Where do you place investment money while waiting on a deal?

Question

I have 5 commercial properties and am always looking for more. Recently I came across a deal that I would have to finance, and the seller took the offer of all cash (as anyone would). My question is, if I pull out money on one of my other properties that are paid off, where do I place the money while waiting to find a deal? Most banks only insure $250k so I would have to open 8 different accounts to hold the money insured which is insane to me. Any recommendations on where you place say $5 million without the risk of a bank going under and it not being insured. TIA!!

Allan C. · Answer

Wouldn't be wise to keep it as cash as your opportunity cost is high. Often cash closes are quicker, but you don't have to close quickly if other terms are strong.

I only keep enough cash to meet EMD, and the rest I leave in normal accounts (treasury, HYSA, brokerage, etc) that I can access within 30 days to meet COE.

Amber Stout · Answer

@Alexandra Isenhour - Hi Alexandra, could you do a HELOC or some sort of revolving credit line on your existing properties? My thoughts are to use the revolving credit line as "cash" to pay for the new deal and then you can finance the new deal and pay back the credit line. Sounds like that would give you the best option without having to pull all the capital.

Kevin Jo · Answer

I think the best 2 options in my opinion are:

1) Depending on how firm you like your mattress, under it and spread out to minimize back risk.

2) The freezer is my next go to. You can never have too much cool hard cash plus in the event of a fire you would be covered by the I.C.E.

Matt Devincenzo · Answer

You can ask your bank about "IntraFi Networks (ICS)", basically it's a way for banks to ensure coverage over the $250K threshold. I have a friend who is a local business bank president and they offer this to all their account holders. That said I can't recall a single bank closure where accounts with values over $250K were not also protected? The reality is you will not see a bank lose even uninsured deposits because the FDIC will figure out a way to get a takeover bank to come in without a loss.

Allison Park · Answer

You might look at the Vanguard Cash Plus Bank Sweep - offers FDIC of up to $1.25M and $2.5M for Joint accounts.  Doesn't completely solve the problem...but lessens.

Victoria OHare · Answer

That’s a really good question, and it’s smart you’re thinking about where to park the cash before you pull it out.

At that level, a lot of investors do some version of spreading the money across multiple insured accounts or using an insured cash sweep program so they’re not exposed to one bank going under, and then keep it flexible enough that they can still move fast when the next all‑cash opportunity shows up.

Where do you place investment money while waiting on a deal?

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