The Power of Operating Reserves: A Crucial Yet Overlooked Strategy

By Mark Kenney | Think Multifamily

In multifamily, operating reserves are your oxygen.

When you’ve got enough, things feel normal.
When you don’t, you’re gasping, and it happens fast.

We’ve seen it too many times:
A deal looks promising on paper… until something goes sideways, and there’s no cushion.

Real Story

We’ve watched solid deals spiral because the reserves were too thin.

It didn’t take much:

• A surprise 5-figure insurance increase
  

• A steep jump in property taxes
  

• A string of unexpected maintenance hits

Without margin, even small shocks trigger big reactions: capital calls, paused distributions, or worse, forced exits.

What’s the takeaway?

Cash reserves aren’t a luxury: they’re a defense plan.

Deals with breathing room survive.
Deals without it? They suffocate the moment something breaks.

Practical Moves:

✅ Fund 6–12 months of expenses upfront

✅ Refill your reserves regularly, not just when it’s easy

✅ Don’t dip into reserves for distributions: treat them as off-limits

Bottom line:

This market doesn’t forgive unprepared operators.

Make reserves a non-negotiable part of your strategy. Or prepare for a rude awakening.

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