Recommendation on Cash Reserves & Vacancy Rate

[Mark Monroe]

8,080 Sq. Ft. Office/flex (22 Units)

$900,000.00

Yearly income $103,000

What’s a good guild to use for a commercial office building,

1. Cash reserves

2. Vacancy rate

[Nathan Gesner]

Greg provides a good start but there's much more to consider. The reserve is your safety net. If you have a strong financial foundation, you need less of a safety net than someone with a shaky foundation. Things to consider:

• Income. Are you living paycheck to paycheck or do you have a lot of discretionary income? A 55-year-old  heart surgeon can probably absorb a $20,000 roof without much trouble while a school teacher may have to borrow the funds at high interest.
• Number of units. Someone with 50 cash-flowing rentals can absorb a $20,000 roof repair more readily than someone with one rental cash-flowing $100.
• Condition of the investment. If the property was renovated top-to-bottom four years ago, you would be safe with a small reserve whereas an old home may need a new roof and boiler and water heater and windows in the next 5 years.

That's just a few considerations.