Rental Property Investor · Brooklyn, NY · Member since 2016 · 84 posts · 139 votes
Hi BP Community,
This year in June I purchased my first buy and hold property - a duplex. I know that it is important to have cash reserves set aside for unexpected issues that may arise with the property. However, should I just be sitting this money in the bank account that I have set up for it or investing it in some type of investment account so that it grows faster? If so, what type of investment account? Is that what the self-directed IRA accounts are for? I am wondering if there is something that I am not doing that I should be doing besides just saving it in the property savings account that I have. Right now all I do is collect the rents from the property management company each month and have the mortgage payment coming out just the same. Thanks for your advice!
Investor · Palmdale · Member since 2016 · 112 posts · 80 votes
5y
It depends. If you have an older property or one you did not recently gut and rebuild, I would recommend keeping a larger reserve vs having a newer build. But realistically it seems like you are asking what you should do with your monthly cash flow. For me, I keep approximately ten thousand in the bank and the rest I put in the stock market. I only buy things I feel comfortable with and if they drop I am confident they will recover and will NOT have a burning desire to sell. Every month I take my cash flow and buy VOO, QQQ, MSFT, AMZN, AAPL, NVDA, SQ or TSLA. That's it, nothing fancy. If you aren't comfortable choosing a company, an ETF could be great. I feel taking cash flow and putting it into the stock market will help you see even more growth. Stocks are very liquid, and will help you grow your money quicker and when you see a deal, buy it. PSA always talk to your CPA and let them know your plan. Also, the gain you make on quick sales or trades will be taxed at a higher rate.
Rental Property Investor · Carlisle, PA · Member since 2013 · 1k+ posts · 543 votes
5y
@Nina Granberry, keep your cash reserves in an account you can get to quickly, with no penalty. As for what to do with the cash flow, it depends on your situation. If you need it to live day-to-day then use it. If you don't need it for day-to-day, then re-invest it. Either into new properties or your current portfolio. Good luck!!!