Managing a community is not easy by any means. Most of the communities tend to have an owners association who looks after the administrative and other tasks like budgeting, sending notices, making sure that the community is abiding the laws, etc. But the association members work as volunteers, and that means they have their own separate professional work. This leads to giving lesser time to the community work.
Therefore, to make the community work properly and to make sure that all the obligations are met in time, the homeowners tend to bring a management company onboard. This investment firm helps in maintaining the community with professionals standards. Read further, to know what a community management corporation is and how these companies can grow their money.
What is a community management corporation?
In a community management company, the board members included are the volunteer homeowners of the community. However, to cover the administrative tasks, financial tasks, and legal tasks, they tend to bring on board a management team. This makes this association a management company.
They manage helps in covering the broader range of responsibilities in time. Not only they help in managing the responsibilities of the community maintenance, but they also help in giving guidance to the board members. They are responsible for handling the finances and accounts of the community and in making sure that the annual budget is followed through. They keep records and prepare reports regarding the community.
Overall, a community management company helps the board members to make decisions, execute them, and also follow them up according to the policies.
What does a community management corporation do?
At times the communities are handled by a simple association of homeowners. But, the fact is that handling a community and maintaining the requirements of the community is not an easy task. This is where a community management corporation becomes effective. They have the right resource and skill set to manage a community alongside the community volunteers.
Some of the functions of a community management company are:
One of the major concerns of the communities is that the value fo the homes should not decrease. Now, if the site is not managed properly and if all the rules and regulations are not followed properly, then the chances of the prices going down are very high.
This is where a community management company can be helpful. They are well aware of the community laws and rules and they make sure that the rules are abided by. This includes becoming aware of the laws and the changes in the guidelines. Also, the company tends to give regular on-site visits to be familiar with the community and the issues.
A few of the crucial tasks involve:
- Inspecting rules
- Identifying the violations of the rules
- Making sure that the vendor tasks are completed and take care of
- Keeping track of maintained issues
- Making sure that the board approved tasks are completed
One of the best things about a community management corporation is that there will be a manager who will be the direct connection between the company and the homeowners. There are several types of administrative take that require completion from time to time. To handle all such things and to coordinate between the homeowners and the company the manager makes sure that a proper line of communication is kept open.
Some fo the tasks that fall under the administrative duties of the community management company are:
- Making and following up the monthly reports of the community
- Schedule the board meetings
- Helo in preparing the annual budget of the community
- Make sure that the inquiries of the homeowners are taken care of in time
Handling and managing the finances of the community is another herculean task that requires time and experience. A community management firm tends to have skilled and experienced accountants and finance experts. They can easily handle and manage the complicated account of the community and also help in creating a budget and financial reports in time.
Some of the major tasks that are completed under the category fo the accounting management are:
- Properly estimating the maintenance costs
- Managing the bank accounts
- Reporting and creating the monthly financial reports
- Reviewing the dues and financial assessments of each month properly
- Give guidance and help in creating a budget and for investments to the board members
Accounts receivable management
Collecting the accounts is very important for a community. This can be handled well by a community management company. As they have skilled managers, who are well aware of the state laws that tell about the collections of the accounts. They will make sure that the notices are sent and the accounts are collected in time from delinquent owners.
Some of the major tasks that are involved in debt management by the community management company are:
- Reporting about the accounts receivable
- Billing the accounts
- Sending the timely notices
- Take legal action if needed
- Work alongside the attorney and get a result in time
These are some of the major tasks that a management company does to make sure that the community is kept well maintained at all times.
Finding the right investments for community management corporation
Handling the reserve funds of the community corporation is not an easy task. There are certain things that one needs to keep in mind. Though, it is important to keep the proper set amount of funds ready in case of requirements. But, it is also crucial that money should grow over time. One of the best ways to do that is by investing the amount in the right place.
Yes, investing money is risky, and but nobody is telling one to invest all of them in a risky avenue. Instead, one can choose to invest the funds in the right mix of risky high return avenue and low-risk avenues.
To make such decisions and to understand how to create a strategy that will be fiscally useful and profitable, one can take the help of an investment firm.
Some things that should be kept in mind while investing the reserve funds are:
- The law: there are certain laws that one needs to abide by when it comes to community corporation investments. The first thing to do is, to read the governing documents and be through with the state laws. Every state has its own law which makes sure that the corporation is investing money prudently, all the while keeping, money aides for restoration, repair and replacement works.
The governing documents of the corporation tend to either have an investment policy outlined or may not have one. If they have then the matters are quite easier to follow up. However, if the documents have no investment policy outlines, then it is crucial to get a proper plan in place first.
- Reserve study: one of the major things that are very crucial to be taken into consideration is the reserve study. So, what is a reserve study? Well, it is a proper outline that is conducted and created by the experts telling how and when the reserve will be used. In this they take the community into consideration and decide three parameters:
- What needs replacement?
- When it needs a replacement?
- What is the cost of replacement?
Having an updated reserve study, one will know how much money is required, and when it is required. This will help in taking better investment decisions so as not to jeopardize the reserve funds objective.
Also, a reserve study needs to updated regularly. Why? Because, it will help in keeping account of the ever-changing cost of supplies, technology, etc.
Now that it is quite clear that who and what all things that one should keep in mind while thinking to invest the reserve funds of the community management corporation.
Let’s see what all options are available when it comes to investing these funds in the right way:
- Bonds: this remains the most popular investment avenue. These instruments are a way to invest money, by giving them to an organization (private or government). These can be either municipal bonds or local bonds or treasury bonds. In this, the return comprises of principle and a pre-decided rate of interest.
- Stocks: everyone must have heard of stocks anyway. It is simple and most popular. Here, one will be buying a stock of the publicly-traded company through a broker, and will wait will till the price of the stock to go up. One can then sell it off to gain profit over the selling price. However, it holds a certain risk as the stock price can go down as well.
- ETFs: this is a collection of the various investments that track the index. These instruments are traded in the stock exchange. These are diversified and thus are less risky. Also, the price of the ETFs tends to fluctuate throughout the day.
- Mutual funds: these are either passively or actively managed instruments that are invested in the collective form. In this, a pool of investors invest their money and the fund manager creates a portfolio of stocks that can have profitable returns. Risks are similar to stocks and bonds.
- CDs: certificate of deposits are easy to invest and low-risk instruments. In this, the money is invested in certificates given by banks for a set period. In this the return includes the pre decides interest and the principal amount.
Finding the right financial investment firm for my community
When it comes to investing in the reserve funds of the community management company, the right decision needs to be taken carefully. As the market tends to face ups and downs often, the chances of hitting losses are always high.
This is why the proper decisions need to take and in time. Some of the tips that should be kept in mind while investing are:
- Reasonable returns: simple making sure that the principal amount is returned is never enough. One needs to take the overall return on the investments into account.
- Protected principle: to make sure that the principal amount is not at a loss, one should pick safe and low-risk investment options. Loss of principal amount means loss of reserve finds and that is not a good scenario.
- Availability of funds: investing the finds is important, but what use are these finds of they are not available when it is required for some kind of replacement or repair work. Take the investment duration and the reserve study into consideration before investing in any instrument.
All these things play a very important role in a profitable investment. However, many times the directors of the community management company may lack in making the right decisions and create the right investment portfolios. Investment is a critical subject and not everyone is well versed with the field.
This where a trained financial advisor can be really helpful. The community corporation can take help fo an investment firm, who has financial advisors who can help in giving proper advice regarding the reserve funds.
However, there are several forms out there, and finding a proper and reliable concern is very important. Some of the things to keep in mind while picking a financial investment firm are:
- One should do some research before picking any investment firm.
- Have a clear dialogue regarding the costs and procedures to avoid any future confusion regarding the finances.
- Talk to the financial advisor who will handle the investments of the company and get an idea about their working style.
- Check the credentials and certifications of the firm and, make sure that they enough experience in the field.
- Decide what is the overall cost of hiring a financial investment firm in the long term.
One of the biggest resources is the money that the community management corporation need to handle, to make sure that the community runs smoothly. Therefore finding the right avenue to invest in and finding a good investment company holds a lot of importance. This will in particular ensure that the company can utilize its funds properly, grow its funds, and maintain good standards of a community.