Sometimes Doin’ Nothing Is The Perfect Thing To Do — Be A Quick Study

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From year to year, the range doesn’t change much, though in extreme times, it skyrockets. I’m talkin’ about the percentage of people I counsel to sit tight. Don’t do anything. Cool it a bit. It consistently remains in the 30-40% range, give or take some. The main reason? Aside from those who simply don’t sport the required capital, the reason used most by me for that counsel is lack of cash reserves. Over the years I’ve called it the ‘Sominex Account’. Sominex, for the Boomers’ kids was (still is, I think) a brand of over-the-counter sleeping pill. Yeah, I know, pure corn. Cash reserves allow you to sleep better as an investor.

Much of the so-called new and improved thinking pays little homage to the concept. Murphy is some guy your grandpa used to ramble on about. Somethin’ about bad luck, right? If anything shows respect for the inevitable, it’s having generous cash reserves as a serious, long term real estate investor. Though the last one happened over three decades ago, I’ve lost three properties. Wanna know a secret? All three were a direct or indirect result of having insufficient cash reserves.

Experience and cash reserves

There isn’t a substitution I’ve found, except for the presence of richer than God, Aunt Ethel. And she’s way too smart to be your backup. Folks often think I only tell newcomers not to invest due to this principle. Not so. I tell ongoing clients all the time. Matter of fact, I saw me do it twice just this past weekend. Things change, Someinex Accounts dwindle. When this happens and they call to tell me they’d love to acquire more property, I ask the question.

“How’s your Sominex Account doin’ lately?” “Well, (fill in the blanks here), so it’s down to around half of what it was.”

It’s almost always at that point I tell ’em not to buy any more real estate ’til that account is built back up. Sometimes this occasions further protestations of how quickly the account will rise. In many cases I know that to be accurate. Still, I merely respond with glee, asking them to please call or write me when that day arrives. But ’til then, let’s keep it on ‘glide mode’, ok?

Allow me a confession

Though I say the Sominex Account is so my real estate investor clients can sleep at night, that’s only partially true. In fact, it’s not even primarily true. The paramount reason I insist on generous cash reserves is so I can sleep at nightInvesting for your retirement income is not only a singularly serious undertaking, putting it at risk unnecessarily is silly — and that’s being kind. The vast majority of us put the spiritual, family, and health on the top of our ‘A’ list. However, the retirement income we create through our own efforts has to be on that list too, and not too far down either.

Don’t ever risk your retirement by having inferior cash reserves. It’s not a sexy subject, I know. Frankly, when I talk about it publicly, most folks hope I gloss over it. I know, cuz I can see it in their eyes. But since I’ve experienced what I never want them to understand, I usually quote Dad, after I’d lost the last property I’ll ever lose.

“Son,  I love ya, and Lord knows you’re smarter than the average bear. But man, sometimes you’re a slooooow learner.”

It’s about OldSchool, and being safe, while gettin’ things done, and checkin’ boxes off your list. What it’s not about, is seein’ your dreams of a magnificently abundant retirement crash on the rocks, just as you thought it was time drop anchor, and retire. Maintaining a very generous cash reserve isn’t a luxury — it’s often the very reason so many still make it to retirement after they’ve defeated Murphy’s best efforts.

Repeat after me: Generous cash reserves — no exceptions.

About Author

Jeff Brown

Licensed since 1969, broker/owner since 1977. Extensively trained and experienced in tax deferred exchanges, and long term retirement planning.


  1. BawldGuy,
    Nice article and very true. Do you have any magic math to help quantify “generous”. Understand that saying 100K is not possible as 100K reserves does not last if your monthly debit is 200K. Something like new roof per property, 6 months expenses.

    Also folically impaired…

    • Jeff Brown

      Hey Joe — No, there’s no magic math. I make my decision per client, based upon their empirical financial and family circumstances, and comfort zone.. There are some who own the exact portfolio as another, but must have higher reserves. There are even factors most don’t consider like weather, age of property, future family financial obligations, etc.

      The most important factor over the years, has proven to be my own comfort zone, based upon my experience. There’s simply no pat answer or formula, regardless of what many would have us believe. ‘Course, I’m OldSchool, which biases my views on the topic hugely.

      • Jeff,
        Ahhhh, the Sominex account. I can’t hear that too many times. I have seen investors lose it all because of lack of cash reserves. Glad I learned this concept from you as it saved our butt in this crash as the name of the game in the last few years has been… who can last the longest.
        An idea that I will pass along is having a credit line where you earn points. Then use the points to get airline tickets to visit your out of state properties, write off the trip and spend a few extra days having fun. (Be sure to follow the IRS rules for business travel and document the expenses and meetings with Property Managers etc)
        Then pay off the credit card with the “real” reserves at the end of the month so you avoid the interest charges. Or, you can also spread out the payments if you want to spread the “pain” out over time.
        Having a large cash reserve AND a credit line is the ultimate in Sominex strategy.
        Also the pain of paying for HVAC’s and roofs is lessened a bit by getting free trips from your bank!

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