Stockpile cash/cashflow rentals

[Marcus Daniels]

Hello BP,

Newbie here..So I noticed that quite a bit of folks hold a stockpile of cash for each rental property that they have to be safe.  Say you buy a reasonable priced home that's in fairly good condition low maintenance and you have 20k stockpiled specifically for that home for emergencies vacancies and so forth.  On top of this stockpile do you still take a good percentage from the income that property is producing and set aside money for vacancies, repairs, cap ex, etc or do you adjust since you have so much stockpiled and maybe fill it up once that money goes below a certain threshold.

[James Galla]

An emergency fund is different from capital expenditures and the other expenses you listed. Naturally, with those items, you may hold on to them, but you are eventually going to get rid of them after the rental term. There is not really a reason to build your emergency fund beyond the standard thresholds you've deemed appropriate. In other words, if your emergency fund is $20k, you will still collect the capital expenditures, repairs, etc, but by the end of the fiscal year, your emergency fund should return to normal. If you kept collecting, you would eventually have a $100k/disproportionate emergency fund where it would not make sense.