One reserve for the portfolio or a funded reserve per house
Talking to two owners this month who run the same size portfolio and hold cash in opposite ways.
The first funds each house separately. Every property has its own account with roughly six months of PITI plus a capex line sized to that house's roof and mechanical age. He can tell you which house is underfunded on any given Tuesday. He also carries more idle cash than the portfolio strictly needs, because the four houses that will never have a problem this year are still each holding their own money.
The second runs a single pooled reserve sized on the assumption that four houses don't blow up in the same quarter. Less cash sitting still, more of it working, and one number to watch. The failure case is a hail event or a freeze that hits every house at once, since the properties are within nine miles of each other and the correlation he's assuming away is a weather map.
There's a third position I've heard from people earlier on, which is that a reserve is just delayed acquisition, and a line of credit against a property does the same job without stranding capital. That works right up until the moment the lender reviews the line, and lines can be reduced or frozen, which is worth confirming in writing with whoever issues it.
What is actually sitting in your accounts, and did you arrive at it on purpose?
How do you hold reserves across a small SFR portfolio?
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