Semi liquid investments

8 Replies

Hello BP community, I could use some advice. I am a new real estate investor with one year and 3 buy and hold deals under my belt. I'm at the point now that I have learned enough to know how much I don't know and I'm in a bit of a holding pattern as far as purchasing more rentals.

I have done things somewhat backward by buying rentals and now need to build my buisiness around it. I have learned the importance of working on my buisiness structure and systems before moving forward with more acquisitions. I plan to spend several months getting my buisiness in order and systems in place before hitting the bricks for more deals. 

During this time, It seems that I could take the capital I have currently and put it into a semi-liquid type investment in order to earn a better return than just letting it mold in the bank. I would be investing 25-30k. I know the returns from a semi-liquid investment in the short term will be minimal, but it would be better than nothing and every little bit helps. 

I'm thinking maybe an index fund or something similar? Are there any ideal short term products available? Is it even worth It for say a 6 month term? Would the risk outweigh the reward? I appreciate any suggestions or info anyone can share with their own experience!

Jesse, I’m kind of in the same situation as you. I don’t know of any short term funds but one thing I’m considering is partnering as an investor or private moneylender with someone needing short term funds.

Thanks for the replies!

That's definitely an option I have considered @Antoine Martel. The only issue I have is that dependimg on the deal, it usually ties up the capital  for a minimum of 6  months and I wouldnt have it available if a good deal comes along...then I'd be looking for a PML for the same interest I'm making, so it's a wash. Short term loans are a good option if the right deal can be found; such as a short term bridge loan.

That's a good option as well @Lucky Tiderman and one I have used in the past. I lent someone a bridge loan that was paid back within a week and made a couple hundred bucks for just making a trip to the bank. Seems like those situations are few and far between though and might be difficult to find. Also, I wouldn't lend to someone unless I have total trust and complete legal coverage. I guess I could put an ad up advertising short term bridge loans to get interest from potential investors. I would be extremely careful with these types of loans though.

That's interesting @Ben Barelman, I haven't heard of these liquid CD's. It would definitely still be better than letting it sit in a checking account. Unfortunately I dont have enough capital to make that type of investment worth while in the short term.

@Jesse Aiken If your timeframe is 6 months then I don't think investing in an index fund, etc. is the best idea.  Granted, it's been great the past __ years and you'd *probably* be fine but, well, you never know.  Knowing my luck if I went ahead and did that we'd get the "5% stock market pullback" that the everyone keeps predicting.  I'd be down 5% after 6 months when I had to pull the money out.  I'm being a little bit facetious but you hopefully get my point.  

You should also look at some of the practical benefits.  I don't know what your pool of money is but investing $10K for 6 months to make 5% instead of 1% gets you $400 more dollars.  And that $400 is taxable so maybe you net $300.  I'm not knocking the value of $300 but that's your "upside" and there is a risk that comes with that.  

@Andrew Johnson That's a great point. I didn't consider the taxes on earned interest. I wasn't aware of the 5% pullback you mentioned either. I've been busy plowing my money into real estate and haven't kept an eye on market conditions. I know that my 401k and Roth returns have been pretty high lately so it makes sense.

I have read that index returns average 7% over time. It would still be risky if I need to cash in quickly to put skin on a deal within a short time frame. If it is in a dip when I need it, I could lose some too. I'm guessing that the best I could hope for is around 1k more capital overall in that timeframe.

Probably not worth going that route. Maybe I'm just trying to squeeze milk from a turnup and need to be patient while I get my ducks in a row. If a great deal comes along in the meantime, I'll just have to grind it out working on systems,  delegate what makes sense, and get creative with financing.

I Just got an off market lead on a 4 unit earlier today and I'm looking into it. I shouldn't let small details hold up progess.

Thanks for your input;  it was helpful and I appreciate it.

I know this post is a little old but I've just finished a refi and need to store liquid funds until my next deal.   

Citibank is now offering 2.05% and Capital one is offering 1.80%.  I'm wondering if I can do better in another short term investment and still get it out in 2-3 weeks as needed when a deal firms up.

Any more ideas?  Thanks in advance.