Question on reserve funds

[Barry Harsa]

Hello, I'm just starting out and looking to buy my first property. One of the things I haven't found an answer to is, should I maintain an "oh ****" fund? Meaning a fund to cover any unexpected cost that may arise and when you're new to this arena might kill you if you're not prepared. I have been thinking an initial reserve of say $5,000 would be adequate, but I'm not sure. What would those of you, who are more experienced suggest? Is this fund needed, what would be a logical amount to set aside for those of us just starting out. I do realize it depends on the property one is buying SF, MF, etc. and with that in mind any input would be appreciated. Thanks.

[Ryan R.]

On my first rental, I went 3 months without a tenant (It was November-January). I had to pay $3,600 plus a few hundred to get it rent ready.

I like $5,000 as a reserve unless there is a large risk exposure; expected roof replacement, expected flooring costs etc. Surprise costs will come up, be ready.

Another tip, try to construct your leases so that they expire during the spring and summer. This may take the lease from a 12 month to a 15 month etc. but this will behoove you and your tenant.