Newbie help! Leased my first 2 units - reserves & debt questions

[Kuriakos Mellos]

It happened..don't really know..but it happened! After several no's, being beat out by cash offers, going in above asking and not getting contracts, going thru HORRIBLE contractors, finally securing a property but realized it was a disaster and having to pull out, not being able to find a stable property manager and a million other things that happened during the last few months - I was able to leverage the fact I was home, get lost in Biggerpockets books and podcasts ( as well as other articles, news) and will now have two doors bringing me income starting next month.

Both of my properties needed work to get going, but I was very conscious of budget and tried to limit additional debt that I took on (although I put it on a 0% interest card) - to allow more funds for a potential future purchase of an investment property.  I leveraged my day job to pay as much of the costs with money coming in as to not 'fall behind'. (Debt makes me nervous!)

So two questions:

A) While I will begin placing vacancy funds and operating future funds in SEPARATE accounts for each property - what is a good goal to reach ? 6 months worth of PTI per property?  Is it wise to maybe put a little more in those reserves each month being that I do not necessarily really need the cash flow right now?  I think I had heard Brandon Turner say in one of his podcasts that he never goes below $50 K in savings for his properties. (I am assuming that is for multiple units - and obvioulsy he has been doing this for a much longer time.)

B) Do I use the first few months of cash flow to pay down the debt before pocketing it? Saving for future investments? What have you all seen as a normal amount of debt acquired to get a property ready for business? I definately was guilty of maybe making a few things too nice for renters, and something I will work on that moving forward - but as a ball pack is there a percentage that is used?

I truly appreciate the help! And your podcasts and comments have been great to read the last few months.

[Lee Ripma]

@Kuriakos Mellos

First off, let me be the first to congratulate you on taking action! That’s huge and starting will open the door to great things.

I own mostly smaller MF properties. I usually just put 5k in the bank for each property once it’s stabilized and leased. Then I’ll decide how much cash flow to take out each month after expenses and saving for capex and put that on auto withdrawal. That 5k is my capex fund if things go wrong but keep in mind that is for small recently rehabbed properties.

I would suggest actually taking out the cash flow monthly. You earned it. You can save it in a separate accoubt to buy more props or you can just spend it. I always love getting those checks/direct deposits monthly. Keeps me motivated that my hard work was worth it.

I wouldn’t pay down debt because the interest is likely pretty low on your loan.