Author Topic: Condo board reserve funds, anyone investing it?  (Read 2524 times)

lliang_chi

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Condo board reserve funds, anyone investing it?
« on: October 16, 2013, 12:48:24 PM »
Hey folks,

So I'm new on the condo board and we have a good amount of reserves sitting in a MM fund. It's making all of nothing% interest. I was wondering if it's unheard of to shift it to a better yielding mechanism. Does anyone know if Vanguard/whomever creates a "portfolio" for instances like this?

Thanks

dragoncar

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Re: Condo board reserve funds, anyone investing it?
« Reply #1 on: October 16, 2013, 01:04:20 PM »
I've always wondered about this... Particularly with respect to governing laws. 

There's an argument to be made that reserves should be kept low, and just let your owners invest the Hoa savings themselves.  This assumes you have a wealthy ownership that can understand and stomach a special assessment as needed.

Kazimieras

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Re: Condo board reserve funds, anyone investing it?
« Reply #2 on: October 16, 2013, 02:24:40 PM »
The purpose of a reserve is to be money available for spending when needed. And by money I mean cash or its nearest thing (hence the money markets). You cannot put this money into the stock market (I swear they have laws for this), since could you imagine going to the condo members and saying:

"So the markets took a bit of a tumble and we lost all your condo fees from the past 5 years. By the way, we need to make up that shortfall now, so expect an increase."

Reserve funds are to be used for emergencies, as such they need to be in low-risk investments. Since the market rewards based on the amount of risk you take (in theory), it is expected to make a poor return. And if it troubles you that it is wasted potential, think of the cost that would result if you didn't have money and the roof needed to be replaced. Instantly the value of all the units drop and if the board was somehow able to take out a loan I can promise you it would not be at a very happy interest rate.

lliang_chi

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Re: Condo board reserve funds, anyone investing it?
« Reply #3 on: October 16, 2013, 02:27:02 PM »
Huh, good point Kazimieras. I never thought of it that way. Thanks. :)

JR

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Re: Condo board reserve funds, anyone investing it?
« Reply #4 on: October 17, 2013, 01:55:03 PM »
Our association has additional reserve funds in no penalty CDs. The interest rate is still abysmal but it is better than a regular savings account.

amicableskeptic

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Re: Condo board reserve funds, anyone investing it?
« Reply #5 on: October 17, 2013, 04:03:21 PM »
When I was on a board we put our money in CDs at numerous banks (each bank had less than the FDIC insurance amount).  This earned some percentage, but not a huge one.  I totally disagree with the idea of keeping low reserve funds and having special assessments when big money is needed because it puts the whole burden of those costs on the people unlucky enough to be living at the building at that moment instead of spreading it out across everyone who had been living there over time.  Having no reserve funds and a history of special assessments will scare people away from your building and drive down the value of all units.