Cash Reserves: When Is It Necessary?

[Vince Espiritu]

Hi BP members,

I am currently saving some capital to finance my downpayment and closing cost on my first property. I'm planning to purchase a single-family house or small multifamily then househack it. My question is: How necessary it is to have cash reserves on getting my first deal? If it is necessary, should I have 6 months, 3 months cash reserves? What is the minimum amount that I should reserve on this?

It would take longer to get my first deal if I wait to have the full amount for a down payment, closing cost, and 6 months' cash reserves. Since I am planning to acquire an FHA 203k loan, the cash reserves are the most expensive part of my starting capital. What I am thinking is I can come up with at least 2months cash reserves then purchase my first deal. I can then save up more later to have enough money for 6 months' cash reserves.

I would appreciate your answers! Thank you in advance!

-Vince