MarkC3 (Indiana)
Posts: 43
Posts: 43
Posted:
I was told by another board member that we can't invest our reserves or any of our collected dues. We are listed as an LLC, is this correct?
Thanks
Thanks
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Started by MarkC3 • 11 replies • 1719 views
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JoeW1 (New York)
Posts: 728
Posts: 728
Posted:
MarkC3 - what kind of investment were you suggesting? certainly reserves should be invested to gain interest. i'm pretty sure an LLC can realize profits, it is a structure similar to a corporation.
GloriaM (North Carolina)
Posts: 829
Posts: 829
Posted:
Mark:
Associations can place their reserves into a FDIC insured bank, such as a Merrill Lynch account accruing interest in the name of the association. You would not be able to place the money into stocks, however CD's staggering them into 3 month, 6 month, 90 day and year CD's would always have money maturing. I would also advise keeping money liqiud in a money market.
Associations can place their reserves into a FDIC insured bank, such as a Merrill Lynch account accruing interest in the name of the association. You would not be able to place the money into stocks, however CD's staggering them into 3 month, 6 month, 90 day and year CD's would always have money maturing. I would also advise keeping money liqiud in a money market.
BradP (Kansas)
Posts: 2,640
Posts: 2,640
Posted:
Mark:
You can invest, however, I would do only invest in non risk investements.
You can invest, however, I would do only invest in non risk investements.
MarkC3 (Indiana)
Posts: 43
Posts: 43
Posted:
Thanks all. I will talk to our banker regarding CD options.
JM2 (Oregon)
Posts: 439
Posts: 439
Posted:
Hi Mark:
We're in an upside-down market where some shorter-term CD's are making more interest than longer-term ones. While it's hard to outguess the market, when long-term rates go up, you might want to put some of the reserve monies (if you've got a fairly long time out on some monies' expected use) into some longer-term CD's. You'll want to have some rolling over regularly in the short term to take advantage of rising rates. Don't be afraid to shop beyond the banks in your immediate area. Depending on the Board's tolerance for risk, you may want to keep money in "Bricks and Mortar" banks, internet-based banks, or money market accounts with a brokerage firm. However, most HOA's avoid the stock market or any investment that puts the principal at risk.
J. Patrick Moore, CMCA
We're in an upside-down market where some shorter-term CD's are making more interest than longer-term ones. While it's hard to outguess the market, when long-term rates go up, you might want to put some of the reserve monies (if you've got a fairly long time out on some monies' expected use) into some longer-term CD's. You'll want to have some rolling over regularly in the short term to take advantage of rising rates. Don't be afraid to shop beyond the banks in your immediate area. Depending on the Board's tolerance for risk, you may want to keep money in "Bricks and Mortar" banks, internet-based banks, or money market accounts with a brokerage firm. However, most HOA's avoid the stock market or any investment that puts the principal at risk.
J. Patrick Moore, CMCA
MarkC3 (Indiana)
Posts: 43
Posts: 43
Posted:
I will be smart on the investments, thanks. I do need help with the question "can we invest HOA dues?" All of the other board members have been told (so they say) that we can't invest our reserves as we can't show a return on our funds. So I don't know who I can turn to that can answer this directly so I can be informed enough to convince the other board members "yes" we can.
Thanks
Thanks
RogerB (Colorado)
Posts: 5,067
Posts: 5,067
Posted:
Mark, not only can you invest your reserve funds, you are losing money if you don't. Your other Board members don't know what they are saying. Perhaps they are confusing non profit with having income from other than assessments. If they doubt this refer them to IRS form 1120-H instructions filing taxes.
MarkC3 (Indiana)
Posts: 43
Posts: 43
Posted:
The "non-profit" did come up. So are HOA's non profit? I know we are an LLC, so I would assume we can invest our dues.
MelissaP1 (Alabama)
Posts: 13,836
Posts: 13,836
Posted:
HOA's can be "For-Profit" or "Non-Profit". It would be in the incorporation documentation. I was once told that the "non-profit" status had to be granted by the IRS only. However, I am not sure on that accuracy. (It came from our CPA).
I believe LLC's work similar for-profit corporations. Meaning you can make a profit and split it amongst the partners/stockholders. Non-profits tend to have to spend as much as they recieve in and any profits "returned" back into the budget. (The budget is shared amongst ALL the owners still). Essentially, with one you may get a profit sharing check and the other profit is put back into operations.
Either way, investing funds in CD's may be a good thing to invest in if your looking for long term growth.
I believe LLC's work similar for-profit corporations. Meaning you can make a profit and split it amongst the partners/stockholders. Non-profits tend to have to spend as much as they recieve in and any profits "returned" back into the budget. (The budget is shared amongst ALL the owners still). Essentially, with one you may get a profit sharing check and the other profit is put back into operations.
Either way, investing funds in CD's may be a good thing to invest in if your looking for long term growth.
Former HOA President
BradP (Kansas)
Posts: 2,640
Posts: 2,640
Posted:
Melissa:
We are an LLC and our surplus at the end of the year goes to our reserve fund. We never have given refunds back to our members and doubt if we could.
We are an LLC and our surplus at the end of the year goes to our reserve fund. We never have given refunds back to our members and doubt if we could.
MelissaP1 (Alabama)
Posts: 13,836
Posts: 13,836
Posted:
I may have gotten non-profit and for-profit comparison to a LLC switched. I am sure another poster will point out my mistake if I did. Been a loong week and my business classes were a few years ago...
Invest if you have the time and money. If not, invest in the areas that need repair or replacement ASAP. May be much better for community improvements than wallet "puffiness".
Invest if you have the time and money. If not, invest in the areas that need repair or replacement ASAP. May be much better for community improvements than wallet "puffiness".
Former HOA President
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