The reserve rule I hated setting up is the reason I still own the fourplex

When I funded the SDIRA two years ago I set an arbitrary rule that felt over-cautious at the time: eighteen months of full operating costs in cash inside the account before I'd spend a dollar on a purchase, and I wouldn't let it drop below twelve.

Meant I bought a cheaper building than I wanted. $228,000 instead of the $265,000 one I actually liked, and I sulked about it for a while.

Then this spring: sewer lateral collapsed under the driveway, $9,400. Two units turned in the same six weeks, $4,100 in make-ready and about $3,800 of lost rent. Insurance renewal jumped 31 percent, another $1,100. Roughly $18,400 of unplanned cash out inside four months.

I paid all of it from the account, on time, with the correct forms, and I never once had to think about whether I could write a personal check. Account bottomed at $11,900 and it's back to $19,600 now.

If I'd bought the $265,000 building I'd have gone to zero cash in the IRA sometime in April, and the only levers left would've been an annual contribution I'd already partly used and a fire sale of a building in the middle of a turn.

What I'd keep: the reserve floor as a hard number, not a feeling. What I'd change: I'd set the floor as a percentage of replacement cost rather than months of operating expense, because operating expense doesn't predict a sewer lateral.