Cash reserves vs. line of credit availability

[Daniel C.]

Hi BP community.  

I'm a buy-and-hold investor with a nice little portfolio (16 units) of cash-flowing properties.  Was chatting with a friend recently about how my return on equity is a little bit less than what I originally forecasted for the portfolio because I hold about $20k in cash reserves for emergency repairs.  Since I started investing about 3 years ago, I've always been able to pay for repairs from cash flow pretty easily.  I've had a few repairs in the $3k range, and it's been no sweat to cover them without looking to reserves.  So - my question:

Instead of holding $20k in cash reserves and losing out on potential return by not leverage/deploying that capital, does it make sense to instead just open a line of credit against a property so I have capital available in the event that I need it?  It would serve the purpose of having access to funds for an emergency, but would reduce the cash drag on the portfolio.

For what it's worth, I hold another $20k or so in personal cash reserves that are separate from my real estate accounts - in case I lose my job, etc.  I have some other other liquid accessible investments as well.  I'm not planning on moving those funds and could always tap them in a bind as well.    

It's a broad topic, but what do you think?  In general, I'm generally trying to wrap my head around a personal policy for reserves.  Appreciate your input.  Best,

Dan

[Franklin Romine]

@Daniel C. I see a lot of value in having a credit line available at a moments notice.  You never know when a deal might present itself.  A couple times I borrowed against a 401k to lock up a couple smaller deals.   Check out unsecured line of credits.  They are usually tougher to get and start out small.

Frank