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How much $$$ do you keep as an 'emergency buffer'?

Discussion in 'Property Finance' started by KayTea, 17th Oct, 2015.

  1. KayTea

    KayTea Well-Known Member

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    I know that a lot of investors negatively gear their property(ies), or are slightly cash flow positive. So, that's got me thinking, how many people have a serious amount of $$$ as a buffer for emergencies - like big, unexpected repairs (that aren't covered by an insurance incident), or having an empty property that they need to keep paying the mortgage on?

    I'd love to know if, and how much, people have put aside, just in case they need it. Or, if you've been hit with a unexpected, expensive incident that you didn't have the funds available for - what did you do?
     
  2. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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  3. Waterboy

    Waterboy Well-Known Member

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    Need at least $200,000 sitting in the PPOR offset account - need that buffer these days!!!

    Not only for interest rate hikes. What if you can't work, made redundant, become sick etc.
     
  4. Tony Fleming

    Tony Fleming Well-Known Member Business Member

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    Show off :) lol when I first started I was very wary I used to have at least 4 months in repayments for each loan available in case of a emergency. At the moment the cash flow helps me sleep better at night.
     
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  5. Ace in the Hole

    Ace in the Hole Well-Known Member Premium Member

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    The answer for us is - more than enough.
     
  6. Corey Batt

    Corey Batt Finance Strategist Business Plus Member

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    Why not have appropriate insurances to cover those events, and then invest using most of that buffer which will cover the cost of said insurances and then some?
     
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  7. KayTea

    KayTea Well-Known Member

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    Thankfully, I have a number of different insurance policies to help cover some of those little 'incidents', but WOW - $200,000…..

    How, as a newbie investor, do I manage to get (and keep) that amount of $$$ to be used only for emergencies? That's over 3 years net income……. (maybe I really don't need to eat……..)
     
  8. SeafordSunshine

    SeafordSunshine Well-Known Member

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    Corey,
    I like your suggestion about having insurance, however sometimes they take a while to pay,
    years ago, my solicitor said to me 'luvvy, a girl needs $40k in the bank'
    I nearly fell off my chair, however It has certainly proved excellent advice,
    eg. if a person were to be unemployed, it could take 6 months to find a new, suitable job....
    you certainly need a buffer, related to your SANF!
     
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  9. euro73

    euro73 Well-Known Member Business Member

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    I hold $10K cash buffer per property, to allow for up to 12 months worth of backside protection per property in the event of a dramatic change of circumstances, or loss of income
     
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  10. B-Man

    B-Man Well-Known Member

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    to answer your question im sure everyone keeps as much as they can.

    similar to waterboy (except not quite the $$ amount) all the extra funds to offset the PPOR are my buffer.
     
  11. KayTea

    KayTea Well-Known Member

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    Like you, @Waterboy and @B-Man, I am saving funds in an offset to my PPOR, for 'just in case'. I just don't know if I'll ever have enough - so I was wondering how much. $200K is never going to happen, so I'll just save what I can…….
     
  12. NicA

    NicA Member

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    I do this too - $10k/property :)
     
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  13. D.T.

    D.T. Adelaide Property Manager Business Member

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    If properties are c.f. + then the dynamics / requirements of a buffer changes imo
     
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  14. larrylarry

    larrylarry Well-Known Member

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    I have everything covered.
     
  15. KayTea

    KayTea Well-Known Member

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    Ok - so I'll aim for $10K, for 'just in case' funds. Pity - I was hoping to put that towards the next IP deposit…… :(
     
  16. Scott No Mates

    Scott No Mates Well-Known Member

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    That's why you have a LOC.
     
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  17. Waterboy

    Waterboy Well-Known Member

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    I actually have these insurance policies. I can't invest anymore without overstretching myself and increasing my risk appetite. At least it's offsetting my PPOR loan which gives me some 'return' (yield of 4%+, tax free), so it's not useless at all.

    These are very scary times to invest in additional property and shares.
     
    Last edited: 17th Oct, 2015
  18. KayTea

    KayTea Well-Known Member

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    I'm thinking of putting 'spare cash' into shares, rather than into another property. Like you've said, it is very scary times to invest, and I don't like the idea of being that vulnerable with another non-liquid asset in the near future.
     
  19. Tranquilo

    Tranquilo Well-Known Member Premium Member

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    With a LOC do you pay down and use ONLY if needed for investment purpose?
     
  20. D.T.

    D.T. Adelaide Property Manager Business Member

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    That's fine, as long as you blame the driver and not the vehicle for the investment returns.
     
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