Investor 路 Jacksonville, FL 路 Member since 2019 路 97 posts 路 50 votes
Hi everyone,
I am a multifamily property operator, and I am looking for some advice on where to park our reserve funds. Currently, we have them in a money market savings account, but I believe there are better options out there that offer higher returns while still being liquid and low-risk.
I'd love to hear from other operators:
Where do you park your reserve funds?
What kind of returns are you seeing?
Is anyone using money market funds for this purpose?
Any insights or recommendations would be greatly appreciated as we evaluate the best strategy for managing our reserves.
I have mine in standard money market accounts. The syndications I am invested in and/or work for do something similar.
I can't speak for what the syndications I am invested in are seeing for their returns, but the operators typically note that it is 2-4%. As for how quickly they can access those funds, I don't know.
My personal reserves are in JPMorgan money market fund averaging 4.5%-5% today, specifically because I also bank with Chase. So while this does not give me immediate access, I can have the money back in checking to cover a bill in 2 business days or less, which I have yet to have any unforeseen expense that needs paid faster than that.
I am using a high yield savings account for bulk reserves that has a 5.26% return. It does take a couple days to get the money however I have smaller more immediate reserves available as well.
@Gerardo Waisbaum this is one of the more thought provoking questions I've seen in some time. Thanks.
The answers provided are solid approaches.
The question I have is how you're holding the reserves? Are these your personal, JV, or Syndicated deals? That structure makes a big difference in how you report the reserves.
I consider a couple of strategies. The time of holding the reserves and liquidity are factors. If you are building a longer term CAPEX reserve, then consider a few strategies...
1. CD laddering as an option for higher returns on reserves not needed immediately. You're locking in the rate for a longer period of 3-6 months on each CD. They have rolling maturities for access without penalties.
2. Money Markets for a more liquid shorter term need. Rates will be more volatile and going into a cycle of rate easing by the FED's these rates are set to drop soon which could cost you in interest earnings. Liquidity is the biggest factor in this approach.
Any way you look at it, have your lazy dollars earning for you while you sleep to help increase your yields over time. Sounds like you're on the right track.