Too much in reserves?

[Tony Matthews]

My initial plan is to have at least 6 months of PITI in reserves as part of my initial expense for a newly acquired property. On top of that, my monthly capex expense and vacancy expense will be added to these reserves.

So my reserves would = 6 months PITI for all properties + all capex and vacancy monthly accruals from all properties from all time - all capex and vacancy spend.

If I had an expenditure that dropped me below 6 months of reserves, I would take money from my savings for my next investment to put me back at that level.

Thirty-seven (two) part question, to which I understand has no right answer. Wondering what you do:

Do you keep your reserves for each property separate, or have one big pot of reserves for all properties?

Do you just keep adding capex and vacancy expenses to my reserves in perpetuity, or stop if you get to 12+ months of PITI of $10k over 6 months PITI?

[Mike Sattem]

@Tony Matthews,

@Account Closed are both correct on this. Don't get too hung up on having tons of cash ready before you purchase your first property. However, once you do get started lenders will require reserves in the bank to lend on new properties (most lenders require 3 months PITI if you have less than 6 properties, and 6 months PITI over that), and things will break in your properties. The fastest way to becoming a slumlord is to spend all your CAPEX money on personal bills.

Also, I keep all my reserves in one savings account for ease of management. I have a tracker for what expenses are being paid on each property, but found that having 6 savings accounts was a major pain in the butt, so I downsized.