How Much cash are you comfortable leaving in a deal?

Question

I was talking with an investor about a potential acquisition recently, and the conversation wasn't really about rate.

It was about cash.

He could make the deal work with more money down, but his concern was simple: "I can put more cash into this one, but then I have less available for the next one."

That seems to be a bigger consideration once investors start doing multiple deals.

There's obviously a point where too much leverage becomes expensive, but there's also a cost to having too much capital trapped in one property.

For those actively buying, how do you decide how much of your own cash you're comfortable leaving in a deal?

Do you prioritize lower debt, or preserving liquidity for the next opportunity?

Ying Tang · Answer

I compare my projected REI 10-year cash on cash return performance with my stock market performance. After tax benefits, usually REI is not too bad.

Alex S. · Answer

The number that keeps this safe isn't cash left in, it's DSCR after the refi. If you pull out to where it drops near 1.1x, one vacancy or a tax hike eats you. I'd leave whatever cash keeps it at 1.25x+ with real repair and vacancy numbers.

James Jones · Answer

I run the opposite math: how little cash can I leave in a deal and still have it be safe? I BRRRR everything, so the goal is to pull most of my capital back out at refi and recycle it into the next deal. Deal flow is my bottleneck, not money — every dollar trapped in a property is a dollar that can't buy the next one.

I never go so thin the deal is fragile, though. I keep reserves for vacancy and repairs, and the deal has to cash flow on a DSCR loan at 70–80% LTV under conservative numbers. If a deal only works by leaving a big chunk of my own cash in it, it's outside my box — I buy under $100K all-in with a real path to pull the capital back out.

Liquidity wins, as long as the property can stand on its own.

Divin Kanyama · Answer

@Frankie Vozzi Liquidity matters, but not at the expense of making the current deal fragile. The property should still cash flow under conservative assumptions, have adequate reserves, and handle vacancy or repairs without depending on the next acquisition.

More money down can improve cash flow and reduce risk, but cash outside the property can cover surprises or fund a better opportunity. It helps to compare the return on that extra equity with the value of keeping the money available.

The sweet spot is enough equity and reserves to make the deal durable without trapping more capital than necessary. There is no perfect leverage target—it depends on the loan terms, overall portfolio risk, and how realistic the next opportunity is.

How Much cash are you comfortable leaving in a deal?

How Much cash are you comfortable leaving in a deal?

Most Popular Reply

4 Replies