Real Estate Investor · chicago, IL · Member since 2012 · 1k+ posts · 231 votes
Since buying a home is so $ intensive, my question is how much did you have in the bank after buying your 1st investment property? Seems it would be difficult to pull off with a down payment, closing costs, rehab, etc. to have a significant amount in the bank?
Did you every hear an authority figure, mom, dad, teacher or other adult say; Do as I say, not as I do! ???
LOL!
My first property was purchased with seller financing and I didn't have $20 extra as a 19 year old! Owner occupied too. I had more than 3 months reserves when I went VA and started financing at the bank, so you can get there. :)
Did you every hear an authority figure, mom, dad, teacher or other adult say; Do as I say, not as I do! ???
LOL!
My first property was purchased with seller financing and I didn't have $20 extra as a 19 year old! Owner occupied too. I had more than 3 months reserves when I went VA and started financing at the bank, so you can get there. :)
After that, we'll have 6 months of payments (mortgage, interest, taxes, insurance) for both properties on hand. I'd like about 50% more than that since we are pretty conservative to cover our personal expenses for a few months, but I also want to be ready to buy another property!
We're into buying and holding, if we were flipping I'd probably want 3 months PITI.
Kelly N. has some good advice, 6 months of reserves is comfortable, unless your market is very cold that should give you enough time to retool or exit if something goes sour.
However, obviously every investment, market, and person is different. If you are a conservative investor, then you will calculate to have enough reserves based on the circumstance and your exit strategy to mitigate losses. If you are a gambler and like "putting it all on red" for the big bucks, then you need to be prepared to lose your shirt if the ball lands on black.
Ideally, I'd like to have as much in reserve as possible.
When I did my first deal, I was 20 years old so what was possible then was "zero". Like Bill Gulley, I couldn't rub two nickels together after doing my first deal, and I put nothing down!
I'm so glad to be older, wiser, and wealthier, but you've gotta start somewhere.
@Kelly great advice! Like Brian said ideally you want as much as possible....
I'm the gambler type and had to start somewhere, so when I purchased my first rental 2 years ago I had nothing in reserves. I took out a home warranty policy, and have a full time job.
Enough to put down $ on #2, and #3. Now was $8,000 enough reserves for 3 fourplexes? Well, not according to my current financials. I'm glad I didn't wait to get into it, because I've captured a lot of equity and appreciation. But the cashflow has not been great enough to cover the cost of the extraordinary expenses that keep popping up.
Hmmmm, my first was when I was 25 and in Los Angeles. Even with 3.5% down, It was close to $20k. After it was all said and done, I had roughly $600 left to my name,lol. I'll never do that again. Between recouping my $ and paying the bills/mortgage it took me a year to get all my furniture.
Like a few others have said... enough to buy #2. Wise?, No. But it all worked out in the end... except buying properties with what is meant to be cash reserves has turned out to be a personal problem, lol.
Hah. And you thought I was a bit of a risk taker. :-) Most of the people in this group make me look a banker.
Compared to everybody else on here, you've got enough to take down #2 thru 10. Well, technically, that would be 4 thru 10 since you really have 3 already.