Cash Reserves

Hi folks,

I’ve been offline for a while. Can you give me your thoughts on a solid number for cash reserves? I realize we’re buying at a discount, OPM, etc. But, we still need cash for repairs, to cover missed rents, unforseen events, etc.

3 months - 6 months rental per unit in cash reserves?


My mortgage company requires 6 months of PITI, but that is usually around $3 or $4 thousand dollars. When I buy the houses, I finance in the fix up costs along with the purchase. I use that as an opportunity to make the property first rate. I install new appliances and make everything perfect. That means you don’t do any repairs. If the applainces break they are under warranty. If the tenant tears something up (like flush a hair brush down the toilet) I use his deposit to fix that. I don’t really start seeing repairs until year 3. I sell in year 4.

Including repair cost what is the total % of market value do you take out a loan for?

When you use the tenants deposit, do you get another deposit since he has already caused X dollars in damage?

This is on moveout. In the lease there is a clause that talks about tenant pays for repairs below some amount. In that section I have the tenant pay the copay on the home warranty $50 with BFS home warranty that covers most of this stuff.

Wow, how do your tenants feel about paying the co pay? An interesting point. I had planned to add it into the rent, so they aren’t seeing it as a separate bill. So if my rent rate range is $400-450, guess how much the tenant is paying. There ya go.

I haven’t had a problem with it in the last 2 years. My rents range from $950 to $1150.