Reserve Fund Investments

Jon, most put reserves into Time Savings (CDs). Look first at security of principle, second liquidity (as needed), and lastly at yield. 5-6% is a good interest rate.

Safety, i.e, do not lose any of the money (principle). Usually the yield increases with risk. Usually state statutes would frown on corporate officers going to Vegas and gambling with corporation money to increase yield

Hi Jon:

Another thing to consider - "laddering" your investments. This means setting up the investments so that you have some rolling over regularly. If you're just starting, you might set up CD's so that one matures each quarter; then add to the principal of the CD when it matures and roll over. You would probably want to set up the first set of CD's so that the first matures in 90 days, the second in 180 days, the third in 270 days and the last in 1 year; then at each maturity, roll the expiring one into a 1-year CD. As rates rise, you'll keep getting better and better interest rates.

Once you have more money, then begin to split them into two, and evenutally split into three, so you have one maturing every month.

When you get more money, you can then begin to look at some longer-term CD's (two year, three year, eventually maybe 5 year). As long as rates are rising, you'll want to keep the term relatively short, to take advantage of rising rates. If & when rates begin to fall, you'll want to look at some longer terms, to lock in higher rates of return.

You'll also want to keep an eye on the reserve study, so that when you have a large item (such as roof replacement) coming up, you have your CD's maturing a little bit before you need the money (in case you need to replace a bit sooner) and have the money sufficiently liquid that you can take care of the project. It would probably be wise to keep a certain amount in an interest-bearing savings account, to take care of smaller reserve items, as well as to have a cushion in case something unexpected comes up. Local banks don't usually give much interest, so you may want to consider an internet bank (such as HSBC Direct) since they give higher interest rates.

You can shop for CD rates online among local and regional banks. Some HOA's use money-market accounts at brokerage firms to get a better rate as well.

It would be wise for the Board to set up an investment policy by resolution. That way, it's an automatic procedure on how to invest.

J. Patrick Moore, CMCA

If your operating can handle a sweep account this too generates a nice monthly interest. We keep an operating account and a separate reserve account for our communities. If their operating has a daily balance of $45,000.00, we place their account into a sweep account. It works out nice for some of our communities and their interest monthly is approximately $650.00. Talk with your banker.

Folks thanks to you all for your time and suggestions.

I have served on the Board of my condo community for 20 years. Secretary, Treasurer, and now President for the last 4 years.

As you all know sometimes I have questioned my mental health for serving for so long. There are times..............

We have 132 units located in NY.

After more then 20 years of the original Board running the property with the main goal of keeping the common charges LOW the total assets of the property stood at $28,000.(Reserve and operating.)

Now after 4 years we have total assets of nearly $160,000.

$130,000 in reserves and nearly $30,000 in operating funds broken down into a checking acount and Money Market account.

Also during this same period we have been able to put over $150,000 into improving the physical property with several projects covering most of the cost. Parking lots, landscaping, painting, etc.

In total over this four year period we have increased the asets of the property nearly $250,000.

Over this same period the average value of the units has gone up 40-50%.

Today our reserve which we still attempt to add to generates income which can either be added to our assets or used to cover costs without input from the owners. Just asking for suggestions as to getting the most bang for the buck.

As suggested some owners upon hearing of the improved financial condition of the property suddenly feel they have the make-a-wish right to ask for projects with the belief they should be considered. Sorry..........

I have seen what mismanagement by the Board and the management company can do to a property over the years hopefully we are headed in a more positive direction.

Thanks again.