Question about the vacancy allocation

[Tomer Shani]

Hello everybody! My very first BiggerPockets question: I know that the method that goes around here is to save anywhere between 5-10 percent for vacancy each month. I was wondering, if I managed to save 6 months in operational funds should I still be allocating money for vacancy? In other words, how much money aside is enough for vacancy? #askBP Would love to hear your thoughts!

[Andrew Johnson]

@Tomer Shani I wouldn't worry about taking on multiple mortgages. What I always try and do is have depreciation and mortgage interest match (ideally) my net income. Bottom line, I don't want to pay taxes if I don't have to. It never works out over the long run because the portion of the mortgage that's "mortgage interest" declines and rents (hopefully) increase but it, at the very least, lowers your tax burden. Now if there's some kind of debt-to-income issue then I can see paying it off. If there's no DTI issue then I wouldn't be eager to pay off a mortgage. And, not for nothing, but Yellen keeps talking about rate hikes in the future. I have no clue if there will be another one this year, one next year, three next year, etc. but it's probably not "zero". With the mortgage you have now I'm guessing you've locked in "cheap money". Don't be so eager to pay back "cheap money" that doubles as a tax benefit. My two cents...

Although I'm the guy who has "dead money" that sitting in a bank account so I can "sleep at night" so maybe I'm the last voice you should listen to what it comes to using leverage...