The $8,000 Leak: A Real-World Reminder Why Reserves Matter

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The $8,000 Leak: A Real-World Reminder Why Reserves Matter

Ryan SpathBusiness Member
Real Estate Agent · Boise, ID · Member since 2017 · 557 posts · 376 votes

Every landlord’s nightmare became my reality while I was on vacation.

At 6 a.m. on a Sunday morning, I got a message from one of our tenants in Florida — there was a leak. Not just a dripping faucet or a loose fitting — a slab leak, the kind that sends a cold jolt down any property owner’s spine.

Thankfully, the tenant was quick to act. We had them shut off the water at the main, and I contacted a local plumbing partner who was able to get out to the property within a few hours. After further inspection, our fears were confirmed: a copper pipe had failed underneath the slab — a known issue in this market — and this now marked the fourth unit we’ve had to re-pipe due to similar problems.

By some stroke of luck (or fate), my family and I happened to be in town on vacation, so I was able to personally oversee the situation. Here's how we handled it:

  • Carpet removal to prevent mold and speed drying

  • Industrial fans and a dehumidifier brought in immediately

  • Drywall and baseboard cut 6–8 inches from the floor (no moisture detected with a meter, but we didn’t want to risk it)

  • 96-hour drying period with equipment running continuously

  • Drywall & painting contractor brought in for a full room (and full house, once we committed to a complete re-pipe)

  • New carpet and padding ordered

  • Re-pipe scheduled and completed

The Cost Breakdown:

  • Carpet and Padding: $527.84

  • Drywall, Trim, Paint, Finish Work: $2,200.00

  • Paint Supplies: $87.70

  • Full Re-Pipe: $5,242.20

  • 🔻 Total Out-of-Pocket: $8,057.74

Yes, we’ve submitted an insurance claim and are optimistic about some coverage, but this situation reinforces a point I think many newer investors overlook: you must be well-capitalized.

The Reserve Rule We Live By:

We personally aim to keep a minimum of $10,000 in reserves per door. When we dip below that number, we aggressively save to rebuild our cushion. This gives us peace of mind and flexibility when the unexpected (but inevitable) happens.

Whether it’s a slab leak, HVAC failure, roof damage, or a tenant issue — you don’t want to be scrambling for cash when time is of the essence.

So Let Me Ask You:

👉 How much do you keep in reserves per unit?
👉 Have you had to dip into reserves lately, and what did it teach you?

I don’t share this story to scare anyone — but rather to emphasize the importance of building your portfolio defensively, not just optimistically.

[email protected]208-600-2814
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Bill B.
Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
1y

If you did that much work yourself I wonder why you made an insurance claim? I run $2,500-$5,000 deductibles so $8k is on the cusp on what I was claim, depending on the policy. 

If you planned to make a claim, why do any work yourself? I’ve had 2 slab leaks and 2 toilet supply lines explode in 25 years. All 4 times allstate had Servpro there within an hour. They did everything you mentioned except they went up 4 feet to make even drywall segments. They managed the whole deal and covered everything. I fear doing the work yourself that labor won’t be reimbursed. 

Ps. Allstate actually sued the toilet supply line makers both times and refunded my deductibles. 

Pps. To answer your original question. This shouldn’t have required any reserves outside of the insurance deductible and that wouldn’t be needed for weeks. But I simply have a high limit credit card as you should never need more than $5-$10k. Money is just too valuable to have it sitting around in reserves. Probably the most expensive repair most people will have is HVAC and capex has to be a roof in areas where that’s a thing. HVAC guys love credit cards, roofers probably do too. As I don’t see most landlords having a $20k reserve for a new roof aging out that isn’t covered by insurance. 

I do appreciate that you and your family were handy enough to lend a hand though. I’d be the guy that wants to help but ends up just carrying stuff to the trash or grabbing lunch. :-)

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  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    1y

    If you did that much work yourself I wonder why you made an insurance claim? I run $2,500-$5,000 deductibles so $8k is on the cusp on what I was claim, depending on the policy. 

    If you planned to make a claim, why do any work yourself? I’ve had 2 slab leaks and 2 toilet supply lines explode in 25 years. All 4 times allstate had Servpro there within an hour. They did everything you mentioned except they went up 4 feet to make even drywall segments. They managed the whole deal and covered everything. I fear doing the work yourself that labor won’t be reimbursed. 

    Ps. Allstate actually sued the toilet supply line makers both times and refunded my deductibles. 

    Pps. To answer your original question. This shouldn’t have required any reserves outside of the insurance deductible and that wouldn’t be needed for weeks. But I simply have a high limit credit card as you should never need more than $5-$10k. Money is just too valuable to have it sitting around in reserves. Probably the most expensive repair most people will have is HVAC and capex has to be a roof in areas where that’s a thing. HVAC guys love credit cards, roofers probably do too. As I don’t see most landlords having a $20k reserve for a new roof aging out that isn’t covered by insurance. 

    I do appreciate that you and your family were handy enough to lend a hand though. I’d be the guy that wants to help but ends up just carrying stuff to the trash or grabbing lunch. :-)

    4Reply
    • Mike Kirby
      Rental Property Investor · New Braunfels, TX · Member since 2021 · 288 posts · 255 votes
      1y
      Quote from @Bill B.:

      I’ve had 2 slab leaks and 2 toilet supply lines explode in 25 years. All 4 times allstate had Servpro there within an hour. They did everything you mentioned except they went up 4 feet to make even 

      Have you really stayed with the same insurance company for 25 years? That's unheard of in Texas. I have had to shop insurance at a minimum every two years for the last 40 years to keep my rates as low as possible while keeping a good coverage. 
      0Reply
  • Ryan SpathBusiness Member
    OP
    Real Estate Agent · Boise, ID · Member since 2017 · 557 posts · 376 votes
    1y

    @Bill B.

    Thanks for your input.

    I jumped in and did what I could because we had a similar situation happen in a home we personally lived in — we were displaced for about 30 days. From that experience, I knew that if I acted quickly and took control, we could minimize both the inconvenience and the overall disruption for the tenants.

    I’m curious about your reserve strategy — you mentioned keeping only $5–10K and relying on a high-limit credit card. We also have access to a high-limit card, but we’ve always felt more comfortable keeping a larger cash reserve on hand. Right now, we’re holding ours in a high-yield savings account earning just over 4%.

    Would love to hear more about how you think through the balance between cash-on-hand vs. credit flexibility.

    [email protected]208-600-2814
    2Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    1y

    There’s probably a big difference between starting (1-3 rentals) and once you get 6-10 or more. I’ve personally never faced an invoice over $10k (massive turnover expense plus took the opportunity to replace all appliance and install grainier to raise rents.) I collect quite a bit more than that monthly in rent so even in that case I still cash flowed. 

    That being said, obviously I have liquid funds of $10-$20k because property taxes and insurance are bunched pretty close together. But I’ve been a long time credit card user and love getting the free cash. So I have one $75k limit credit card I use for EVERYTHING. As long as you can earn 4% I have no problem with you just calling that investment funds you can use in case of an emergency. (I’m at the point in my life where I have a pretty large investment in CDs and Bonds yielding 4-5% that I consider “investments” rather than reserves. The day you see a 6 figure stock market loss in one day you start to value to “stability”. 

    Ps. LMK what the insurance company says/does about reimbursing you and if you think it was worth making the claim. Is your deductible under $2,500? If so, have you asked your agent what the saving would be for a higher deductible? Going form $1,000-$2,500 saved me $400/yr per property. Easily paid for it self in a year. 

    4Reply
  • Tyler Brown
    Member since 2019 · 4 posts · 0 votes
    1y

    Agree $10k per door is a bit excessive, unless you have only a couple doors

    0Reply
  • Jules Aton
    MD/DC · Member since 2024 · 1k+ posts · 1k+ votes
    1y

    Ugh that sounds awful but like you managed it quickly. How much did you spend for tenant relocation? 

    Like @Bill B. noted I'm also not a fan of having too much sitting around in low fixed interest accounts but I generally have about $5-10k between a savings account and my checking account depending on the time of the month. For unexpected large expenses I put on credit card and use income from my W2 job for a few weeks to pay off in full. As a worse case scenario I could sell from my total stock market index fund taxable account which fortunately hasn't had to happen. 

    0Reply
    • Ryan SpathBusiness Member
      OP
      Real Estate Agent · Boise, ID · Member since 2017 · 557 posts · 376 votes
      1y
      Quote from @Jules Aton:

      Ugh that sounds awful but like you managed it quickly. How much did you spend for tenant relocation? 

      Like @Bill B. noted I'm also not a fan of having too much sitting around in low fixed interest accounts but I generally have about $5-10k between a savings account and my checking account depending on the time of the month. For unexpected large expenses I put on credit card and use income from my W2 job for a few weeks to pay off in full. As a worse case scenario I could sell from my total stock market index fund taxable account which fortunately hasn't had to happen. 


       that seems to be the general consensus from the more experienced guys, thanks for sharing! I may have to shift how we personally store cash! for the relocation, the tenant stayed with a friend and we gave them a $500 discount on the rent, this was there request. We offered a free month but they thought that was to generous.

      [email protected]208-600-2814
      1Reply
  • Bill B.
    Investor · Las Vegas, NV · Member since 2013 · 8k+ posts · 10k+ votes
    1y

    @Mike Kirby

    Yes. Until 2-3 years ago it just wasn't worth it. The average policy was only $400-$600. Now it's about $750-1,000. These are just replacement cost $400-$600k SFR, with $500k liability, no multi family and nothing fancy. I also keep a $2,500 deductible because I'm probably not making a claim under $10k. (I'm literally in the middle of my 3rd claim ever. Tenant "fell asleep after starting tub". They'll sue the Tennant's insurance after it's done and I'll get my deductible back from them or the tennant.

    I don’t know if they’re busy because of all the other disasters going on or they keep a small Vegas office. But while the other 2 claims were finished in 10-15 days. This one while a little worse will probably be closer to 20-30 days. It took 10 days just to get an adjuster out. Luckily the GC was out in 2 days and wrote up a quote they basically just said ok to according to them. So claim could proceed without waiting for adjuster. 

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