#257: Rental property cash reserves: How much is enough? [Ask Coach]
Real Estate Investing with Coach Carson
Chad Carson
4.9 • 613 Ratings
🗓️ 7 October 2022
⏱️ 15 minutes
🧾️ Download transcript
Summary
Episode #257 - What if you don't get rent for 1 to 4 months? Or you have to replace your roof which costs thousands of dollars? How much cash reserves is enough to give you peace of mind and not go bankrupt? That's the question Coach Carson tackles in this edition of the Ask Coach Podcast.
Show notes (with transcript and links): https://www.coachcarson.com/enough-cash-reserves/
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Transcript
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| 0:00.0 | So you've got a rental property or you're about to buy a rental property, but there's something in the back of your head that's bothering you that you know things can go wrong. Maybe you won't get rent for a month or two or three or four, or maybe something will break, like you have to replace the roof and it's going to cost thousands of dollars. The bottom line is you know that you need a cash reserve. The question is, how much do you actually need for a rental |
| 0:22.3 | property? That's the question I'm going to answer in today's edition of Ask Coach, and we're |
| 0:26.0 | getting started right now. Welcome to the Ask Coach edition of the podcast. I'm your host Chad Carson. You can also call me |
| 0:40.3 | coach, and this is a show all about helping you get out of the financial grind so you can do more |
| 0:44.6 | of what matters. In the Ask Coach editions, where I do my best to answer your burning questions |
| 0:48.9 | about personal finance and real estate investing. Today's question came from a YouTube user named |
| 0:53.8 | keeping it super simple, and the question was very simple's question came from a YouTube user named Keeping It Super |
| 0:54.8 | Simple, and the question was very simple. How big a reserve do you need? I'm going to share |
| 1:00.1 | some very specific numbers and approaches that I use to saving money for cash reserves in my real |
| 1:04.6 | estate investing business, but I want to start off with a brief story to share why you actually |
| 1:08.9 | need cash reserves in the first place. And I want to take |
| 1:11.4 | you back to 2007 in my own real estate investing business. I had just begun in 2004 with a business |
| 1:17.4 | partner. I was 27 years old in 2007. And the first couple of years of our business, we grew slowly. |
| 1:23.2 | But by 2007, we bought a lot of properties. We actually had 33 closings in one year. Some of those |
| 1:28.5 | were flips that were making money just to put food on the table. Some of them were long-term buy-and-hold |
| 1:32.7 | rental properties. Well, the problem was, it was 2007, if you know your economic history, |
| 1:37.5 | was right before the Great Recession. So brilliant us, we decided to grow very fast right before |
| 1:43.5 | the recession. |
| 1:45.9 | Now, not all of that was bad. |
| 1:50.7 | We made a lot of money on some of those deals and we set a lot of that money aside and reserve accounts, |
| 1:51.9 | which I'll get back to in a moment. |
| 1:57.0 | But the negative thing was because we grew so fast, because we were new, inevitably we made mistakes. |
... |
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