Rule of Thumb for cash reserves?

Question

Is there a rule of thumb for how much cash you should keep on hand per unit?  I have set aside 5k per SFR in case of repairs.  I would love to hear what other people are doing.

Account Closed · Answer

@Brad Schultheiss  I don't have a max amount....they are revolving accounts....

Property taxes get paid out every year.  Insurance gets paid out when policies get renewed.

Repairs happen

If I have a stove and need send out a repair person, the money comes out of the repair fund.  If I have to buy a new stove, it comes out of the capex fund.

Samantha Soto · Answer

Thank you all!  This info is helpful!  I want to keep buying more properties, but also do not want to neglect my reserves.  I think my idea with 5k/property was that money could always be pulled from another property's account if absolutely necessary to cover repairs/capex/vacancy etc.  However, being as I only own 2 properties right now, 10k is not a ton of reserves.  Once I have 5 properties and 25k put away I might feel more secure to face whatever arises.  I love hearing everyone else's process and way of thinking about it.

Robert Shelton · Answer

Personally, I would say to keep the largest CapX replacement you can think of +3 months of "absentee" coverage. For me, the plan is to be passive in growth until I reach that point. So, it might be a few months after getting a tenant that I would do nothing I don't need to get some income from the property after purchase.

Brad Schultheiss · Answer

@ed e. Do you have a max amount that you hold for each house or does that just build on forever?

Kim Meredith Hampton · Answer

@Samantha Soto I think it also depends on the age of the house, condition, and do you have an A,B, C neighborhood and tenants. I think you are doing it the correct way. I see a lot of people freak out over having to replace and A/C system and the house is 10-15 years old!!!

Samantha Soto · Answer

When you say 6 months reserves, could you be more specific?  Do you mean 6 months of PITI payments?

Kenneth Garrett · Answer

I keep 6 months minimum in reserves.  This covers possible evictions, repairs, etc.  I also bank all my cash flow so I can pay down the mortgage or buy additional properties.

Rule of Thumb for cash reserves?

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