Where to put capital project savings?

Question

When you have a stash of money for capital projects such as repairing a roof or something that will happen every five or 15 years or so, where is the best place to save that money so it is doing a little bit of work for you? Of course you want to keep it liquid so you have it when it is time to replace something. But at the same time you want to get as much interest as you can. Is it best to have it in the highest interest savings account that you can find which of course would only be one or 2%?￼

Evan Polaski · Answer

@Josh Lyons it also depends on the size of your portfolio.  If you have a lot of houses, and I know it was an example but a roof is a 20-30 year investment, the cashflow from the properties can easily handle that expense with only a month or two of warning.  But I also keep $10k total in my account at all times for my 6 properties, which can typically handle anything in the soon to medium term and let me build back up for the next.

Beyond that, I am saving to buy more properties, which makes it easier to then cover costs, since you have more money coming in.

HELOCs are a great tool as well, but can be pulled without notice if bank feels underlying asset has lost value.

Jaysen Medhurst · Answer

Really depends on your risk tolerance, @Josh Lyons. You could keep it in index funds, H.I. savings account, or  bonds/CDs. A prudent approach may be something like:

• 20% (or a fixed amount) cash
• 50-60% index funds (with a stop order at 95% of value to minimize downside risk)
• 20-30% bonds/CDs with 1-2 year maturity dates that overlap every 6 months. Municipal bonds are particularly attractive due to the tax advantages.

That should be plenty of liquidity. You can supplement that with a LOC for short term use and pay it back when bonds/CDs mature.

James H. · Answer

I grown money for my investing this way:

I wait until Amazon takes a beating then I thrown any savings I have at that point into the stock. 2 years ago in the fall the stock dipped below $1600 (I bought a lot) then rose up over $2000 (cashed out) Stock dropped again two weeks ago to nearly $1600 I dropped in $17k now it’s sitting over $20k today. It needs to climb back a little more before I cash out but..it works I’m serious.  So..it’s not really that risky when you look at the companies financials and quarterly reports. Very powerful company and I’ve made thousands on them.. between drops in stock I price I keep it in a high yield savings account.  You can set up automatic alerts so you know when to buy. It’s no brained for me. Just one idea!

Where to put capital project savings?

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