What are Cash Reserves?
Maintaining Cash Reserves to pay large or unexpected expenses is a critical component of a real estate investor’s strategy and can help to save your return potential with an over-budget investment property.
In addition to the funds you’ll use for your down payment and closing costs, smart investors want to be confident that they have enough cash reserved to account for unforeseen hurdles that often arise during the rehab/resale processes.
Backflip thinks of Cash Reserves in two categories: Cash Equity and Liquidity Reserves and Contingency.
Cash Equity is the total cost of completing the investment (including rehab costs, interest expense, etc.), minus the loan amount. A portion of the Cash Equity is invested at closing, with the remainder invested after closing.
Liquidity Reserves & Contingency represent the additional cushion you want to have available to you to navigate unexpected situations – for instance if rehab costs are over budget. This is not “cash” that goes into the investment; it is liquid funds (cash, stock portfolio, etc) that could be available if needed.
Using innovative technology and borrower-friendly capital, Backflip works with you to help de-risk your investment. We’re proud to support real estate entrepreneurs of all sizes to reinvigorate the housing supply on your terms.