Reserve Funds: 6 Ways to Improve Returns

Posted on Friday August 24, 2018

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In our 2018 HOA budget survey, 72% of board members said that they were not confident in the returns they were getting on reserve funds and/or operating funds. Want to make sure you’re getting the most reserve fund returns? Here are six practical steps you can take (including one important step you probably haven’t heard of – see #6). Read the full article and download a complimentary guide here > 

1. Only invest in money market accounts and CDs

Your role as a fiduciary is to safeguard your Arizona homeowners association’s assets. That’s why it’s crucial that you invest only in FDIC-insured money market accounts and CDs. Likewise, avoid risky investments like bonds, stocks and mutual funds

2. Trust HOA pros for investment advice 

Even if you have a solid background in investing, look to your HOA financial services provider and community management partner to help you make wise investments. In some cases, board members spend too much time doing their own investment research via financial publications or on the internet, which cuts into the time they should be spending on developing HOA policies. 

3. Know the fundamentals of HOA investing and financials

As a fiduciary, it’s important to know the basics when it comes to HOA investing in addition to state-specific reserve fund requirements. While Arizona doesn’t require an annual budget or reserve study review, it is in your HOA’s best interest to review financials regularly. 

4. Work with an HOA-specific financial services firm

Partner with a financial services company that specializes in associations. They should have a large portfolio and bank relationships in order to obtain competitive rates for your HOA. 

For example, FirstService Financial partners with FirstService Residential clients on average earn rates that are 4 to 5 times higher than the national average. In fact, FirstService Financial helped a master-planned HOA in San Tan Valley increase their portfolio’s average interest earned by $32,000.

5. Review your association’s investments regularly 

As mentioned, it is in your best interest to review your HOA financials and reserve fund investments regularly. This is especially important when you’re not working with a financial services firm since banks often offer teaser rates to individuals.

6. Create and implement an Investment Policy

Last, but definitely not least – develop an Investment Policy for your HOA.  According to Karla Chung, vice president of FirstService Financial, “An Investment Policy is critical in providing continuity of prudent investment decisions that safeguard the association’s assets.”

Get a free guide

Complete the form below to read the full article and download a complimentary guide, “How to Create an HOA Investment Policy.”