Rule of thumb on what to have in the bank?

[Eric P.]

Lets say I buy a $100k home I plan on renting for $1000 a month.  All my expenses as an owner are $650 a month.  I leave extra for a property manager, vacancies and cashflow..  Is there a rule of thumb on how many months worth of bills I should have extra in the bank?  Like 6 months worth of bills in case of a bad tenant and vacancies + $5,000 for emergencies or something.  Whats a good number to plan for to start with?  Maybe like 20% down on the house, 5% for surprises, and 5% for potential vacancy?

[Jon Holdman]

Six months PITI is the minimum. That's typically required by lenders. I think six months rent is a big safer. But also consider what sort of big, sudden bill you might have. For instance, the $6200 in costs I had a couple of years ago for replacing a sewer line.