Where do you guys keep your reserves

13 Replies

Where do you guys keep your reserve funds?  It seems like a waste to just have them sitting in a checking or savings account, but other accounts usually either have risk, or make it hard to pull the money out.  Does anyone have any clever investments to keep their reserves in?

Thanks,

Teague

My reserves are my HELOC. My monthly rents go in, my expenses come out.

It is a 200K line that fluctuates depending on whether I have a flip on the go or some other short term investment. 

Immediate liquid reserves- High yield savings

Semi liquid - short term RE crowd funding

60 day plus - Equity within my properties. I keep a few properties mortgage free which allows me to finance them if needed at a later point.

@Teague Anderson

As anyone that's had an emergency can tell you, there is a ton of value in keeping your reserves liquid. Given that, I definitely recommend checking out interest rates with Credit Unions near you. They tend to be a solid bet for savings interest rates.

I've asked this question a few times before with many different responses.  I keep my "emergency funds" or anything I think I will need fast for my next deal in a Ally Savings account.  Not like home run interest rates but at least its earning something.

Robert E Bogino, Real Estate Agent

I keep them in a credit union checking account that currently pays about 1.35% on up to $20k, when certain conditions are met.  There are also online savings accounts you can get similar or even a little better return.  

Larry Fried, Real Estate Agent in OR (#201211636)

@Teague Anderson Unless large pools of money (greater than a few hundred thousand), it doesn't make sense to go through all the trouble of finding a higher savings account (with interest rates being so low). Go with your most convenient, liquid option.

For instance, even with $20K at 2% (not many, or any, bank will offer you that high of a rate), you will "earn" only $400/year or $33.33/month or a measly $1.09/day. That hardly warrants the effort.

Like @Thomas S. our liquidy is in our line of credit. We don't keep a ton of money in checking or savings and in turn aggressively pay down debt when we can while I also do fairly high payroll deductions for 401k and stock purchase plan. If you saw my checking account you would think we're broke :) Luckily our line of credit is large enough we can do major expenses and pay "cash" for smaller properties so it's easier just to pay that back off as quickly as we can instead of paying 4% on the money compared to earning 1% in a higher yield savings.

I'm similar in that I don't keep much in checking (treat more as an inbox/outbox) and immediate emergency reserves in online savings like those already mentioned. The warchest / opportunity fund I keep using the infinite banking concept which there are plenty of threads on.

For those who use lines of credit, is that only for acts-of-god types of repairs or vacancies, or for ordinary capex, like a new roof?  If the latter, it seems (dare I say?) foolish to go into debt to pay for expected repairs.  

Also, will a bank consider a line of credit as a reserve when they're deciding whether to approve your loan or not?

Originally posted by @Teague Anderson :

For those who use lines of credit, is that only for acts-of-god types of repairs or vacancies, or for ordinary capex, like a new roof?  If the latter, it seems (dare I say?) foolish to go into debt to pay for expected repairs.  

Also, will a bank consider a line of credit as a reserve when they're deciding whether to approve your loan or not?

It's a catch all for everything for me. I don't consider it "debt" necessarily since my cash is sitting as a principal reduction on the line compared to sitting in a savings account earning squat. I could literally move "cash" into my account in less than a minute through online banking. The only risk I'd say you run is if for some reason the bank freezes the line. I'm a stickler for credit so that helps with the likelihood of it not getting closed out.

Join the Largest Real Estate Investing Community

Basic membership is free, forever.