How much cash is too much cash in savings?

[Scallywag]

I just wanted to be able to buy multi-families. I wasn't sure how much we were going in. Or if I could get into a commercial building. I was picturing $1m invest into something or multiple multi families. Not really paying cash. Still leverage but derisking I was hoping by having more doors.

Jluke, I didn't buy in March 2020 because I was really torn. I thought about moving all-in and DH and I discussed moving all our excess cash into the market. But then we decide we have too much invested in stocks right now and always have been and we've never pulled the trigger on RE. I really want to diversify and buy a rental at least one. And if we sunk in all the money I know we'd not want to pull it out and instead work on "saving" our DP again. So we would again be behind the 8 ball. Last recession we didn't have excess cash to take advantage of the 2007-2008 housing crash. We were younger and poorer. This time I want to try to not be in that position and instead have money to buy RE and ride it out. Maybe it's a stupid, but I really want to gamble on this.

FWIW in March i pushed in another $50k in taxable account to invest more in the market and bought stocks that are risky plays and just watching. I doubled up on my KO and XOM long term positions. I added TSLA and JETS and bought HA. I hadn't considered FVRR until Singuy and I just moved into that as well after he mentioned it but only $5k. But I bought some really random stocks to buy and sell like CCL, TUP, WMT, COST, UCO (bought and sold already). I also took gains in my kiddos ESA and taxable accounts and moved from VTI to VOO for both 100%. I moved their 529 which I just opened in Feb 2020 and moved it with losses to Ibonds for now. I'm going to wait that out and then move more into their accounts and VOO.

And we are investing DH's 401k about $5k/month the maximum $56k/year. I already did single investments into our Roth and kids ESA. So I am moving into the stock market but I holding off big moves mostly because of what we talked about - buying a different primary residence or buying rentals. I think next year I'm thinking about 16 - 18 months we'll see a decline. The question is do we hold cash until then? I think the answer yes, because now we are getting serious about us moving and we are getting really serious with a RE decline i'll feel more comfortable jumping into Investment property. I know all landlords say it doesn't matter if it pencils out. But at the same time would you rather be buying high or buying low?

IMO, if you really really want a rental, I'd stay cash and keep looking. You don't want to rush to buy and plus many people likely don't want to sell now due to all the restrictions of COVID-19. Inventory may be up later this year or early next year and you may be able to pick something up then. In your shoes, I'd be maxing out my cash so I can buy a home free & clear with no debt.

i have a smaller nest egg than most people here but I have my ER in cash and saving up my downpayment in cash as well. I don't trust this market. There will be pullback soon and I'm waiting to buy then. I understand that I won't know the exact low but my goal is to buy each time the Dow drops about 500 points. We'll see how that works out.

.

[Like2Plan]

We are sitting on more cash than usual due to DH delaying his retirement. Technically, the money should have been spent as part of our retirement spending plan. I don't want to put the money in the market, because maybe this is just a short term delay and we are going to spend the money later this year (or next year). CD's are earning next to nothing, so I don't see any reason to tie the money up in CDs.

[Like2Plan]

And we are investing DH's 401k about $5k/month the maximum $56k/year. I already did single investments into our Roth and kids ESA. So I am moving into the stock market but I holding off big moves mostly because of what we talked about - buying a different primary residence or buying rentals. I think next year I'm thinking about 16 - 18 months we'll see a decline. The question is do we hold cash until then? I think the answer yes, because now we are getting serious about us moving and we are getting really serious with a RE decline i'll feel more comfortable jumping into Investment property. I know all landlords say it doesn't matter if it pencils out. But at the same time would you rather be buying high or buying low?

I'm actually surprised that anyone has an appetite for buying rental properties these days--but, you're right maybe this presents an opportunity since it might not seem to be an ideal time in regards to renters either not being able to pay rent (or deciding not to pay rent in solidarity. (If you can hold on long enough)

"He is joining his Parkdale neighbourhood’s Keep Your Rent movement on April 1. The campaign is in tandem with similar efforts by neighbourhoods across North America in Toronto, Ottawa, Montreal, Vancouver, Los Angeles, and Portland. It calls on all tenants to skip their monthly rent payment in solidarity with people who can’t afford to."

https://www.vice.com/en_ca/article/p...virus-job-loss

https://www.cbsnews.com/news/cancel-rent-strike-may-1/

[disneysteve]

I'm actually surprised that anyone has an appetite for buying rental properties these days

I would think it would be a good time. With an economic downturn, fewer people may be buying homes and will be looking to rent instead.

It calls on all tenants to skip their monthly rent payment in solidarity with people who can’t afford to

How ridiculous! How does one person not paying their rent, that they can afford to pay, in any way benefit those who can't afford to pay?

[Like2Plan]

I would think it would be a good time. With an economic downturn, fewer people may be buying homes and will be looking to rent instead.


How ridiculous! How does one person not paying their rent, that they can afford to pay, in any way benefit those who can't afford to pay?

Sure, I imagine that it might be a good time, but if your tenants don't pay the rent and you can't evict them (and you have high overhead and debt service), it might make for some lean months....

[Scallywag]

Sure, I imagine that it might be a good time, but if your tenants don't pay the rent and you can't evict them (and you have high overhead and debt service), it might make for some lean months....

One of my friends moved to Oklahoma and picked up a couple of rentals there, for cheap, in cash, now that oil has supposedly crashed the local economy. They're spending the next few months supposedly remodeling the units and seem to be in no rush to rent because the homes are paid for in cash and they really want to & can afford to take the time to remodel and find "quality" aka paying tenants.

I don't know if I can ever invest in rentals as I'd likely make a sucker landlord ever ready to fall for a sob story. I prefer to invest in REITS instead.

[LivingAlmostLarge]

One of my friends moved to Oklahoma and picked up a couple of rentals there, for cheap, in cash, now that oil has supposedly crashed the local economy. They're spending the next few months supposedly remodeling the units and seem to be in no rush to rent because the homes are paid for in cash and they really want to & can afford to take the time to remodel and find "quality" aka paying tenants.

I don't know if I can ever invest in rentals as I'd likely make a sucker landlord ever ready to fall for a sob story. I prefer to invest in REITS instead.

That would work but I don't have time nor appetite for remodels. I'm looking for rentals and property managers. But because of it I can't afford to buy high and take a gamble. I'd like to know I'm buying not at the top. I don't know if I can swallow it like a primary residence. You have to live somewhere so overbuying on our primary makes me sad but okay. Overbuying at the peak of a housing bubble again for a rental will really freak me out. Yes I do want to buy but i'm going to wait and be patient. What I'm hoping is maybe some airbnb arbitage mortgage holders can't last with all their rentals and then start to dump in a panic. Or people losing jobs dump because they can't afford it without payment. I know that if this goes bigger then there could be a lot of people unable to pay which if the landlords are overextended could cause foreclosures or heading there. That's when i'd prefer to buy.

Buying now at the peak seems a bit stressful. Knowing that all this could happen. And then still paying a premium for homes. And like2plan's posting makes me sick. That more people are getting onboard with not renting. I had heard that from the banker i was trying to refi with that there are homeowners also trying not to pay.

Corn, my AA is already screwed. Too much cash. But i keep everything not in cash in balance of 85/15. Sometimes as high as 90/10 and sometimes 80/20. It fluctuates around there. I rebalanced january and dumped too much into the market to help. uggh.

[Scallywag]

That would work but I don't have time nor appetite for remodels. I'm looking for rentals and property managers. But because of it I can't afford to buy high and take a gamble. I'd like to know I'm buying not at the top. I don't know if I can swallow it like a primary residence. You have to live somewhere so overbuying on our primary makes me sad but okay. Overbuying at the peak of a housing bubble again for a rental will really freak me out. Yes I do want to buy but i'm going to wait and be patient. What I'm hoping is maybe some airbnb arbitage mortgage holders can't last with all their rentals and then start to dump in a panic. Or people losing jobs dump because they can't afford it without payment. I know that if this goes bigger then there could be a lot of people unable to pay which if the landlords are overextended could cause foreclosures or heading there. That's when i'd prefer to buy.

Buying now at the peak seems a bit stressful. Knowing that all this could happen. And then still paying a premium for homes. And like2plan's posting makes me sick. That more people are getting onboard with not renting. I had heard that from the banker i was trying to refi with that there are homeowners also trying not to pay.

Corn, my AA is already screwed. Too much cash. But i keep everything not in cash in balance of 85/15. Sometimes as high as 90/10 and sometimes 80/20. It fluctuates around there. I rebalanced january and dumped too much into the market to help. uggh.

I actually don't want this to get any bigger but housing - esp in California - is due for a correction. If that correction does happen then I'd be in a position to buy. As for your AA being screwed, that's always fixable.

[corn18]

Corn, my AA is already screwed. Too much cash. But i keep everything not in cash in balance of 85/15. Sometimes as high as 90/10 and sometimes 80/20. It fluctuates around there. I rebalanced january and dumped too much into the market to help. uggh.

Sounds like your AA is fine. The cash is savings, not investment. I have $280k sitting in cash right now. $140k is for 2019 taxes, $126k is for a house downpayment. On Friday, it will go to $780k. If we decide to keep the mortgage, the $500k balance will go into my taxable account.

For you, all that cash is sitting there for a reason. Any money needed in 3-5 years should be sitting in cash or cash equivalent. It looks to me like you have a good plan. If you end up not getting any real estate, you can consider putting it all in the market.

[Scallywag]

Sounds like your AA is fine. The cash is savings, not investment. I have $280k sitting in cash right now. $140k is for 2019 taxes, $126k is for a house downpayment. On Friday, it will go to $780k. If we decide to keep the mortgage, the $500k balance will go pinto my taxable account.

For you, all that cash is sitting there for a reason. Any money needed in 3-5 years should be sitting in cash or cash equivalent. It looks to me like you have a good plan. If you end up not getting any real estate, you can consider putting it all in the market.

$140K for taxes?! Is that business income tax? Wow!

BTW, what are cash equivalents?

[corn18]

$140K for taxes?! Is that business income tax? Wow!

BTW, what are cash equivalents?

Not business tax. I had a LOT of stock bonuses vest last year. Total income was $1.5M.

Cash equivalents are CD's, money market, short term treasuries (3 months or less).

[LivingAlmostLarge]

I'm just a little stuck on waiting so long. I coulda, would, should, probably have invested in 2018. Now like I said it was 2 years later and looking longer. I do think that the housing market is going to drop. I have friends who don't think so. They think people who are in jobs are going to push housing even more expensive and it keep going up. I disagree. I think a lot of white collar jobs will be lost. Look at uber laying off another 3000 in 2 weeks. I think companies are holding it together now. but in 6 months i think they will see has consumer spending come back? I don't think it will and i think that will cause them to change guidance and layoffs and home sales are coming

[james.hendrickson]

I'm just a little stuck on waiting so long. I coulda, would, should, probably have invested in 2018. Now like I said it was 2 years later and looking longer. I do think that the housing market is going to drop. I have friends who don't think so. They think people who are in jobs are going to push housing even more expensive and it keep going up. I disagree. I think a lot of white collar jobs will be lost. Look at uber laying off another 3000 in 2 weeks. I think companies are holding it together now. but in 6 months i think they will see has consumer spending come back? I don't think it will and i think that will cause them to change guidance and layoffs and home sales are coming

Lots of doom and gloom on the forums today. Don't worry you guys, the economy will come back eventually. Plus, this is a great time to connect with friends and family.

[Scallywag]

I'm just a little stuck on waiting so long. I coulda, would, should, probably have invested in 2018. Now like I said it was 2 years later and looking longer. I do think that the housing market is going to drop.

Did you mean investing in the housing market or the stock market? I thought you were already invested in the stock market? If there's a repeat of 2008 then you may be able to pick up a good rental.

Lots of doom and gloom on the forums today. Don't worry you guys, the economy will come back eventually. Plus, this is a great time to connect with friends and family.

What happened to your photo avatar, James?

[scfr]

Too much cash in a bank would be the amount that exceeds the FDIC insurance limit.

Although it may be quite rare, for some people cash might be an appropriate part of their asset allocation.