Initial project reserves are funds set aside from the permanent financing to cover possible losses or shortfalls in the cash flow. Before the project is in operation, developers fund the initial reserves. Once the project is operating, cash from reserves will be withdrawn when needed and replaced on an ongoing basis.

• Initial Rent-Up Reserves allow the project to maintain a positive cash position even though all of the units are not leased.
  
  
• Initial Operating Reserves protect against any shortfalls in income. For example, funds from the operating reserve would help the project continue to operate through a temporary increase in vacancy.
  
  
• Initial Replacement Reserves establish a fund for replacement of major building components that will occur over the life of the project. For example, replacement reserve funds may fund the replacement of a building's roof or plumbing system.
  
  
• Use the Other Initial Project Reserves Costs field to enter costs related to initial reserves that are not represented by the other items in this category. Enter a label (replacing the "Other Initial Project Reserves Costs" text) and an amount. If you do not need to use this field, simply leave it blank.