Cash Reserves With Multiple Properties

[Matthew Hartman]

I've been browsing the forums for a little while today because I have a question which I've not yet found a clear answer to here, or elsewhere.

I've heard various wildly different rules of thumb for how much of a cash reserve one should keep around to handle expenses on a rental property. One thing I've never heard much information about is how the appropriate cash reserve should change if you have multiple rental properties (or have other cash accounts for various reasons). Afterall, having a lot of money sitting in cash is a hefty opportunity cost, and the chance of multiple properties needing a big expense at the same time is very small.

To give some rough numbers about my own situation, I am trying to use rental properties as one of my investments for early retirement.

Exactly  1 year ago I bought my first rental property, a duplex, for about 70,000 with a mortgage. The furnace is about 24 years old, the roof about 19. Both the roof and HVAC have had some recent improvements to extend their life a bit. Looking back on the year, my average for all expenses including the mortgage, insurance, taxes, repairs, and everything else was 600 per month.

I have been keeping 6 months of expenses in cash for that property, so 3600.

More recently, I bought my second rental property, a single family home, for about 50,000 with a mortgage. The furnace is about 23 years old. The roof is about 12. I've only had the property for a couple of months, but it looks like the average monthly expense will be about 400 + whatever the average cost of repairs turns out to be. (As a side question, I don't think I know a good way to estimate that in advance).

So if I were to keep 6 months of expenses in cash for that property, that would be another 2400.

My total personal monthly expenses are about 1000, and I've been keeping about 6 months of expenses in cash for that. So 6000.

And I also have a high deductible health insurance plan with an HSA with another 2000 in cash.

That would be a total of 14,000 in cash. That feels like a large amount to just have sitting around unproductively as cash. My whole portfolio is only about 175,000 in NW afterall.