I currently have some cash (my army) that I am building up for a down payment on an investment property sitting in a Barclays 1.20% APY savings account (Earnings peanuts). Waiting for that perfect moment to pounce a on deal that comes along. Many moons have passed I am getting restless, antsy and perhaps a little trigger happy to pull on a sub par deal. I am certain the returns would be much greater invested in a Multi family home. With that said, where do you keep your army of cash while waiting for an opportunity?
I don't even bother putting my money in an interest bearing account with how low interest is offered. I just park mine in a regular checking account and wait for an opportunity. I have 5 properties now each earning around 18-20% return.
I keep my cash (ammunition for growth) in an account of a local bank that does most of my lending.
I get an amazing 1.25%. Which honestly is "amazing" in this ZIRP environment
I personally split it between cash and liquid investments - checking/savings and ETFs (total market/well diversified); absolutely none of my money is in individual companies. I've seen some other posts on BP that, to me, are exceptionally bearish on parking money in stocks/ETFs while you wait for a deal (example: "don't keep any money in stocks that you intend to use in the next 5 years" was a real piece of advice I've seen here) - I don't personally agree with that logic (because even a 10-20% market correction would just bump me from market A to market B) but I can understand if someone's trying to buy RE at a price that doesn't leave much room for error.
I guess it kind of depends on if you have a more-than-vague concern that the US/the world is headed for another financial crisis. I'm getting slightly nervous looking at current valuations/the current state of international politics, so I'm not really looking to add more money to my ETF positions unless the market moves sideways for a couple months.
Your primary residence is a great store of wealth. If you don't have one of those, then house hacking should be your first stop in REI IMHO. If you do, then you can take out a HELOC. The beauty of that is you don't pay on money you don't use until you use it, yet you can pull it out to use quickly (next day). As for cash above that, standard bank account or MM account is fine. I think of cash in such an account in 2 ways:
1)An emergency fund to finance unforeseen expenses. The cost of this insurance is the interest rate minus what I could reasonably and reliably get if invested elsewhere. Anything above and beyond that is ...
2)An option on future RE investments. Again, the cost of this option is the interest rate minus what I could reasonably and reliably get if invested elsewhere. The upside of the option is the return I think I could get/find on deals in the future vs the return I could get today. This is a tricky judgement call that only you can answer, but at least IMO this is the way the mental calculus works for me at least. Another way you could do that mental calculus is set a minimum required return for a given type of investment/risk ... and if you can't find anything that meets this return, then keep looking but build your cash ... bad stuff tends to happen when you compromise too much on your minimum requirements, so discipline and patients is prudent IMO.
@Jordan Grimstad I also have been using ETF's for about 4 years now.. Ideally I want to get the majority of my money in real estate and I keep limited in checking account.
I am seeking multiple private individuals such as yourselves if you would like a 6-8% return on working with me. I am purchasing sfh in Tampa FL and you would hold the 1st lien on the house. I am interested in structuring seller financing for owner occupants. This can be short term or long term. I can elaborate offline.
@Raymond Leung I use vanguard which should provide decent returns and you can cash out quickly