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In our 2018 HOA budget survey, 72% of board members indicated that they weren’t confident in the returns they were getting on their reserve funds and/or operating funds. To help, we’ve outlined six ways to improve your returns with the guidance of your HOA management company. Read the full article and download a complimentary guide here >
1. Only invest in money market accounts and CDs
Your responsibility as a fiduciary is to protect the assets of your association. That means only investing in FDIC-insured money market accounts and CDs and avoiding risky investment vehicles like mutual funds, bonds and stocks.
2. Trust HOA professionals for investment advice
Look to your California community management company and financial services provider to help your board make sound investing decisions. Some boards research investment information themselves via the internet or financial publications, which is time that may be better spent creating better HOA policies.
3. Learn HOA investment fundamentals
Board members should have a basic understanding of HOA financials and state legislation when it comes to managing reserve funds.
For instance, in California, the board must review the current reserve revenues and expenses on a quarterly basis.
4. Work with an HOA-specific financial services company
Work with an HOA financial services company that can help you get the most out of your reserve funds. They should have a large portfolio and existing relationships with banks in order to obtain competitive rates on your behalf.
By utilizing FirstService Financial, FirstService Residential clients typically earn rates that are 4 to 5 times higher than the national average. In one case, FirstService Financial partnered with a Dana Point association to increase their annual interest by more than $27,000 by leveraging existing bank relationships and evaluating the association’s current investments.
5. Review HOA investments regularly
Reviewing your reserve fund investments on a regular basis is important. Banks often offer teaser rates to customers, which will go away over time. Review your portfolio quarterly to make sure rates don’t change.
6. Create an Investment Policy
Last but not least, create an HOA Investment Policy. Karla Chung, vice president of FirstService Financial said,
“An Investment Policy is critical in providing continuity of prudent investment decisions that safeguard the association’s assets.”