I thought the fact that we don't put any of our $$ down is a good thing,
we get to continue building the cash reserves, while locking in a very low interest rate?
Being unable to afford the down payment is an immediate indicator that you're undercapitalized. Rental properties can unexpectedly become very expensive despite our best efforts to do due diligence and choose good ones. Case in point, I closed on a property this year that cost me triple the original repair estimate through no fault of myself, my contractor, or my inspector. Shit just happens sometimes, and it's as likely to happen on day one of year one as it is many years down the road.
I am guessing that you might be in your 20s or maybe early 30s, and missed the housing meltdown in 2008 or 2009. The constant message of "put little or nothing down and refi in a few years" is the one that left millions in foreclosure. The reason we suggest having a good amount of equity AND cash reserves left over is to be able to weather this kind of adversity. Going in with zero down and scant reserves might go fine... but under the right (wrong?) circumstances, it could ruin you. Also, in this specific instance, the extra interest will only make this property more cash flow negative than it already is.
Does everyone here build the equivalent of 6 month cash reserve before purchasing a property?
I'm certain not everyone does. It's just a good rule of thumb, and it's one that lenders will enforce after your fourth financed property, too.
Should we stop contributing to the retirement accounts and focus on accumulating cash faster ?
We have contributed the maximum to all retirement accounts for the past 4 years.
Personally, I wouldn't. In your shoes I would take my time in building my reserves, read everything I could find on landlording, and probably consider investing out of my area.
In our market, I can't see finding a better deal right now.
We want the property to be close to us, within 30 min from our house.
This may mean that there aren't any viable rental opportunities in your market. I know how that is, my area is the same (and it's why my rentals are all many states away). It doesn't mean that you should make a poor investment just because poor investments are all that's available, though.
Iamlindro, the mortgage of $1617 includes the taxes and insurance.
Insurance quote was for the specific property, obtained from my agent and the taxes already reflect the fact that property is not owner occupied.
Right, so my suggestion would be to have a reserve of $9702 in the bank as an absolute bare minimum
after making a down payment, paying closing costs, and paying for all expected up-front repairs.