Where to put cash between deals

Question

I have an odd question as a flipper. When you have received a decent payday from a deal and you don't have another deal lined up, where do you stash your money so you can get to it in a short time frame and still have a fair return?

I am in Nashville and the market here is HOT. It is hard to find motivated sellers to give up there homes at a discount. I have sold a flip or 2 a while back and that money is sitting in a savings account waiting for someone to call from my direct marketing efforts. I am getting almost 1%, and I think it is pathetic. I have thought about ETF mutual funds, but I am afraid of the value going down or it only goes up a little and the fees take all the return. A money market would keep me liqud and safe, but only slightly more return.

I would love to hear suggestions.

Josh Braun · Answer

I always like to have money working for me, versus sitting idle in an account. My routine usually falls in this order:Payoff HELOC, credit cards, hard money or private money used for real estate activitiesAsk investor friends/colleagues if they have any deals coming up that they would be willing to partner on Reinvest profits towards a 15% downpayment on a rental in desired farm area (I'm fine paying 5-10% below market value of a property if it is in my desired rental area and meets my criteria to cash flow)Lend private money out to other investorsPay towards principle balance on primary residencePay towards principle balance on rentals

David Faulkner · Answer

I'm not a flipper, but some of the successful ones I know combine buy-and-hold with flipping. Specifically, they take out a HELOC on their buy-and-hold (and/or primary residence) ... when they find a deal they pull money from the HELOC ... when they finish they pay off the HELOC ... after a few of those, they take the excess profits and buy another rental.

Luka Milicevic · Answer

If you have debt on your primary, I would get a HELOC all in one. Park the money in your HELOC until you're ready to use it again. That way your cash is a productive asset as it goes towards lowering your outstanding balance.

Mindy Jensen · Answer

@Roger Poulin, I agree with Russell, I park it in the stock market. Go for an index fund - Vanguard has the lowest fees. There aren't any options for a super low risk, high yield place to put your money. I like the returns in P2P Lending like LendingClub and Prosper, but those funds aren't liquid.

Michael Lee · Answer

Hello and welcome to BP! That is decent advice. Sometimes Partner mean something instead of nothing. It is pretty low inventory right now and good deals are getting harder to find in some areas. just keep on hustling and you will be OK. just take care of indirect things right now like financing and Team members. It won't be slow forever. Remember to take out some insurance when you do close to help protect yourself in case of a loss. Always get more education to help you do better or change. Do not try to do everything yourself. Keep focused on the thing that are income productive. Hire out the other things you don't like. I am 59 years old and I found BP about 7 months ago and I am still trying to decide what to do. I went to college, not that it is mandatory, and I got a business degree that emphasized real estate. Since I was in Texas and planned on staying there I found out that I was qualified to take the broker test. I kept that license for about 30 years. Regardless of what I had I felt more comfortable in the construction business. I have been in the construction business since I was 17. My father has been in real estate sales for about 40 years and he has taught me a little bit. If you think I could help you please contact me through BP at any time. Good luck!fffr

Devan Mcclish · Answer

@Roger Poulin short term investments with a decent return are going to be tough to achieve will high liquidity. I would either buy a rental low enough that you can pull all cash out in a short period of time, or I would lend the money to someone who is consistently finding good deals. You can also partner with someone who is finding good deals.

Mindy Jensen · Answer

These are non collateralized loans. I am seeing 8-9% on a regular basis. I don't think there is any recourse for non payment. The borrower gets a negative mark on their credit report I believe. It pays a lot more than a bank account, but is a lot less liquid.

Roger Poulin · Answer

@Mindy Jensen, what kind of rates can I expect to net with those P2P sites after fees? It might be a way for me to diversify. What kind of due diligence is available for the borrower(s)? Is there any recourse for non payment? This is very interesting to me.

Roger Poulin · Answer

That you Josh and Luka. I may be starting on a strategy.

Russell Brazil · Answer

If I need the cash within the next 6 months, I just let it sit in savings. If I do not, I invest it in the stock market. 6 months or less is sort of my time horizon where I do not want to let the value of that cash drop in the market if I know I am going to need soon. However always understand the risks, and it does sound like you do, of losing some of that capital to the swings of the market.