BRRR | How much reserves you need?

[Krystof Pilisiewicz]

Hi, I am in the middle of working on finances for a purchase of a multifamily house in Queens, NY. I`m planning to move out from my current place and move to the new house. I was speaking with my bank and they told me that I need 2 reserves (6 months each) for the new house and the current house. This doesn't sound right to me, since why I need to have reserves for a house that I`m already living in. I thought I need reserves just for the new house. I wonder if this is a standard requirement when comes to BRRR.

Thanks, guys!

[Michael Swan]

Let's also think deeply why you need to have reserves.  I suggest people that have only one or two rental properties to have at least $10,000-$15,000 in reserves for when Murphy's law raised its ugly head. 

It is not if, it is when.  I have 122 front doors and in the 7 years I have been investing in rental properties have had 3 residents die, others trashed a few, bankruptcy, 1/2 of a roof blow off, inefficient Property Management letting slow paying tenants payoff debt too long and need to evict, an OD in the unit (prescription drugs opiod epidemic), plumbing issues (water goes down and the units below have damage too), mistakes by section 8 or other government assistance organizations, the city coming by and citing for shingles on roof starting to look weathered, but no leaks and required to replace entire roof, Furnace or boiler go bad etc....

You can NEVER have too much in reserves.  To be forewarned is to be forearmed.  One who fails to prepare, plans to fail!!!

Swanny