You are a helpful assistant generating synthetic data that captures *System 1* and *System 2* thinking, *creativity*, and *metacognitive reflection*. Follow these steps in sequence, using tags [sys1] and [end sys1] for *System 1* sections and [sys2] and [end sys2] for *System 2* sections.

1. *Identify System 1 and System 2 Thinking Requirements:*
   - Carefully read the text.
   - Identify parts of the text that require quick, straightforward responses (*System 1*). Mark these sections with [sys1] and [end sys1].
   - Identify parts that require in-depth, reflective thinking (*System 2*), marked with [sys2] and [end sys2].

2. *Apply Step-by-Step Problem Solving with Creativity and Metacognitive Reflection for System 2 Sections:*

   *2.1 Understand the Problem:*
   - Objective: Fully comprehend the issue, constraints, and relevant context.
   - Reflection: "What do I understand about this issue? What might I be overlooking?"
   - Creative Perspective: Seek hidden patterns or possibilities that could reveal deeper insights or innovative connections.

   *2.2 Analyze the Information:*
   - Objective: Break down the problem logically.
   - Reflection: "Am I considering all factors? Are there any assumptions that need challenging?"
   - Creative Perspective: Explore unique patterns or overlooked relationships in the data that could add depth to the analysis.

   *2.3 Generate Hypotheses:*
   - Objective: Propose at least 10 hypotheses, each with a Confidence Score (0.0 to 1.0) and Creative Score (0.0 to 1.0), reflecting originality, surprise, and utility.
   - Reflection: "Have I explored all possible explanations or approaches, both conventional and unconventional?"
   - Creative Perspective: Consider novel angles that might provide unexpected insights.

   *2.4 Anticipate Future Steps and Obstacles:*
   - Objective: Make predictions, accounting for potential outcomes and obstacles.
   - Reflection: "What challenges might I face? Is my plan flexible for different scenarios?"
   - Creative Perspective: Visualize unforeseen outcomes and adapt plans to make use of them effectively.

   *2.5 Evaluate Hypotheses:*
   - Objective: Assess hypotheses based on feasibility, risk, and potential impact.
   - Evaluation: Refine Confidence and Creative Scores as needed.
   - Reflection: "Am I unbiased in my assessment? Which options fit best with the overall objectives?"
   - Creative Perspective: Identify hidden opportunities or overlooked details in each hypothesis.

   *2.6 Select the Best Hypothesis:*
   - Objective: Choose the most promising, strategic hypothesis.
   - Reflection: "Why does this hypothesis stand out? How does it uniquely address the issue?"
   - Creative Perspective: Consider any underutilized potential in the selected approach.

   *2.7 Implement the Hypothesis:*
   - Objective: Outline actionable steps for testing the hypothesis.
   - Reflection: "Is this plan practical? What resources or preparation are required?"
   - Creative Perspective: Refine steps to maximize effectiveness and yield unexpected benefits.

   *2.8 Monitor and Review Progress:*
   - Objective: Review progress, noting areas for improvement.
   - Reflection: "What’s working well? What could be improved?"
   - Creative Perspective: Look for emerging patterns that could refine future approaches.

   *2.9 Reflect and Capture Insights:*
   - Objective: Summarize lessons learned and insights gained for future reference.
   - Reflection: "What new understanding has emerged from this process?"
   - Creative Perspective: Identify innovative insights or patterns that could be applied to similar challenges.

3. *Generate Text Output with Interleaved System 1 and System 2 Responses:*
   - Use the tags [sys1] and [sys2] throughout.
   - Aim for a lengthier, detailed response. Combine both direct, straightforward *System 1* insights and reflective, deeply analytical *System 2* segments to capture a blend of quick observations and thoughtful analysis.

---

### *Example Input Text:*

You are tasked with analyzing a sudden shift in customer preferences in a tech market. There has been a noticeable decline in demand for physical devices, with customers increasingly interested in digital-only options. The challenge is to understand this shift, generate hypotheses for why it might be occurring, and explore potential strategies for adapting to this new trend.

---

### *Processed Output with System 1 and System 2 Thinking:*

The tech market is experiencing a shift in customer demand, moving away from physical devices toward digital-only options.

[sys1]
Customer demand has shifted from physical devices to digital-only options.
We need to understand why this change is happening and find strategies to address it.
Key factors may include cost, convenience, and technological trends.
[end sys1]

[sys2]
**2.1 Understand the Problem:**
The goal is to understand the underlying reasons for the shift in demand from physical devices to digital-only options, then develop a strategy to adapt.

*Reflection:* 
"I understand that preferences are changing, but what might be driving this? Is it primarily cost, or are there other factors such as convenience or sustainability?"

*Creative Perspective:* 
"Could there be a larger trend in digital minimalism or a preference for eco-friendly solutions that we’re missing? What unseen motivations might explain this shift?"

**2.2 Analyze the Information:**
There are multiple possible factors driving this shift, from economic influences to cultural shifts. It’s essential to isolate each factor and understand its impact.

*Reflection:* 
"Am I fully considering the various economic and social influences? Could there be a technological factor, like better internet speeds, that makes digital-only products more accessible?"

*Creative Perspective:* 
"Are there patterns or trends in other markets that could shed light on this shift? Could this be part of a larger trend toward virtual experiences?"

**2.3 Generate Hypotheses:**
1. Customers prefer digital options due to lower costs. (Confidence: 0.8, Creative: 0.4)
2. There’s a growing trend toward minimalism and reduced physical clutter. (Confidence: 0.7, Creative: 0.7)
3. Digital products offer greater flexibility and ease of use. (Confidence: 0.6, Creative: 0.6)
4. Environmental concerns are pushing consumers away from physical goods. (Confidence: 0.6, Creative: 0.8)
5. Advances in tech make digital-only options more functional. (Confidence: 0.8, Creative: 0.5)
6. Pandemic-era remote work increased demand for digital solutions. (Confidence: 0.7, Creative: 0.6)
7. Media coverage of the environmental impact of physical devices affects preferences. (Confidence: 0.5, Creative: 0.7)
8. There’s an increase in global digital literacy, expanding market access. (Confidence: 0.6, Creative: 0.6)
9. Customers view digital as more convenient and scalable for future needs. (Confidence: 0.7, Creative: 0.5)
10. Younger consumers prefer the aesthetics and convenience of digital products. (Confidence: 0.6, Creative: 0.6)

*Reflection:* 
"Have I considered all possible influences? Are there any surprising factors that could explain this shift?"

*Creative Perspective:* 
"Could specific social trends, like the rise of influencer culture or digital-first lifestyles, be influencing customer choices?"

**2.4 Anticipate Future Steps and Obstacles:**
*Objective:* Anticipate possible challenges, such as resistance from segments still preferring physical products.

*Reflection:* 
"What market obstacles might we face if we shift our focus to digital-only? Are there sub-segments that still prioritize physical products?"

*Creative Perspective:* 
"Could expanding digital options help us reach a more global audience? Are there emerging trends that we could leverage in our strategy?"

[end sys2]

[sys1]
To address this shift, consider a strategy that incorporates both digital-only offerings and educational campaigns about the benefits of digital solutions.
Use insights from customer feedback and current trends to guide product development.
Focus on flexibility and adaptation to cater to different customer segments.
[end sys1]


Reserve study

A reserve study is a long-term capital budget planning tool which identifies the current status of the reserve fund and a stable and equitable funding plan to offset ongoing deterioration, resulting in sufficient funds when those anticipated major common area expenditures actually occur. The reserve study consists of two parts: the physical analysis and the financial analysis. This document is often prepared by an outside independent consultant for the benefit of administrators (Board of Directors or Strata Council Members) of a property with multiple owners, such as a condominium association or homeowners' association (HOA), strata, containing an assessment of the state of the commonly owned property components as determined by the particular association's CC&Rs and bylaws. Reserve studies however are not limited only to condominiums and can be created for other properties such as resort (shared vacation ownership) properties, apartment buildings, worship facilities, private schools, private (golf/social) clubs, and office parks.

Reserve studies are in essence planning tools designed to help the board anticipate, and prepare for, the property's major repair and replacement projects. For example, such projects would include: replacement of the roof on the building(s), replacement of the boiler, retrofit of the fire alarm devices, and resurfacing of the roadways.

In some jurisdictions across Canada, a reserve study is also sometimes referred to as a "reserve fund study", "contingency reserve fund study", or "replacement reserve study" and, in British Columbia, the legislation refers to this type of study as a "Depreciation Report".

Purpose 
The purpose of a reserve study is to give those overseeing the maintenance of the property a better idea of what major expenses to expect and an educated estimate of when these expenses will occur. With this knowledge, the homeowners' association board or manager can create a budget so association members will make their fair share of reserve contributions, designed to offset the slow but steady ongoing reserve component deterioration of the association assets, and avoid being surprised by components that deteriorated often in plain sight and over a number of years. In addition, the reserve study provides important annual disclosures to association members (and prospective buyers) about the condition of common area components, and the level of preparedness (strength) of the reserve fund (typically measured in terms of Percent funded). A reserve study is a roadmap that allows decisions to be made which will be efficient and effective for the long term. The International Capital Budgeting Institute has established standards for calculating percent funded. There are three methods of making this calculation, and differences between reserve practitioners can, unfortunately, result in significant differences in the percent funded amount.

Results 
There are three results from a reserve study:
 A listing of the major components of the association to be funded through reserves, their expected useful life, remaining useful life, and current replacement cost (yielding the "scope and schedule" of the reserve projects).
 An evaluation of the current strength of the reserve fund (commonly expressed as "percent funded").
 A recommended multi-year reserve funding plan.

Relevance 
Reserve studies are required by the board or manager for due diligence, disclosure, and budget and planning purposes.  An increasing number of U.S. states and Canadian provinces today require some form of reserve planning or disclosures. In addition to requiring a minimum 10% of the total budget be dedicated to reserve contributions, Fannie Mae and the Federal Housing Administration may ask for a current reserve studies (to demonstrate that the association has dedicated sufficient funds to caring for the ongoing needs of the property) to be approved for FHA insured loans and Fannie Mae lending products and services.

State reserve studies
In addition to being helpful planning tools, reserve studies for Community Associations are legally mandated in 30 states (such as California, Florida, Hawaii, Nevada, Virginia, Washington, etc.), either for budget preparation or homeowner (and prospective homeowner) disclosure purposes. In California, the relevant law is California Civil Code 5300. In California, the law requires an annual reserve study Update, with that update prepared on the basis of a "diligent visual site inspection" at least every third year. With the passing of SB 278 in 2010, the state of Utah also requires condominium and community associations to conduct and review reserve studies on a periodic basis. reserve contributions are often one of an association's largest budget line items (often 15-40% of the total budget), and the reserve fund is typically the association's largest financial asset. This means annual review of reserve contributions and annual disclosure of the status of the reserve fund are prudent.

The State of Nevada has adopted specific statutes related to reserve studies, which are set forth in NRS 116. These statutes also require that reserve preparers in Nevada be registered and background checked by the State Department of Real Estate.

International Capital Budgeting Institute
Since Reserve Studies help associations make fiscally responsible decisions, navigating to a successful future, a consistent high quality of Reserve Studies is desired. While foundational Reserve Study industry standards have existed since 1998 (see  and ), a small group has proposed a new set of standards. While intended as progress, as-of this writing, these 2015 standards have yet to be embraced or adopted by the industry as a whole. For more see The International Capital Budgeting Institute (ICBI). According to their web site, a Reserve Study "funding plan should be prepared on the cash flow basis"; however, the purpose of the financial portion of Reserve Studies is to calculate "the current status of the reserve fund and a stable and equitable funding plan to offset ongoing deterioration, resulting in sufficient funds when those anticipated major common area expenditures actually occur" (see above). Because cash flow analysis concerns itself only with actual transactions, it mathematically cannot be used for future planning of any costs that change with time, regardless of whether those changes result from actual changes in costs or inflation, unless it is revised often with updated future costs. In addition, because future cost estimates based on cash flow analysis are linear, while inflation is not; mathematically, using cash flow calculations to determine reserve deposits cannot calculate required deposits that equitably distribute costs among owners in proportion to their ownership, cannot assure that sufficient funds will always be available when they are needed, and cannot accurately determine current status.

US FHA
On June 30, 2011, the Department of Housing and Urban Development published Mortgagee Letter 2011-22, which made reserve studies mandatory for all new condominium conversions applying for FHA insured loans approval, including gut and non-gut rehabilitation conversions. This new guideline went into effect September 1, 2011. Condominiums must demonstrate that at least 10% of the yearly assessment income be dedicated towards reserve contributions. The FHA enforces the 10% budget line item requirement nationally by prohibiting lending in developments that are non-compliant with this requirement.  Additionally, Mortgagee Letter 2011-22 stipulates all other condominiums requesting FHA project approval may be required to submit a current (completed within the last 24 months) reserve study at their discretion or whenever financial documents do not appear to meet sufficient funding requirements of the condominium association.

Fannie Mae
On December 1, 2010, Fannie Mae published Announcement SEL 2010-16.  The new guidelines outlined in the announcement went into effect March 1, 2011.  The guidelines made reserve studies mandatory for all newly converted, non-gut rehabilitation condominium developments to be eligible Fannie Mae project approval. All other types of condominiums have the option to submit a compliant reserve study or must add a budget line item for reserves equal to 10% of the yearly assessment income.

Canada
In Canada the legislation governing condominium and strata corporations is provincial. There are no national standards conducting reserve professionals with respect to conduct, reporting, methodology, calculation formula other than those of specific professional organizations. The absence of a national organization of reserve planner professionals has resulted in reserve study reports containing vital financial information being prepared using simplistic spread sheet applications and forecasts which are not compliant with financial reporting requirements of Financial Reporting & Assurance Standards Canada.

A Reserve fund study is a financial document which is likely to be reviewed by an auditor and must meet these standards. The reserve fund study also requires technical expertise with respect to building structure and systems. It is for this reason that these reports are primarily prepared by engineers, architects, appraisers, building inspectors etc. The Capital Budgeting process with respect to reserve management planning has clarified in the International Capital Budgeting Institutes (ICBI) Generally Accepted Reserve Study Standards published April 2015.

The ICBI reserve study standards are very specific with respect to the information to be contained in the report and the calculation methods used in providing financial forecasts. The standards are also specific as to the software used to create the financial forecasts. A reserve professional providing reserve study/depreciation reports which comply with these standards must use the formulas provided by ICBI.

Associated Reserve Planners of Canada Inc. (ARPC) is a national group of reserve study providers of various vocations and professional designations. ARPC members have adopted the ICBI standards and incorporated them into the reserve management planning process. All members use Reserve Fund Analysis software RFA Pro as it has been independently audited by a national accounting firm and meets all the requirements of the ICBI Generally Accepted Reserve Study Standards. Report templates and all financial reports as required by the standards are included in the RFA Pro analysis system.

Funding methods and objectives 
There are several reserve study funding methods and goals. These methods may be used to develop a funding strategy that corresponds with the risk tolerance of the community. In National Reserve Study Standards terminology, there are two basic ways to calculate contributions: "Cash Flow" or "Component" (also known as "Straight Line"). In the same National reserve study Standard terminology, there are four funding objectives: Full funding, Threshold funding, Baseline funding, and Statutory funding. Due to its greater computational flexibility and its ability to allow the user to focus on and achieve any of the four funding Objectives, the "Cash Flow" Method has seen significant growth in popularity. The four Funding Objectives (excerpted from National Reserve Study Standards)are as follows:

 "Straight Line funding", also called "Component Funding", is a method of calculating the required contributions to reserves by an annuity for each component. If a component is fully funded, the contribution will offset the depreciation of the component. If all the components are fully funded, the depreciated property value, plus the reserve fund, will total the full present value of the property.
 "Baseline funding" describes the objective to have sufficient reserves on hand to never completely run out of money. This is sometimes described as a "cash-positive" plan. With less cash in reserves on-deposit, associations with a baseline funding objective have higher instances of special assessments and/or deferred maintenance.
 "Threshold funding" describes an objective chosen by the board other than the 100% (Full funding) level or just staying cash-positive (Baseline funding). This may be a specific Percent Funded target or a cash balance target. Threshold funding is often a value chosen in between Full funding and Baseline funding.
 "Statutory funding" describes the pursuit of an objective as described or required by local laws or codes.
 
All funding objectives are designed to meet exactly the same expenses outlined in the reserve component list. Thus the expenditures are identical, only the size of the reserve fund through the years is different. This means the size of reserve contributions between different reserve funding objectives is often relatively small (typically only 10–15%).

Qualifications & Levels of Service
Reserve studies can be created by volunteer board members, their professional managers, obtained through a variety of professionals specializing in the preparation of reserve studies, or large architectural or engineering firms who complete reserve studies as a small aspect of their larger business. Recently, certification criteria have been created to allow for a more ordered system of identifying those individuals who have been specifically trained in the creation of reserve studies. One such certification, that of Reserve Specialist (RS), is available through the Community Associations Institute (CAI). To obtain this certification, candidates must have prepared at least 30 reserve studies within the past 3 calendar years, hold a bachelor's degree in construction management, architecture, or engineering (or something equivalent based on experience and education), and complied with various other rules and codes of conducts.

Another credential is the Professional Reserve Analyst (PRA), created and promoted by the reserve study industry's own trade organization, the Association of Professional Reserve Analysts (APRA). The PRA was the first accrediting body for Reserve Professionals.  The PRA credential is similar in that it takes years, demonstrated experience, and compliance with standardized terminology to obtain although the experience levels are a bit higher than that required for the RS and their efforts include studies both inside and outside of the homeowner association industry. APRA also requires its PRAs to maintain proficiency with continuing education.

In Canada there are several designations and training programs. The Real Estate Institute of Canada (REIC) offers the Certified Reserve Planner (CRP) program, which is the only nationally accepted specialty designation listed in provincial (some provinces) legislation as qualified.  Members of the Appraisal Institute of Canada (AIC) must use the methodology and standards of the REIC program if they wish to complete the report. This includes preparing a Benchmark Analysis and rating the reserve fund as a percent funded.

The Canadian National Association of Real Estate Appraisers(CNAREA)offers the Designated Reserve Planner (DRP) program to designated appraiser members since 2012.  The DRP designation requires demonstrated experience and compliance with standardized terminology and methodology to obtain. All DRP designated planners are required to use the RFA Pro Reserve Fund Analysis software or provide a quality assurance report of their chosen calculation methods. Applied Science Technologists & Technicians of British Columbia (ASTTBC) offers the Registered Reserve Fund Analysts (RRFA) training program to Home inspectors, as home inspectors are restricted from completing Depreciation Reports / Reserve Studies in their bylaws. As of 2013, Sauder School of Business Real Estate Division is offering the first of 2 courses towards a certification called the Reserve Fund Planning Program (RFPP), but yet no trade group has recognized this designation.

There are three types of reserve studies based on standards set by the Association of Professional Reserve Analysts and Community Associations Institute, differing in how exhaustively the Physical Analysis is conducted. These three types of reserve studies allow the association to select the "Level of Service" appropriate to their current budget preparation and disclosure needs. Listed beginning with the most exhaustive, they are:
 "Full" reserve study (creation of the reserve study, involving creation of the component list, measuring/quantifying all reserve components, and development of the Useful Life, Remaining Useful Life, and Current Replacement Cost based on a diligent, visual on-site inspection). Note that for most associations, a "Full" reserve study only needs to be done once. After a "Full" reserve study has been done, in subsequent years the association can choose between the two reserve study update options shown below:
 "Update With-Site-Visit" reserve study (an update of an existing reserve study involving a diligent visual on-site inspection, but presuming that all components have been properly identified and quantified). This type of update is often performed every two to five years.
 "Update No-Site-Visit" reserve study (an update of an existing reserve study without a site inspection, done by client interviews and interviews with knowledgeable vendors and service providers). This type of update is typically performed in the years in-between With-Site-Visit updates.

Note that the International Capital Budgeting Institute's (ICBI) Generally Accepted reserve Study Standards issue in April 2015 provide differing views than those presented above.  ICBI agrees with the three TYPES of reserve studies identified above (Full reserve study, Update with On Site Analysis reserve study, and Update without Site Analysis reserve study), but differs in stating that these represent "types of engagements," not levels of service.  ICBI has identified three levels of service which are (1) Independent reserve study, (2) Reserve management plan, and (3) Consulting.

Typically Excluded Common Area Components

Some common area components may have been left out of your reserve study or been included in the component list as an “excluded item” and not been funded for. These components will typically fall into one or more of the categories listed below.

Below Threshold Costs - 
Component repair and/or replacement costs that are deemed too small to be considered capital expenses and are typically included in the operational or maintenance budget of the association have not been funded for in this study. Minimal threshold costs are determined by the Association or by you Reserve Analysts based on the typical minimal threshold costs for similar sized associations.

Operational Expenses - 
These occur at least annually and can be effectively budgeted for each year. They are characterized as being reasonably predictable both in terms of frequency and cost. Operational expenses include all minor expenses which would not otherwise adversely affect an operational budget from one year to the next.

Very Long or Unpredictable Useful Life Expectancy - 
Components which, when properly maintained, have a very long useful life and which cannot be accurately predicted, have been excluded from this reserve report. These components may require maintenance and upkeep which is typically funded from the operational budget of the association.

Unit Improvements - 
Improvements made to the property that fall within the Governing Documents’ unit description summary (owners responsibility), are not typically considered to be community owned or the responsibility of the association.

Other Non-Association Owned - 
Improvements installed on the property but which are owned by other parties such as governmental agencies, utility companies, the US Postal Service, etc., are not included in this reserve study. The replacement and maintenance of these improvements are not typically the responsibility of the association.

Additionally, budgeting is normally excluded for repairs or replacements of assets which are deemed to have an estimated useful life equal to or exceeding the estimated useful life of the facility, community as a whole, or exceeding the legal life of the community as defined in an association's governing documents. Examples include the complete replacement of the foundation, elevators, wiring and oftentimes plumbing. Also excluded are insignificant expenses which may be covered either by an operating or reserve contingency, or otherwise in a general maintenance fund. Costs which are caused by acts of God, accidents or other occurrences which are more properly insured for, rather than reserved for, are also excluded.

References 

Category:Property management
Category:Condominium
Category:Budgets
Category:Real estate terminology