Investing Reserves

Started by JohnC46 • 5 replies • 1636 views

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JohnC46 (South Carolina)
Posts: 14,265

Posted:

We are discussing investing our reserves. As of now they are in a money market account earning less then 1%. Any other suggestions?

Has anyone looked at or use a online bank like Ally Bank? They seem to offer a much higher rate and are FDIC insured.

Thanks

MelissaP1 (Alabama)
Posts: 13,836

Posted:

What are the tax ramifications for a non profit? What is the penalty for early withdraw due to an emergency? I am not one for investing reserves money... A good savings account is okay but nothing long term... Just my opinion...

Former HOA President

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Quote:

Posted By MelissaP1 on 10/25/2014 7:42 AM
What are the tax ramifications for a non profit? What is the penalty for early withdraw due to an emergency? I am not one for investing reserves money... A good savings account is okay but nothing long term... Just my opinion...

Mel

Thanks

Good points. Some of our reserves are long term (like roofs) so maybe the answer is split it up.

Thanks

MelissaP1 (Alabama)
Posts: 13,836

Posted:

I live in a tornado prone area...Matter of fact my car got picked up and spun by one a few weeks ago... So to me roofs are not necessarily long term. When roofs or other capital investments go, they can go fast. I plan for long term repairs and yearly maintenance. Repairs that will carry us through to full replacement can really suck up your regular budget. It is a tough balancing act.

I do believe some larger HOA's can indeed take an investment hit. It is a hit for most HOA's to invest. Ties up their money and can have tax and investment costs tied to it. Consider also how much time would have to go into a vote of spending reserves or pulling them out of investments is quite time consuming.

Running a budget for a HOa is different than your home budget. We tend to be creatures of control and habit when it comes to our money. Something a HOA is not. It is all for one or none at all. A HOA only needs a savings for replacement costs.It ONLY needs money in it's accounts to meet it's bills. Other than that your HOA is collecting too much money or is not collecting enough. Non profit does not mean one can not make a profit they say. However, if it does then that profit has to reinvest itself into the budget. Otherwise your asking for the IRS to climb aboard...

Former HOA President

JohnC46 (South Carolina)
Posts: 14,265

Posted:

Mel

To clarify we are standalone, individual, private, patio homes. Included in our dues is all outside home and grounds maintenance due to normal wear and tear, including roof replacement. Each home carries its own insurance thus storm damage would be between the individual homeowner and their insurance company. We often joke that one good hail storm would assure our reserves are more then sufficient as their insurance company would pay for roof replacement thus letting us off the hook for another 25 years or so.....LOL

DavidW5 (North Carolina)
Posts: 565

Posted:

Most of the online only banks will not accept business accounts which your reserve account would be. One exception I have found is Everbank. We were recently able to open a 60 month CD at Everbank at 2.23%. Also look at Synchrony Bank (was GE Retail Bank).

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