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Updated about 2 years ago on . Most recent reply

- Rental Property Investor / REALTOR® / Property Manager
- Gilbert, AZ
- 395
- Votes |
- 353
- Posts
Why you need reserves
I see a lot of people analyzing deals and they do a nice job of assigning a certain percentage of monthly rent for different expenses, maybe 5% repairs/maintenance, 5% Cap Ex, 4% Vacancy, and 8-10% Property Management. I think this is a great way to underwrite a deal, but in reality these expenses don't happen all nice and spread out like the budget; they can and do happen thousands of dollars at a time, sometimes tens of thousands. In the past 3 months I replaced the HVAC in two of my rental SFH, one was $9k and the other was a little bigger, so it was $10k, this wasn't a big deal because I had the reserves. My point is, for anyone starting out wanting to live on the cash flow from rental properties, do yourself a favor and add a little extra to your reserves, it will help you make better decisions. Lenders usually require 6 months of PITI payments as reserves, but I like to have a little more, I like to have 6 months plus $10k per property for SFH. How much do you like to keep in reserves?
Most Popular Reply

- Lender
- Lake Oswego OR Summerlin, NV
- 64,432
- Votes |
- 43,626
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I would NEVER ever leave a job with only 4 years left to a pension.. your just changing one job for another. running a bunch of rentals is a JOB no matter what people say on BP.. thats why I sold out when i could.. took my profit and did other things that did not include dealing with residential tenants in C class rentals which really were probably D class if we are being honest and some B's
I put together a real estate paper offering to do our portfolio much like a syndication. I had no cash into it and I actually refinanced at the purchase so was pulling 5 to 10k per property when i closed on them so we generated about 3,000,000 in cash .. and while it should have cash flowed on paper I came to the realization of pulling max ltv out of the deals we simply broke even at best.. So I took my cash and left the other partners in control of the assets IE they bought me out.. its was a glorious day for me :)
- Jay Hinrichs
- Podcast Guest on Show #222
