A good rule of thumb is that your DCR is the amount that your gross rents can come down and you can still break even. So with a DCR of 1.2, your rents can come down 20% and you will break even on cash flow.
There are two totally different budgets running at the same time when you buy a property and manage it:
1. Operating budget: property taxes, small maintenance repairs, property management, insurance, marketing, bookkeeping, legal, utilities.
2. Capital budget: these are the big ticket cyclical expenses. Roof replacement, driveway, windows, furnace, fence, exterior, mechanical upgrades. Unless your property is brand new you are going to need a capital budget.
The right amount of cash in your account could be $0 if you are comfortable providing cash calls to your property. I don't really see any rigorous discussion on this forum regarding capital budgets. All I seem to see is regarding before tax cash flow = NOI - debt service.
My over leverage evaluation starts with a robust budget exercise:
1. Operating budget: even if I am providing my own PM, I charge out the fees to the property when performing a financial analysis on it. Operating budgets need to be based on actuals and should be a line by line build-up budget. Maintenance line is not going to be 5% of gross revenue, it is going to be determined by the upcoming small maintenance items for the property. From there I take a look at the before tax cash flow of my portfolio.
2. Capital budget: I update my inventory of cyclical repairs. I code each one: U=urgent, N=needed, R=recommended, W=wanted. Some cyclical expenses need to be done (furnace) while some can wait a year until there is more cash available (windows). Other enhancements may provide an enhanced tenant profile and help to protect the investment longer term (going from low quality laminate to luxury vinyl tile).
Before talking about leverage you need to really understand your numbers. 20% equity minimum before you know what you are doing is a pretty safe starting point. If you are the investor-owner, you need to look at the actual cash in account after tax and after cyclicals / capital budget and ask, "when do I get my money back?" Personally, I think it is really amateurish to have a portfolio that constantly needs cash calls, but that may be some investor's preference.