Skip to content
×
Pro Members Get
Full Access!
Get off the sidelines and take action in real estate investing with BiggerPockets Pro. Our comprehensive suite of tools and resources minimize mistakes, support informed decisions, and propel you to success.
Advanced networking features
Market and Deal Finder tools
Property analysis calculators
Landlord Command Center
ANNUAL Save 54%
$32.50 /mo
$390 billed annualy
MONTHLY
$69 /mo
billed monthly
7 day free trial. Cancel anytime
×
Take Your Forum Experience
to the Next Level
Create a free account and join over 3 million investors sharing
their journeys and helping each other succeed.
Use your real name
By signing up, you indicate that you agree to the BiggerPockets Terms & Conditions.
Already a member?  Login here
Multi-Family and Apartment Investing
All Forum Categories
Followed Discussions
Followed Categories
Followed People
Followed Locations
Market News & Data
General Info
Real Estate Strategies
Landlording & Rental Properties
Real Estate Professionals
Financial, Tax, & Legal
Real Estate Classifieds
Reviews & Feedback

Updated over 7 years ago on . Most recent reply

User Stats

83
Posts
42
Votes
Adam Ulery
  • Investor
  • Safety Harbor, FL
42
Votes |
83
Posts

What to do about cash reserves for big apartment deal?

Adam Ulery
  • Investor
  • Safety Harbor, FL
Posted

Hi BP family! I'm preparing for my future goal of owning an apartment. I have a question about cash reserves. How do I handle ensuring enough cash reserves for an apartment when I don't have a large amount of capital? My plans for purchasing a large apartment would involve raising capital, leveraging a commercial loan and seller financing. I will contribute as little personal capital as possible. I'm scaling up outside of my current comfort zone so, relatively speaking, I won't have a lot of cash reserves in case something goes wrong; I'd love some feedback about how to overcome this challenge.

 I recently purchased a duplex that needed rehab. I found more problems than I budgeted for and if I didn't have enough cash reserves (thankfully I do) then I would be in a bad situation right now. If this were 20 units instead of 2 and I had expenses proportional to my current costs, I wouldn't be able to cover them. Granted I've learned many lessons on this deal that I will apply to future ones, but even experienced investors run into unforseen problems. What strategy should a new apartment investor consider to protect himself?

Thanks for any comments from experienced large multifamily to help me prepare!

Most Popular Reply

User Stats

2,055
Posts
1,387
Votes
Jeff Greenberg
  • Real Estate Consultant
  • Camarillo, CA
1,387
Votes |
2,055
Posts
Jeff Greenberg
  • Real Estate Consultant
  • Camarillo, CA
Replied

As a part of the raise you need to ensure that you budget for cap reserve, closing costs, funding the operating account, first years insurance, utility deposits, and other contingencies.  Getting caught short at the last minute can ruin your day, and deal.  A week before closing, I had a lender tell me that he wasn't going to give me the 80% ltv that he had put in the term sheet, but changed it to 75%.  In addition to having to come up with 5% for the down, he also told me that I needed to have $1000 per door capex reserves in his bank at close.  I had budgeted for $500 per door and had to scramble for both of these changes.

Loading replies...