I recently bought my first rental about 4 months ago. I think I am ready to buy another one but am curious on what others stance is on reserves. How much cash do you keep in reserves in case of emergency. I dont wanna spread myself too thin.... Just curious on what everyone's strategy is....
The lender will require 6 months of PITI on all investment properties and 3 months PITI on personal residences.
@Seth Jacowski @Brie Schmidt I think this is a great question. I am closing on number three next week and have the exact same question. I agree with what Brie said for the bank's requirements but still wonder what is prudent to protect myself (10k per house?). I know the answer will vary based on risk tolerance but would like to hear what some more seasoned investor's believe is wise. I wonder if at some point the amount can be less due to having "economies of scale" with income from multiple units available to cover catastrophic situations or prolonged vacancies in one or two units. Brie has likely reached this level after reading her posts.
Thanks for any advice you seasoned investors can share.
We transfer a set amount for vacancy, repair, and capex into an account each month. At the end of the year we keep $30k in the account and use the rest on preventive maintenance or upgrades. Then we start all over again.
We use the bank guidelines. 6 months PITI for each property works well for us. We used to keep a lot less on hand, but now I sleep much better! Of course, if you have a tiny PITI payment (which is a great problem to have), it makes sense to store some more for large repairs/replacements.
Thank you everyone!
Free eBook from BiggerPockets!
Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!
- Actionable advice for getting started,
- Discover the 10 Most Lucrative Real Estate Niches,
- Learn how to get started with or without money,
- Explore Real-Life Strategies for Building Wealth,
- And a LOT more.
Sign up below to download the eBook for FREE today!
We hate spam just as much as you
You must be a BiggerPockets member to post on the forums
Join the world's largest, most open Real Estate Investing Community online, 100% free forever!