Rental Property EF Question

[jd2005]

I'm turning my house into a rental. I have relocated because of work, and cannot sell. I don't mind this as it was my long term plan anyway. I already have one rental property so two should be ok.

How much do you keep in your rental property emergency fund? Do you have one lump sum for all your rentals (if more than one) or do you allot different amounts depending on the size of the rental?

I am debating whether to: 1) place enough in the EF to cover the expenses of each rental (i.e., HOA fees, loan payments if any, electricity and gas) for 2 or 3 months; 2) have $500-1k for each rental representing estimated repair costs; or 3) both.

What do you Landlords have?

[Deleted]

I have enough in my EF to cover all expenses for 3 months but that includes the amount I put away for repairs every month.

[Tiny]

I'm a newbie 'landlord' (almost a year!) - I made sure I had 3 months of expenses in savings as an EF at the closing... in addition to what I needed to get it up and running. I currently have 5 months of expenses and stopped 'feeding' this account this month. I'm thinking I'll review the EF size if/when my tennant renews their lease in a couple of months. I'm leaning towards putting it at 3 months expenses and re-allocating the rest to something else (maybe start a DP fund for the next rental... )

[phil5185]

We keep enough to pay the mortgage for 3 months OR buy a new $4000 AC unit (Arizona). When we added more houses we kept the EF the same, didn't add more for more houses - the idea being that the probability of 2 or more houses having vacancy or an AC failure at the same time was low.

[Deleted]

Keeping in mind that Phil has other cash in his investments that he can tap.

[phil5185]

other cash in his investments that he can tap

LOL - we do now. In 1980 when we had 4 houses with 6 mortgages, probably not.

[Deleted]

So you did not have any money in taxable accounts in the 80s?

[phil5185]

So you did not have any money in taxable accounts in the 80s?

Well, if we had any money at all, that's probably where it was. The IRA and the 401k were not yet invented. I think we had some individual stocks. The SP500 Index Fund was invented in 1975 but I don't remember when we got one. And Spiders started in 1993, had one of those when they started.

[jd2005]

Thanks guys! I too have other cash I can access if needed. What I am trying to do is allocate a "proper" amount to an EF for my rentals. I am about to own one property free and clear (I know you disagree Phil). I guess I will shoot to have $3-4k in the EF for my new rental.

Thanks!

[Deleted]

I've allocated 3mos of expenses per property in addition to our own EF. I do keep up on the maintenance of each house and normally do one capital improvement per year. But my "surprises" last year were a new hot water heater $1,500 and a new window (double paned window lost its seal) $500 for the SF Bay Area house. The year before I had to tent for termites in my San Diego County Area house and it took 3.5 months to rent out my personal residence in AZ before we moved to Germany. I had never had a vacancy in any of my rentals before.

I can't wait to see what surprises are in store for me this summer when I go back for my annual visit.