Proper Cash Reserves

[Jordan Schrage]

Hello BP,

Alot of people talk about Cash Reserves but I haven't seen what that amount actually is. Is it 10k on 100k house 10% of purchase price. Is it the price to fix one huge problem? 5k for the roof so you keep 5k on hand. If you have 10 properties do you keep your same principle if you do the 10% of all your properties and you have 1 mil in assets do you go down to 50k in reserves?

What do you keep in reserves? How do you arrive at the number?

Look forward to your answers,

Jordan

[Lynn McGeein]

For loans 5-10, you'll need to show the lender 6 months PITI in reserves for all your property. It can be held in your 401K and still count. As far as cash reserves just for our own liquidity issues, we keep a separate cash savings account that holds our future down payment funds, and we use that for any excessive repair bills. The balance fluctuates depending on where we are at with next purchase, but minimum is never under $10K.