Denver, CO · Member since 2016 · 15 posts · 3 votes
Hello BP community,
I'm interested to learn what most investors do with the portion of rental income commonly set aside for cap ex, repair, and vacancy costs.
Does it go straight to the bank? Invested in CD's or a money market account?
It makes sense that this money be liquid to use at a moments notice, but it'd also be nice to get a return on this money, wouldn't it?
Best regards,
Adam Bearup
Process Engineer · Rochelle, IL · Member since 2016 · 36 posts · 16 votes
9y
Hi Adam,
Personally, I keep $5000 in a checking account which handles the day to day transactions. Anything over that gets put into a high yield checking account through our local bank and earns us 2%.
You can also use an online bank like Synchrony or Ally and get something close to 1%. But these are savings accounts so there are restrictions on the number of transactions per month. These returns are quite pitiful compared to the stock market, but the money is secure and easy to access in a pinch.
Denver, CO · Member since 2016 · 15 posts · 3 votes
9y
@Len Roche
Thanks for the info. That sounds like a nice straight forward approach to keeping the money liquid while maximizing returns through your bank. I've heard of Ally but not Synchrony, you'd think the online banks could offer better returns, not needing to maintain the brick and mortar footprint of traditional banks. I guess the market sets the price, but here's to wishing anyway....
Rental Property Investor · Phoenix, AZ · Member since 2015 · 224 posts · 50 votes
8y
I know the thread is a bit old, but thought I'd throw in my 2 cents. I would not put my money anywhere that I couldn't have access to it. When there is a vacancy one month, I need that money flowing back from my vacancy account into my checking to cover other expenses. I wouldn't want it tied up in a CD. If it were at any point that I was holding onto so much money that I knew I didn't need to touch for a year, then instead of throwing into a CD, I would be pulling that money all together and finding myself the next deal.
I currently use Wells Fargo for my business checking and sub accounts (vacancy, repairs, etc.) and I was considering moving my sub accounts to Ally savings accounts with their 1.6% rate. I use this method for my personal finances and it's super easy.
However, Ally does not have business accounts and I don't think just opening up accounts under my personal self is the best idea if these funds are to stay within the business.