All Forum Posts by: Benjamin Sulka

Quote from @Benjamin Sulka:

Quote from @Andrew West:

I keep 6 months PITI for each property. I also try to knock out any upcoming maintinece issues and budget for looming capex when I purchase a property. I have access to several lines of credit.

I keep all of my reserves in a savings account earning 5.25%.

Another consideration is how much steady W2 income that you have to supplement repairs and maintinence as issues arise.

 Andrew, 

What kind of savings account do you have that can yield a return like that? 

Ben,

I use Milli. They're a mobile only division of the First National Bank of Omaha. They're currently paying 5.25%. There are plenty of other options that are 4% plus as well If you don't like the mobile only format. 

Quote from @Benjamin Sulka:

"Prepare templated questions in advance to streamline the process and utilize text replacement features on your smartphone for efficiency. For example, all I have to do is type "rental1" in my iPhone and it will replace it with that first reply. I type "questions1" in my iPhone and it replace it with all of the questions I want to ask."

This is such a good idea and a huge time saver. 

"When you are house hacking there is no fair housing laws."

Is this actually true? 

"And remember to declare your rental income on your taxes so you can use that income to help you qualify for the next house hack!"

Can you get a tax reduction through depreciation on the property too? 

Thanks for providing all of this info! 

 The text replacement is the BOMB! For computers I use a clipclip for "clipboard management" same idea  for copy and pasting templates or links you use all the time. 

To the best of my knowledge fair housing laws do NOT apply to renting our your primary residence. 

For a pure rental property you can depreciate the the purchase price of the house minus the value of the land divided by 27.5. For a house hack, you can then depreciate that number by the percentage of square feet that your home is used as purely a rental. For a duplex it would be 50%.

Examples. 450k purchase price. Land is 50k. you have a duplex and live in one side by yourself and rent the other. 

450k-50k =400k

400k/27.5 = 14,545

14,545/2 = 7,272.

You can deduct $7,272 from your rental income each year. Or in other words the first $7,272 you make is tax free. You of course have to make that much in rental income to deduct that much. I think it carries forward if you don't use it all though. You really need to talk to an accountant if this is something you want to do. They are worth every penny! 

Oh and that same tenant.... when he left the carpet was destroyed and he had a pet without telling me. I had to scramble to rip out carpet and put down LVP in a weekend. He didn't do a great job, but it go the job done. I kept his security deposit. And sent him a letter laying out why. 

That was the biggest headache so far.

Thanks for sharing! Super inspiring but not sure I could do a curtain-in-room situation. Kudos to you! Looking for a home to househack at this 7.3% interest rate life we currently live so reading these stories get my spirits up!

@Benjamin Sulka

Nice man!! Haha yes, I was single at the time. 

Looks like you're in Cleveland which is a much more affordable market. It can certainly be done. 

I was able to save $45k in 15 months waiting tables and selling things on eBay (would be happy to show you what I was doing) - but I sacrificed A LOT (I really did not have friends or a life). 

You do not need to go that extreme, and as I get older I'm understanding more and more of the value of balance. 

Having a significant other definitely changes things, but for me it's been very positive :)

I keep 6 months PITI for each property. I also try to knock out any upcoming maintinece issues and budget for looming capex when I purchase a property. I have access to several lines of credit.

I keep all of my reserves in a savings account earning 5.25%.

Another consideration is how much steady W2 income that you have to supplement repairs and maintinence as issues arise.

Quote from @Ben Einspahr:

I was at a meetup the other day, and we were discussing the question, "How much should I keep in reserves for each rental property?". So I figured I would post it to hear everyones feedback

My quick and simple answer is 6 months of PITI (Principal, Interest, Taxes, and Insurance) or $10,000 in reserves for each rental property. Which ever is greater. K.I.S.S.

To date, I still still use this metric. For context I have 3 rentals. Are there times when I dip under that thresh-hold? Yes!

However, there is a tipping point at which this rule of thumb no longer applies. For instance, if you have ten rental properties and $10,000 in reserves for each property, that amounts to $100,000 sitting idle in a checking or savings account. For me personally, that is too much and I would rather redeploy some of that money into other investments. How much money is too much depends on the individual.

Question for the BP community? How much do you keep in reserves for each rental property?

This is a fantastic, responsible, reasonable question. Great job for asking it.

I think it’s something like $10,000 for the first property or two, and $5000 per property after that. (Or 6 months PITI / 3 months PITI, whichever is greater).

As my portfolio grows, however, and I have other diversified assets, like stocks and a personal emergency fund, the importance of getting a formula for this amount diminishes.