Issues with investment properties

[Justin Loveland]

Hello everyone, new to this group, but have been investing in real estate for about 5 years now. Rented my house we originally lived in 12 years ago because we couldn’t sell it when we moved and that’s how we got started. 5 years ago we made a plan and an effort to accumulate multi family properties and did that. We own 7 properties as of today. Let’s get to the issues. 

Over the last 3 months we’ve spent $70k in rehab work.
1 property flooded, big storm across from the ocean we gutted it and it’s under construction 1 property had a lead incident, tenants ended up buying a house and we’re abating the unit. 

My question is have other members dealt with these same type of issues? We have the reserves to cover, but I don’t like keeping over $100k in cash reserves. Do most people have hundreds of thousands of $$ just lying around waiting for these things to happen? My wife and I both work full time and as of last month I’m managing my own properties. Easy way out is to sell the investment properties, payoff our house and sit on a pile of cash. We did this all ourselves with our own funds for down payments. 

[V.G Jason]

Quote from @Justin Loveland:

Hello everyone, new to this group, but have been investing in real estate for about 5 years now. Rented my house we originally lived in 12 years ago because we couldn’t sell it when we moved and that’s how we got started. 5 years ago we made a plan and an effort to accumulate multi family properties and did that. We own 7 properties as of today. Let’s get to the issues. 

Over the last 3 months we’ve spent $70k in rehab work.
1 property flooded, big storm across from the ocean we gutted it and it’s under construction 1 property had a lead incident, tenants ended up buying a house and we’re abating the unit. 

My question is have other members dealt with these same type of issues? We have the reserves to cover, but I don’t like keeping over $100k in cash reserves. Do most people have hundreds of thousands of $$ just lying around waiting for these things to happen? My wife and I both work full time and as of last month I’m managing my own properties. Easy way out is to sell the investment properties, payoff our house and sit on a pile of cash. We did this all ourselves with our own funds for down payments. 

 They don't, but they'll learn to if they have a decent size portfolio. Especially nowadays with the cost of capital so high it makes even more sense to cause you're getting 4-5% to hold it, and not having to loan it at 10% when you're stuck.

 Everybody needs to keep 75%-100% of capex set aside, and about 6-12 months of rent payments aside. That is per property. If you don't believe me, face a downturn and I'll be there to buy your property cause you're not equipped. And you likely haven't faced life on a downturn, it all comes down at once and it's kind of correlated professionally and personally. 

The solution to your problem is to start paying down your properties, by selling 1-3 of them to pay off the others and have a healthy pile of cash then hire a PM. Keep 3-4 houses and have them mortgage free. You'll always be liquid, less capex exposure, and you have more of your time. but if your ego insists you keep 7, then make more money and spend more time with this.