How much is enough to save

Question

Kyle Guida · Answer

don't forget to save for capex. Like was mentioned hvac, roofs, vacancy , eviction , tenant turnover are all things you need to consider. Also a 100 year old house is likely to need more repairs more often then a 20 year old house .  Same goes for sfr vs condo

Personally I rather have a lot more in my "oh shit" fund aka my reserves .  I shoot for 6-12 months. I also don't rely on my real estate money as I'm still working full time so sometimes if my reserves get too high I might apply to principle

Andrew Johnson · Answer

You're probably miss a couple of variables.  One would be if the 3 properties are each cash-flowing.  If they are generating $3000 a month in cash-flow combined you can probably easily stomach most repairs, appliance replacement, a vacancy, etc. and not "feel" it.  If they're cash-flowing $300 a month it's another situation and if you're cash-flow negative it's a completely different dialogue.

As far as getting to a more generalized number, you should be able to look up repairs, maintenance, and the impact of vacancies over the past 12 months and come up with a number.  I'd make sure 3 months worth of whatever that number is in sitting in a bank account somewhere.  But you should be also looking at the age of your HVAC system, the roof, etc. so know if you need to be building reserves for a larger repair/replacement that you can see coming.

Kevin Siedlecki · Answer

@KATHLEEN DEEGAN -

I run major expenses through a HELOC, so I'm not quite structured the same way, but if I had to keep cash on hand, I wouldn't do it as a straight cash per property equation. I would probably keep 2 months regular expenses plus $5k for the first property, maybe the same for the second, but then you don't need to add a ton to that as you get to properties 3, 4, and so on. Two reasons for that:

1) You are unlikely to have a $5k+ surprise on multiple properties in the same month.

2) As you get up to more properties, you have more cash every month to cover surprises, so you don't necessarily need cash sitting in an account doing nothing.

Hope that helps!