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Investing & Protecting Your HOA Reserve Funds: The Right Way To Do It
As a member of the board, it is your responsibility to stay on top of your reserve fund making sure it is regulated well and in the community’s best interests.
Understand When to Use Your Reserves
Is it a reoccurring expense? Is it a capital improvement? A reserve fund is savings set aside for common area maintenance, repairs, replacements and unexpected repairs not covered by insurance.
HOA Reserve Fund Laws
Can an HOA invest money? It depends on what your state laws are and your governing documents. Some states have restrictions on which investments HOAs are permitted to take advantage of. Always exercise prudent fiscal management when investing.
Your Investment Policy in the Bylaws
Check your governing documents, as they may include a policy on investments regarding your reserves. Every homeowners association should have an investment policy laid out in the governing documents.
It is very important to consider the following in order of its priority:
- Safety above all else
- Liquidity is a must
- Consider yield last
Investing HOA Reserve Funds
HOA reserve funds don’t have to sit idly by.
Columbia Bank offers the Demand Deposit Marketplace (DDM), a sweep account that will provide FDIC Insurance up to $25 million in deposits. Funds over a target balance are swept out daily to the DDM account where funds will be invested amongst various FDIC insured financial institutions in $250,000 increments.
You will receive a monthly statement listing the names of the financial institutions and the dollar amount that is invested with each institution. This program will satisfy the HOA investment guidelines and provide you the safety, convenience and availability to your funds as you need them.