Honestly do you?

[Aaron Junck]

Ok I am a small time investor , for now :).

My question is pretty simple. What do you keep in reserves? I know everyone says typically 3-6 months and if you want to be really safe go 12+months.

1. What do you really keep set aside? Do you do a percentage and then once you reach that amount then you quit funding the reserves?

2. I assume you do this for every single property, correct?

3. Once you build up a large enough portfolio do you look at all your holdings' reserves and set an amount off of that?

4. Example:

Gross Monthly Rent: $1000

Payment: $270

Taxes: $100

Insurance :$40

PM:$150

Vacancy:$90

CAPEX:$100

Repairs:$100

Maintenance:$50

Net Cashflow:$100

For this standard scenario what would your reserve fund look like, and when would you stop funding it to start putting your money to work for you? What I am asking do you at the end of the year only decide that you have $1200 to fund new investments or do you say once your reserve account has say $4,000 in it you stop adding to it the vacancy, CAPEX, repairs and maintenance amounts? Therefore adding an additional $340 a month to invest in more properties?

I would think starting out you need a good cushion incase something does happen, however there has to be figured in opportunity cost by having a pile of cash sitting there. What have you felt works best for you? Once your portfolio has many properties your risk can be spread across the board, therefore it doesn't make sense to have 30 properties and $4,000 for each sitting there does it?

[Pete T.]

I think its a matter of comfort, but as @Duncan Taylor mentioned, it can all come at once. I had one month that was about 10k as 4 (yes 4) different HVACs failed/installed, a staircase rebuild, and plumbing issues.