Cash liquidity strategies

[Tuan Tran]

I’m currently parking my cash in a high yield MMA in anticipation for my next acquisition; however, I feel that inflation is rating it away.

What are your strategies to keep it liquid yet still have your cash work for you?

Do you have it in stocks, mutual funds, etc? I feel that the market may be volatile or mutual funds have restrictive conditions when you can liquidate your holding.

What’s your strategy and why?

tt

[Daniel McNulty]

@Tuan Tran

Inflation is a long term problem, not short term. If your time frame for finding a deal is a year or less, I would not trouble myself with inflation. From an economic standpoint we are still in a deflationary environment. Inflationary pressures may pickup in the near future, but most estimates put it a year or more out before it even appears on the radar. One of the more prominent factors is the employment number as Consumer spending makes up nearly 2/3 of the economy. Once we approach something closer to full employment in the mid to low single digits, inflation will become much more likely if not addressed.

All that said, you are not alone trying to pickup some yield on idle cash. Money markets are a decent start. Ultra short bond funds can essentially replicate those with a little more yield. Online savings accounts are another frequently used vehicle. If you can pickup upwards of 2%, you might as well sit back and relax. For the limited duration it will be sitting there it is hardly worth the effort to pickup any more yield.

Generally avoid the market or any more risky or illiquid vehicles to store cash. If the cash is supposed to be readily available for a deal, you should not put it at risk or lock it up.

Good luck!

[Tuan Tran]

@Daniel McNulty

Appreciate your comment and makes complete sense.  Didn't know if there was another action I could take to maximize my capital while I'm looking for prospective acquisitions.  

[Gavin G.]

@Daniel McNulty

Just making sure I understand this correctly. For a commercial multifamily agency loan, you can meet the liquidity requirement with non-retirement account holdings? I'd rather not earn 1% on $100k-$200k of post-down payment liquidity requirements. I don't mind holding down payment funds or enough to cover bumps in the road.

My question stems from having to wait longer than expected to do a cash-out refi, which will then seed my next commercial deal.