One of the great things about living in a well-managed strata community is knowing your regular levies (called fees in Victoria) help future-proof your investment.
In addition to the Administration Fund, which takes care of the regular expenditure items (such as gardening and cleaning of common property areas), your community has another fund.
- Queensland: it is called a Sinking Fund;
- New South Wales: it is called a Capital Works Fund;
- Victoria: it is called a Maintenance Fund.
No matter what name it’s given, this fund puts regular money aside for big ticket items such as repainting a building, replacing lifts, or conducting major repairs to the swimming pool, for example.
Since the fund is used for major and often infrequent expenses, a substantial amount of money can build up over time in bank accounts that earn little or no interest.
So, what can a strata community do to make sure they’re getting best value from their contributions?
The answer may be found in investing some of the funds into a Term Deposit.
However, before shovelling thousands (if not hundreds of thousands) into a locked-away term deposit, there are a number of factors to consider:
Is It Actually Worth Doing?
Putting funds into a term deposit is not the right decision for every scheme and working that out will be a decision for the community to make.
However, SSKB can provide a return on investment (ROI) analysis which considers the income derived from a TD investment, less the cost of lodgement, redemption and taxation (30%). This will estimate the net return on investment and will assist the strata community to determine appropriate cash management strategies and products.
How Much Is Too Much to Invest?
SSKB can provide a cashflow forecast which considers the strata communities short term cash needs based on recent history and forecasted expenses. This will assist the committee in determining how much to invest and for how long.
Who Should We Invest With?
SSKB recommends Bendigo Bank and Macquarie. Both institutions know Body Corporate/Owners Corporation Communities and offer market competitive rates. We can also assist in finding alternative banks that offer a similar product.
SSKB is Australia’s leading strata management company specialising delivering expert advice and management to Owners Corporation and Body Corporate communities.
If you would like to see how easy it is to make the switch to SSKB, click here to contact us today.