Personal Emergency fund and property reserves

8 Replies

Hi All,

I have gone through the forums and realized everyone suggested 6 months of rent reserve per property. I have 4 duplexes and if I keep 6 months rent reserve for each and 6-8 months of personal emergency fund it is more than 100K, this seems too large for a "rainy day" scenario. Want to hear if everyone keeps aside large amounts (almost cash without any returns), especially when the whole idea of REI is to invest and leverage.

We're in a market where we can reasonably expect the extension of eviction moratoriums. The rainy day is here for many, my friend! In my opinion if you're sitting on solid reserves right now you're in exactly the best position to be in. We're not in the market to continue to lever.

@Sattir Bitti when you’re getting into larger amounts like that, I look at it as investment diversification. I would keep $20K of that in a savings account for quick access, the remainder in different types of investments. Bonds, mutual funds, maybe a few stocks.

Determine your risk tolerance if the market drips. If the RE market drops, etc. Myself, I wouldn’t keep $100K in a savings account earning 0.4%, but there are reasonably safe things to do with that money to make it available if needed - while still working for you.

@Sattir Bitti

I have a number of units and I keep $20,000 in cash available for emergencies. I started with 6 months for each property, but then I looked at how much cash that would be. If you have other resources to cover emergencies then it's up to you. I feel $20,000 is a fairly safe number. If your leverage is high 75% then you'll need resources for things as there is no ability to access equity. During this COVID, I've been pretty fortunate, tenants are mostly paying; a few late, a few short but there still covering my costs. We always need to be prepared for the unexpected.