What’s your magic emergency/oh crap/oops it’s broken fund per house?

[Amanda Sutherlin]

$3K? $5K...$10K? How much per house do you set aside for an emergancy, evections, something broke?

[Mike H.]

 I think that a reserve fund shoudl be more than the number of houses. I would suggest that if you only have 1 or 2 houses, you still need 10k to 15k in the bank or available credit in a credit card to cover a disaster.  That is 5k to 10k per house.....

But if you have 20 houses, you don't really need 100k to 150k in the bank or credit card access.

To me, once you get over a certain number of homes, 50k should be more than enough of a reserve to cover yourself.   Banks don't ask for 6mos of reserves any longer once you start going with portfolio loans. They just want to see adequate reserves to cover a sky is falling scenario. 

And keep in mind, if you have over 20 houses, you should be seeing net income of at least 4 or 5k a month. Ideally, it would be 6 or 7k a month. So even if you have to replace a roof every month for a year, your profits from your rentals will take care of that and you shouldn't have to dip into your reserves at all.

Now, in a given month you may have a roof, furnace, 3 water heaters and a partridge in a pear tree hit. Then you may have to dip. But the profits from the following month should allow you to replenish those funds again.

So I do think that your reserves is more of a sliding scale instead of a per house number. Unless, of course, you're still getting conventional loans as they absolutely would require the 6 month rule and then you know thats your minimum number.

But here is how I would bracket reserves:

1 to 3 properties - 15k
4 to 7 - 20k
8 to 12 - 30k
13 to 20 - 40k
20 or more - 50k

At some point, if you are in the 40 or over category, then you probably would want to have more than 50k in the bank. Or some banks might ask why you haven't been able to grow your reserves at all given that you're making 5 to 7k a month in profit....

But in terms of safety, I would feel pretty comfortable with a 50k reserve after 20 houses - provided you are making a reasonable profit on those homes as well.   Over any 6 month period, you should never have to go below that 50k number at all. At least not for anything operational.   You might take some money out for additional investments but your investing is now a self-feeding operation.