Real Estate Agent · Noblesville, IN · Member since 2015 · 7 posts · 1 vote
I have been a property manager (and my wife a realtor) for many years on a smaller scale; helping out relatives and friends. But recently my company has exploded in the Hamilton County, IN area. I knew never to touch any security deposits, don't view it as any income, must be put in trust, etc. And I haven't done anything but keep the deposits in a business savings account. But now that there is tens of thousands in the account, Is there anything I can do with it to have it grow more than 0.01% in a savings account?
I looked over the real estate laws in Indiana, which haven't changed much since the 70's, but not much is said about what you can do with deposits. Just that they are to be securely held and returned. Does anybody else in Indiana know of a safe account I can move deposits to gain more interest?
I would guess that larger management companies have money managers that put a certain percentage into other investments.
Property Manager · Indianapolis, IN · Member since 2010 · 1k+ posts · 1k+ votes
10y
We are a small-medium sized pm firm with a lot of security deposits. We were instructed to make certain it doesn't earn interest. You definitely don't want a money manager to touch it and lose it. It's not yours to play with. Also, not sure you are correct about keeping it in a trust. Talk with your attorney, but I believe it must be in separate bank account earning 0%. Being an agent is a requirement of starting a PM company, but so are tons of other things, and you want to make sure you dot your i's and cross your t's. Getting sued, even when you win, is no fun.
Nice job on your success and growth.
Property Manager · Indianapolis, IN · Member since 2010 · 1k+ posts · 1k+ votes
10y
We are a small-medium sized pm firm with a lot of security deposits. We were instructed to make certain it doesn't earn interest. You definitely don't want a money manager to touch it and lose it. It's not yours to play with. Also, not sure you are correct about keeping it in a trust. Talk with your attorney, but I believe it must be in separate bank account earning 0%. Being an agent is a requirement of starting a PM company, but so are tons of other things, and you want to make sure you dot your i's and cross your t's. Getting sued, even when you win, is no fun.
Nice job on your success and growth.
Property Manager · Orlando, FL · Member since 2015 · 257 posts · 58 votes
10y
@Robert A Lawson What you could do if you want to earn money, is put the security deposits into an account earning 0% then get a Line of Credit from the bank your account is held at. You can hypothecate the line of credit, and earning money on the spread.
We have done everything by the book and checked with our attorney, who is a property lawyer professor at IUPUI. He let us know that the law in Indiana does not restrict the use of the deposits by the manager/owner as long as they are returned correctly. So I was interested in what other people and companies have done with them.
Also, Josh, I know of some other property management companies that have the tenants sign off in the lease agreement that no interest gained from security deposit is due to tenant. I don't think you should worry about putting your deposits in a savings account (even if it is only 0.01%)
Property Manager · Orlando, FL · Member since 2015 · 257 posts · 58 votes
10y
wow! @Robert A Lawson and @Josh C. if you can truly grew that money then do. The interest earned will help your companies grow. I am from IN and I currently have 4 houses in Muncie IN. I think I will call my manager and tell him to start using that money or at least see what he says. LOL I have learned that lending is the best and fastest way to grow money.
Investor · Carmel, IN · Member since 2015 · 60 posts · 13 votes
10y
@robertl a lawson, thans for your comment. I have always heard what @joshcompton said about no interest, separate account, no "co-mingling". It's nice to know that might not be the case any more.