Reserves

[Arthur Banks]

How many months of reserves do you have on hand? Whether it be for after closing, finishing renovation, or for turn-over on a rental? I'm sure it would be great to have a tenant lined up to move in right away, but I know that's not always the case.

[Will Barnard]

This is a very common question with many discussions already on BP. I would suggest searching them out. My answer to you is two fold. One is that if your estimated expenses for everything is $500 monthly and you actually spend $411 on actual hard costs, the $89 balance would go to deposit in reserve account. So every month that you don't have major expenses, you should be applying the extra to the reserve. For starting out before you ever own it, it would be wise to have a reserve of the operating costs and reserves for 4-6 months. As you buy door number two, three and so forth, you eventually would not need to have an initial reserve of 4-6 months for every door as it would be improbable yo have them all go bad at once.

For your first and perhaps second, you would want the initial 4-6 month reserves. After that, you are diversified in doors and would only need the monthly extras applied to your reserve account.