Leverage and reserves

2 Replies

How comfortable is everyone with leverage?  How much cash reserves do y’all like to have in case of emergencies?

I'm just getting started. Im under contract on a duplex. I work full time currently and make good money but currently my school loans are killing my DTI to get a conventional loan for the next two years (until I own my first property for two years).

Just trying to plan going forward for each property I get-Capex for roof/hvac and two months rent in reserves is what I was planning on before I get leveraged with a new property.

Thoughts?

Originally posted by @Joshua Kohl :

How comfortable is everyone with leverage?  How much cash reserves do y’all like to have in case of emergencies?


Using leverage is fine... its the level of risk, and each investor has a different plumbline by which they measure how much risk is comfortable.

I keep my properties in separate bank accounts.  I aim for 3 months cash in reserves to cover emergenices relative to the property.  

@Joshua Kohl if you want to grow your rental portfolio, you have to be comfortable with leverage. I dont know that I'd be happy at 90% leverage, but I aim to be in the 70% range to in the beginning. I reserve the greater of $5000 per property or 6 months PITI. That will cover nearly any major capex item or easily pay for an unexpected vacancy.