"Safe" amount of money before purchasing

[Chris Chesser]

What is (generally speaking) a "safe" amount of cash to have set aside for expenses before entering into a first deal? In my area I can find 3-4 unit properties around $120K (smaller town) so, obviously on an FHA loan 3.5% would be $4,200 + any closing costs. I'm trying to figure out a timeline for myself, on a meager 38K income, to get the ball rolling for buy & hold rentals but don't want to hamstring myself when the inevitable unforeseen expenses occur. I intend to house hack the future property. Any help is appreciated!

[Daniel Hanson]

@Chris Chesser

I'd simply say that you should calculate 2 levels of reserves.  1 level for when you have just bought it and there is the most risk of rent loss and rehab overspend.  Once you are fully rented and have completed any rehab or upgrades, your risk should go down.

A second level of reserves, probably lower than the first level, after you have the property operating steadily.  For that as a quick comfort level I like 3 months of rent saved, but I do a detailed calc looking at building a fund for predicted replacements of things like roof, furnace, any other item over $500.