Author Topic: How much do you keep in cash reserves for your RE portfolio?  (Read 1012 times)

Megma

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How much do you keep in cash reserves for your RE portfolio?
« on: October 25, 2017, 08:11:33 AM »
I am curious how much people keep in their cash reserves as they scale up?

Right now, we own one SFH rental and our primary residence (we are not responsible for its roof, it's a townhouse) and we keep 5k in reserves for the 2 houses, emergencies, etc.

If we buy another rental it seems reasonable that we should then keep at least 8k, but probably more like 10k. After that, with rental #3 maybe 12-15k? Then I think it would max out around needing 20k for emergency maintenance for rentals (we only plan SFH/townhouses, no apartment complexes or anything like that) and our primary residence, or not?

Is this enough? What do you you guys who have several properties keep in cash?

We also have access to short term credit if needed in a pinch (a scarily large amount) and one of our jobs could cover both mortgages right now with some left over for living expenses. I am trying to think about when we're "ready" for rental #2 and balance between being risk adverse and too conservative.
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YttriumNitrate

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Re: How much do you keep in cash reserves for your RE portfolio?
« Reply #1 on: October 25, 2017, 08:43:43 AM »
I don't keep a separate fund for emergency housing expenses, but I also have one SFH rental and a primary residence. I keep about $10k in a general emergency fund that I would tap into if I got double whammied with back-to-back major expenses.

Megma

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Re: How much do you keep in cash reserves for your RE portfolio?
« Reply #2 on: October 26, 2017, 07:17:10 PM »
Mine is also general. Hm, maybe i should listen to my husband and we should keep more.
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SnufferBottle

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Re: How much do you keep in cash reserves for your RE portfolio?
« Reply #3 on: October 26, 2017, 08:19:56 PM »
$5k cash but can always put money on a 0% credit card, 401k loan, or worst case roth IRA withdrawal.

My goal is always to find a way to get more leverage :)

frenchsquared

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Re: How much do you keep in cash reserves for your RE portfolio?
« Reply #4 on: October 30, 2017, 12:12:32 PM »
I have 10 homes.

interesting... I have none. As soon as I have cash I buy another house or renovations. I have two houses needing new roofs so I am putting money away for that as soon as I have it the roofs will be done. Did a roof last month so nothing left in reserves.

I have $7,500 line of credit and a couple thousand available on a business card.
I cash flow about $2,000 a month after everything. So for the last few years I have been able to just pay for any issues. I have insurance if I need something major. Im clearly way higher risk. I often think I should put some cash away but I hate the idea of paying interest on a house loan or a credit card while having cash in savings earning less then 1%. I would rather invest it and then use credit in an emergency.

Im in no way saying anyone should do what I do. Its much safer to have cash on hand.


Peony

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Re: How much do you keep in cash reserves for your RE portfolio?
« Reply #5 on: October 30, 2017, 12:47:33 PM »
I have 2 multifamily properties consisting of 5 apartments. One is in a HCOL area where repairs are expensive. The other is a crappy house, not in a terribly HCOL area but the house tends to need small amounts of work frequently -- and I really should try to improve it by replacing siding, doing landscaping, etc. I currently have about $11,000 in reserve for big-ticket costs for both properties, and that's low because I had to take out about $4,000 for a car purchase a couple of months ago. I'd say that at the moment I'm underprepared for expenses that I know ultimately WILL come, such as a new roof on the HCOL-area property.

So I'm aiming to rebuild that reserve enough to cash-flow a roof on the HCOL house if necessary, and I estimate that at about $20K. I just raised some rents substantially (they were below market but excellent tenants) and am socking away most of that money for future expenses. I'm also thinking about a HELOC of about $10K just so I don't have turn to credit cards if a bunch of stuff is needed at once.

I've had the unpleasant experience of being caught up short without adequate reserves and I don't want to do that again.

montecristo1985

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Re: How much do you keep in cash reserves for your RE portfolio?
« Reply #6 on: November 13, 2017, 09:45:24 AM »
I basically just keep my security deposits as a reserve.  The chances of everyone moving out at once is absurdly low, and honestly 99% of people don't get their security deposit back in my experience (there is rather an epidemic of just skipping out without warning around here), so I'm comfortable with that number.  I also save for insurance and taxes on a monthly basis, so there is generally a good bit of money sitting around in that account too.

tralfamadorian

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Re: How much do you keep in cash reserves for your RE portfolio?
« Reply #7 on: November 13, 2017, 12:26:28 PM »
I guess I'm on the conservative side compared to the other answers so far. I keep six month's PITIA in each property's checking amount. All maintenance and capex reserves (~20% of rents) is shunted to a joint savings account. If a property has capex on the horizon, then the amount to cover that is allowed to accumulate in the property's checking account as well.

I think I've heard too many horror stories about folks who lost everything in 2008 when the banks froze the HELOCs and credit lines of people with perfect payment and credit history. 

Enigma

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Re: How much do you keep in cash reserves for your RE portfolio?
« Reply #8 on: November 22, 2017, 07:08:40 AM »
I have a lot of units.  Also do not have a cash reserve.  I am trying to pay off all my investments as quickly as possible.  When something comes up I stop paying down debt and start hording cash to pay for the expense.  Leverage my excellent credit when needed for 0% ccards.  (Worst case)
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Dicey

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Re: How much do you keep in cash reserves for your RE portfolio?
« Reply #9 on: November 25, 2017, 11:00:41 AM »
We keep a LOT. Our newest rental has cost well over $2k in odd repairs in the last couple of months. We had to replace the a/c on another property because the neighbor complained that it was "too noisy" and the HOA agreed, possibly because he's on the board, bleck! Garage door springs broke on another property. Shit happens all the time. We don't worry about any of it because we have money in reserve.
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waltworks

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Re: How much do you keep in cash reserves for your RE portfolio?
« Reply #10 on: November 25, 2017, 11:19:30 AM »
I just sold my last rental but I had about $5k in reserves (all single family) for each one. That is probably excessive but I wanted to be able to easily handle a situation where an emergency repair is both 1) expensive, and 2) renders the home uninhabitable for some period of time and I can't collect rents.

Hope for the best, plan for the worst. You're already levered up pretty high (in most cases) with residential real estate. It does not take that much to have a real problem on your hands.

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clarkfan1979

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Re: How much do you keep in cash reserves for your RE portfolio?
« Reply #11 on: November 26, 2017, 01:21:39 AM »
I have two single family rentals. I typically have at least 10K per rental house and another 5K for personal expenses. One rental house is worth 360K with a 5K deductible and the other is 240K with a 2.5K deductible, but a 5K hurricane deductible.

I have listened to a few real estate podcasts in which 5K to 10K for a single family rental is kind of the norm. Anything over 10K is probably excessive.

MOOVN2MTL

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Re: How much do you keep in cash reserves for your RE portfolio?
« Reply #12 on: December 01, 2017, 02:20:35 PM »
I have three duplexes (i.e. 6 units) I own and manage the past 3+ years. Albuquerque is a LCOL area. I started out with putting aside 18% of gross rents until it got to an amount about what it would cost for a new roof (~$13K). Nowadays I  still put aside the 18% per month, but 1-2 times a year take a big "owners draw" on what the remaining amount minus a $5K buffer. I still have the roof money in my investment portfolio somewhere, if needed. My houses are older (1950's -1960's era) and the largest single bill so far has been $4000 for new underground piping (not unexpected). Tho one will need a roof soon.

Just my method, but I feel very good about how it works so far.