Property Managers: Is Your Reserve Fund Earning Interest?

Property managers and homeowner’s associations often keep a sizeable reserve fund. This cash is crucial to many tasks including keeping properties in good condition, funding improvements, and covering unexpected costs.

Due to the nature of the reserve fund, it needs to be safe and available to spend on short notice. These needs eliminate many popular investment options, and property managers too often settle for holding cash in an account that provides minimal interest. If your firm employs this outdated investment strategy, you could be forgoing significant income.

Why is it important for your reserve fund to earn interest?

Interest income is important for businesses in all sectors, but it is particularly beneficial for property managers. This additional income helps your reserve fund keep pace with inflation and can even improve your company’s profitability.

Reduce The Impact of Inflation

If your reserve fund isn’t growing, it is actually shrinking due to inflation. Because of this lost value, you need to save more to afford the same maintenance and tenant improvements.

On the other hand, if you invest your reserve fund wisely, you can earn a competitive return that helps your cash keep pace with rising prices. This preserves the value of your reserve fund and helps you minimize the amount you need to add to it.

Grow Profits

The less money you need to add to your reserve fund, the more you can spend attracting new customers, improving your operations, and growing your profits. In some cases, interest earned on your reserves can even be significant enough to add to profitability on its own.

Common Investment Options Don’t Work for Property Management Reserve Funds

While the benefits of earning interest in your reserve fund are clear, achieving that goal is more challenging. It requires an investment vehicle that has it all – safety, liquidity, and returns. However, most common investment options fall short in at least one of those areas.

Stocks Don’t Offer the Safety Property Managers Need

The right stocks in a good economy can provide exceptional returns. However, that income is far from guaranteed. In fact, you risk losing not just interest but your entire balance if the investment fails. This lack of safety generally makes stocks a poor choice for reserve cash.

Treasuries Provide Limited Liquidity

Bonds issued by the U.S. Treasury are generally considered safe investments and can generate competitive returns. However, they are issued for specific terms that limit access to your funds until the investment matures.

If you need to access the money you’ve invested in a Treasury security prior to maturity, you must sell the bond at the current market value. Depending on market conditions, you could make a profit during this sale – or you could lose a substantial amount of your investment. Because of the limited liquidity and risk of principal loss during an emergency withdrawal, Treasuries are not generally a suitable investment for reserve cash.

Most Highly Liquid Bank Accounts Offer Subpar Returns

Deposit accounts offered by FDIC member banks or NCUA member credit unions solve the issues of safety and liquidity. These accounts are protected by government insurance – up to the applicable limit. Some of them are also specifically designed for accessibility. However, these accounts fall short on interest income.

Even with interest rates at their highest level since 2001, the average checking account pays just 0.08% annual interest and the average money market account pays just 0.66% as of July 2024. These miniscule returns are far below the inflation rate and do not provide the growth property managers need to keep pace with rising prices.

You may be wondering, if stocks, bonds, and traditional deposit accounts are generally considered poor choices for reserve cash, what other options exist? There are a few possibilities, but one stands out above the rest – deposit management services.

Deposit Management Services from ADM Provide Returns Plus Safety and Liquidity

With deposit management from ADM, property managers don’t have to sacrifice interest income to achieve their safety and liquidity needs. These services work by spreading cash across our nationwide network of financial institutions to provide access to unparalleled safety, simple access to cash, and nationally competitive interest rates.

Earn Rates 7x Higher Than the National Average

The banks in our network compete for deposits – helping you earn much higher rates of return than the national average. In fact, our accounts have generated 7x more interest than the national average for money market accounts since 2017.

Over time, the additional income from an ADM account can greatly increase the value of your reserve fund. For example, a customer with a $1,000,000 starting value would have earned about $12,500 in interest from 2017 through 2023 in a money market account at the national average interest rate. On the other hand, an ADM account would have generated over $105,000 during the same time frame. That’s $92,500 more income!

The Ultimate Safety for Reserve Cash

In addition to nationally competitive rates of return, our deposit management services provide access to full government protection for all your cash – even funds above the traditional FDIC limit. Best of all, we accomplish this with one account and one consolidated monthly statement.

Access To Your Cash When You Need It

We understand that property managers need access to their cash on short notice. That’s why we designed our solutions to provide next-day liquidity. In fact, we created our modern cash solutions to reduce effort in every possible way – including simple account setup, hassle-free investments, and support every step of the way.

Earn More, Risk Less® With ADM

With deposit management services from the American Deposit Management Co. [ADM], you don’t have to make sacrifices when investing your reserve fund. Our solutions for property managers offer access to the safety and liquidity you need along with the nationally competitive interest rates you want.

Contact a member of our team to learn more about how we can improve your cash management plan and get started today!

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