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of course this depends. Is there a mortgage to be paid or is the house free and clear? What is the property tax situation? what type of lease? Let us assume the most basic scenario a single family residential home with a fixed mortgage with escrow for taxes and insurance. Let us also assume the property (you live in your home and this is an investment) is fully repaired, recently renovated and you are starting from square one with your first tenant just after all bills (taxes, insurance, water, sewer, electric, contractors, liens, et cetera) are paid and the tenant is taking full responsibility for all utilities including water. As long as the market bears monthly rent that equals or exceeds the payment of the mortgage (deed of trust), your expected first month of repairs should be near zero. So, nothing would be needed in reserve. However, long term or more realistic situations than the ideal described, you should expect tenants to be late on the rent and even skip out in the middle of night two months behind with substantial repairs needed. A prudent approach is to expect to have make three mortgage payments out of your reserve (a reasonable length of time for proper eviction in many areas) and two major system replacements (i.e., heat and roof) in the same few months.

Though, the best advice I have to offer is this: If you have to ask this question in this type of forum, you should probably not be renting property. Consider working for a property management company part-time (evenings, weekends, on-call) and get a feel for the headaches and emergencies. As a bonus, late rent stories are the best song and dance shows around. It is amazing how creative tenants get. After a few months you will likely consider putting cash in the mattress instead of real estate.

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Q: How much total reserves should you have for rent houses?
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