by property size and complexity. For a smallest buildings, fees may start around $3,000–$4,000. For large multi-tower properties, they can exceed $15,000.
OurCastle specializes in efficient, affordable reporting by leveraging streamlined inspection processes, modern takeoff methods, and optimized financial modeling tools.
How Long Does It Take To Get A Depreciation Report?
A typical report takes 4–8 weeks from engagement to delivery. Factors affecting timeline include property size, access scheduling, and how quickly documentation is provided.
At OurCastle, we believe the best DR / RFS are not only compliant but also useful. They’re built to be read, discussed, and acted upon; guiding communities toward stable, transparent, and sustainable ownership.