Do any of you calculate opportunity cost of cash reserves?

[Sean Tracey]

Hi All, 

Do any of you calculate the opportunity cost of the cash reserves you need in order to be prepared for repairs and capital expenditures on your investment properties? For example, the opportunity cost of not investing that money in passive investments like a 80/20 stock to bond index fund portfolio, which over time tend to average 8-10%. 

If you have 100k of reserves for a mature rental portfolio in savings, treasury bills or a CD ladder, that's an 8-10k/year loss compounded annually. After inflation you're often times getting negative returns on the 100k to keep it liquid. 

This is totally irrelevant to those that would never put their money in stocks or bonds, but for myself this is a real loss that I will factor in. 

[Thomas S.]

I do not hold cash. My reserves are held in equity in my properties with a line of credit I call upon when needed. Income from the property must cover the ongoing opportunity cost of that equity on top of positive cash flow from the property itself. Everything I purchase from screws to properties is on a line of credit pay'd down by tenants.