Troutdale, OR · Member since 2016 · 47 posts · 15 votes
Hey BP!
My cousin and I are slowly working into a partnership. He recently refinanced one of his rentals and doesn't know what to do with his money while we find a deal. He doesn't want to let it just sit in the bank and not work for him, but he/I am not sure what else the money can do while we look for the next deal. He wants to put it in real estate stocks since you can liquidate pretty fast, but I figured I would reach out on here and see what others do.
Do people just let it sit in the bank and just try to find deals faster? Do people put it in the stock market? any suggestions would be awesome.
Holliswood, NY · Member since 2017 · 49 posts · 10 votes
9y
Ben Winchester Morning Ben keep the money in the bank until you find another deal because you don't want to gamble with the money if you're planning on doing rental believe me situation will come and you will need the money. That's just my opinion
Holliswood, NY · Member since 2017 · 49 posts · 10 votes
9y
Ben Winchester Morning Ben keep the money in the bank until you find another deal because you don't want to gamble with the money if you're planning on doing rental believe me situation will come and you will need the money. That's just my opinion
Beloit, WI · Member since 2016 · 100 posts · 40 votes
9y
I'd say a savings or money market account is safest. If you were waiting a few years, five or more, then maybe stock market (by way of mutual or index funds) would be my choice. We're looking for a rental and the money is earning a whopping 1 percent in an Ally savings account.
Investor · Louisville, KY · Member since 2011 · 1k+ posts · 1k+ votes
9y
@Ben Winchester - I've been in the same situation and have tried placing some money in the stock market. I would not repeat and would recommend an alternative solution primarily because it forces you to be a short-term investor in the stock market which is no better than being a short-term investor in real estate (not a rehabber, but somebody who banks on appreciation/cashflow over 3-6 mos instead of 3-6+ years).
If a good property comes along you have to liquidate stocks immediately. This will likely produce a short term capital gain OR lock in losses if the stock market happens to be down when you need to sell. Taxes and transaction costs will take a huge toll on any gains, and that's assuming you're lucky enough to be able to sell for a gain when needed.
I do keep money in the stock market, but it is not earmarked for RE transactions except as a last resort.
Troutdale, OR · Member since 2016 · 47 posts · 15 votes
9y
@Frandy Blain, Thanks for the response. I think I'm with you on that it's not worth the gamble and needing the money immediately could be tough.
@Charlotte Edwards, yea, that whopping 1 percent is what he is trying to avoid haha... but I think you are right in keeping it in savings account or money market.
@Michael Seeker, Thanks for responding! I think you make a very valid point that I will pass along. It's not worth the risk of having the market be slightly down when needing to pull it out, and I didn't even think about the costs associated with pulling the money out, that would pretty much eat up any short term profits and would just add to the loss if the stocks were down.
Evergreen, CO · Member since 2017 · 91 posts · 22 votes
9y
Ben Winchester
You might be able to find a HML that you could lend to. Sometimes they have pooled funds that will allow you to get your money out relatively quick.