How much cash on hand?

I'm in the process to buy 2 investment cash neutral properties at $350k each in Qld on guarantor. I have $30k savings that I won't need to use on this purchase. The plan is to continue to save till end of 2018 so I have $60k savings and then, assuming 5% growth of $35k on both properties, I would then re purchase another one.

My question is, how much cash do people keep on hand at anyone time. Is the cash a % of the overall portfolio or just a set cash amount.

As you can see by the above example, I would be very leveraged with little cash reserve on hand for around a 6months - 1 year. How do you grow but protect yourselves?

 

Golden rule ... protect what you have before risking it all by adding another one to the portfolio.

Absolute bare minimum cash on hand of $5k per property plus 3 months of living expenses

 

Mines about 15% of total loan debt. Its not very useful because thats mostly funded by generous "here borrow an extra $__k more than you need coz the valuation came back great" repeated over several properties in the pre-APRA era. All that cash is sitting quietly in offsets to deploy on a good value buy, or a decision to close the ppor loan (naah), or to be a shield if my income takes a hit or rates climb.

I find having no buffer to be scary beyond belief.

 

Also make sure you’re properly insured if you’re close to the wire - income protection for eg is a must.

 

Do you have Life, TPD, income protection, trauma insurance? If so you can be higher leveraged.

It also depends on how much risk you are willing to take on and how secure your job is. Someone in contract work might have higher amounts towards the end of their contract but someone who is a school teacher of 10+ years will likely feel a lot more secure in their job.

 

your salary x 2 years would be a good goal post

 

Depends on your specific situation.

Are you single with low living expenses or married with children for example.

What is your risk profile like, will you loose sleep and be stressed out if things go pear shaped?

The more cash buffer you have the better imo but not so much so you never take any action.

 

Mine is 8-10k savings per property I own.

 

25yo with no GF and no kids is different from 45yo with 4 kids. You will need different buffer at different life stages based on you risk appetite. Do a bit of forecast, there are no standard rules.

 

Our cash is in offsets, bank accounts, term deposits, etc and is:

• 12% of our total assets
• 17% of our net worth
• 42% of our loan portfolio

We are self-funded retirees so the above are very conservative, in my humble opinion.

At our age, the main thing for us is not to lose sleep at night.

 

Cash in offsets at the moment comprises ~42% of the total loan value.

 

I keep 3 years living expenses at a minimum, may seem excessive but it helps me sleep