Read Part 2: Doing The Math

Now, for the tricky part: How do I fund the account?
The answer is simple to say, but hard to execute. Here are a couple of methods to get the cash for an emergency fund:

  • Set a budget within your monthly income and expenses, and save up the money.
  • Sell a property, and save the profit.
  • Manage the properties yourself, and set aside 10 percent of the monthly rental income (in lieu of hiring a property manager).

Remember to rebuild

The goal is to keep at least a minimum amount in your account at all times. If you draw on these savings, or go below this minimum threshold, be sure to rebuild it as fast as you can.

If you own quite a few older properties, if you typically have vacancy rates of20 percent or more) or if you are just risk averse, you should consider changing the calculation to cover six months of expenses-essentially, doubling your emergency fund.

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