P.K. from New Jersey writes:
Dear Mister Condo,
Investing condo HOA reserve into term CD’s. Is HOA reserve (non-profit) considered like personal account or business account? And is there restriction as to what type of CDs HOA can invest into? like personal CD or business CD? I am asking because there seem to be rate difference between personal and business CDs. Thanks.
Mister Condo replies:
P.K., the HOA is indeed a business and would be treated as such by banks. HOAs are not specifically restricted to what type of CD they invest in but it should be of sound means and comply with the guidelines in the governing documents and/or state laws. It can be tempting to take some Reserve Fund money and invest in something like BitCoin or some other commodity that might produce very high rates of return but these instruments are not sound investments for the association’s money. For this reason, you will almost always find associations investing their Reserve Funds into the simplest and most stable investments. Traditional CDs are the most common. All the best!