A number of the online banks are offering interest at around 1.65% to 1.7% which is pretty good, and federally insured.If you are willing to hold onto something for a few years, I would consider Treasury bonds. 

EXEMPTIONS Real Property - The sale, lease or rental of real estate (land, houses, buildings and other structures attached to the land) to the same person or occupant for thirty or more consecutive days.Intangible Property - Sales of intangibles (copyrights, royalties, notes, bonds, etc.)."

This is where you can try to force the old contractor to perform (let him know of the deficiencies and copy his insurance/bonding company) to get him out to correct. 

Based on your posting the damage seems to be extensive, especially since it’s affecting the structure of the home such as a floor beam, sill plate and subfloors.It appears there is active termites as well as a beetle issue and both must be resolved before repairs can de done.You didn’t mention home value, just purchase price so it’s difficult to say what to do from this point.At a minimum, I would have the termites and beetles dealt with and get a bond from the termite company to cover the first year for more treatment.Also, have a licensed contractor give you a repair estimate.

My "reserves" are actually invested in equal parts cash, long-term Treasury bonds, the total work stock market, and gold, which is a very defensive asset allocation that should theoretically hold its value and likely grow in just about any economic environment.

@Michelle Elaine Fontan You could almost make 1.7% in a CD or bond fund without going into debt.

This year, investors have raised billions of dollars from bond buyers, pension funds and even wealthy Chinese individuals to purchase more homes.

The court ruled to evict them but they appealed and I just found out that they had to pay a rent bond to the court when they appealed (they have since moved out and I have sold the house).

Closing date, inspection timelines, non refundable earnest money, etc... are all good ways to strengthen your offer as well.

Follow up question: we have the two properties and i like the idea of building up $10k for each but do any of you guys keep that invested in say a bond index fund of anything?