Emergency Fund and Capital Expenses Amounts
Member since 2020 · 1 post · 2 votes
Emergency Fund and Capital Expenses Amounts
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Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
8moWhen I was starting out, I typically would keep around $20,000 in a savings account, as my portfolio grew, I have a line of credit that is available but rarely use or only use it in case of emergency so I do not need to keep the cash liquid and can put it on higher yield investments but still have it available if I need it
7e investments53 Reviews
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- Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes8mo
When I was starting out, I typically would keep around $20,000 in a savings account, as my portfolio grew, I have a line of credit that is available but rarely use or only use it in case of emergency so I do not need to keep the cash liquid and can put it on higher yield investments but still have it available if I need it
7e investments53 Reviews - Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes8mo
@Broderick Neel-Feller, a few thoughts:
1. I don't think there is a simple one size fits all answer to this. As with many things you need to evaluate your own personal situation.
2. I lump Cap Ex, Maintenance, and Vacancy together. A general guide might be 5% each or 15% total but that is just a rule of thumb. You might do a little less if you have a newly rehabbed property or you might want to be conservative and do more.
3. Your comment about "6 months of expenses in a HYSA sometimes feels like that money could be growing at a faster rate elsewhere" is TRUE but not the whole story.
Yes, you could do more gainful things with it, BUT what if you NEED that money! Not every dollar is going to be deployed most gainfully every moment.
Having several months in cash reserves can be important when you go to get loans. They want to see you are in a sound financial position. Access to financing is more important than the difference between a 4% and 7% return on a modest amount of cash.
4. As I said in #3 there are real reasons to have some cash in reserves, BUT that doesn't mean you need to use cash as the entirely of the reserves you want. You could also set aside a LOC to cover part of that need. If you have $20k in cash reserves, but wish to have more available in case the need arises a LOC can fill the gap without holding onto more cash.
5. A LOC can double as added reserves AND ALSO funds you can draw upon to take down more deals!
- MD/DC · Member since 2024 · 1k+ posts · 1k+ votes8mo
Many ways to do it depending on your financial circumstances and good thinking to max the returns on your money. I keep about $5,000 in a HYSA and have a high paying job so large unforeseen events go on credit card and get paid off with next couple paychecks avoiding cc interest fees. I also have more than enough money in taxable TSM index fund and could sell some in a pinch which fortunately, knock wood, hasn't happened yet.
- Hinton, WV · Member since 2025 · 11 posts · 2 votes8mo
To reduce cash drag, I keep only the minimum in HYSA and park excess reserves in money market funds or T-bills so it stays liquid while earning more.
- Investor · Houston, TX · Member since 2019 · 95 posts · 29 votes6mo
Broderick — you're asking the exact right question. Having 6 months in a HYSA earning 4-5% feels safe, but you're right that it's a lot of capital sitting relatively idle when you have 4 doors and could be deploying it.
Kevin made a great point about LOCs. I use one too. But I want to share a different angle I don't see mentioned much on here.
I park a significant chunk of my reserves inside a dividend-paying whole life policy. Here's why it works for me as a real estate investor with a growing portfolio:
1. The cash value earns 4-6% annually — comparable to a HYSA but tax-deferred and guaranteed to never go down in value.
2. When I need capital — whether it's a furnace replacement, a vacancy gap, or a deal that pops up — I take a policy loan. Money hits my account in 3-5 business days. No credit check, no application, no approval process.
3. Here's the part that changed everything for me: when I borrow against the cash value, my full balance keeps compounding as if I never touched it. The insurance company lends against it as collateral. So my money is literally working in two places at once.
4. I pay the loan back on my own terms — no structured payments, no penalties. When rents come in or a deal closes, I pay it back and the system resets.
For someone with 4 doors who's scaling, having a reserve system that grows guaranteed, is accessible in days, AND doubles as your family's life insurance protection is pretty hard to beat. It solves the "my emergency fund isn't working hard enough" problem without adding market risk.
It's not for everyone and it takes a few years to build meaningful cash value, but once it's rolling, it becomes the most flexible capital tool I've found as an investor. I've used it to fund flips, cover emergency repairs, and even lend to other investors.
Just another option to consider alongside the HYSA and LOC strategies others mentioned.
- Investor · Houston, TX · Member since 2019 · 95 posts · 29 votes6mo
The question you are really asking is where should my money sit while it waits to be used. A high yield savings account pays you maybe 4 percent right now. Sounds fine until you realize that money is just sitting there doing one job.
There is a vehicle where your emergency fund grows tax-deferred, you can access it in 3-5 days with no penalty, and it also provides a death benefit for your family. That is what a properly structured whole life policy does. Your money sits in cash value instead of a savings account. When the furnace dies or a tenant stops paying, you take a policy loan. Your cash value keeps growing even while you borrow against it.
I have 4 doors myself. The biggest risk is not the repair bill. It is having all your capital tied up in deals when life happens. A savings account solves that problem at 4 percent. Cash value solves it at 4 percent plus a death benefit plus tax advantages plus the money never stops compounding.
It is not about earning more. It is about making your idle capital work harder while it waits.
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