When should I stop saving for repairs?
Hello,
I'm getting ready for my 1st property and I want to build a solid model for future investing. When do you stop saving for repairs? For example a 3BR 2Ba , I save 8% for CapEx and eventually I have $10,000 saved. Do I continue to save or stop and turn that 8% into added cash flow? Also, with more than 1 unit do you save 10000 for each unit? Or reduce the amt allotted for each subsequent unit as your total cash reserve grows? Ex. 1 unit-$10,000... 2 units-$17,500. Hopefully this is clear enough. Thank you, I'm really trying to figure this out.
I would make a list of future items that will need to be replaced. This list should include estimate cost, and year when to expect replacement. Now becomes a balancing act! How often do you want to re-carpet and paint the place? HVAC system goes out and that can be $7000. How fast can you refill your reserve cash when big ticket items come up? These types of questions you have to ask yourself and or know where you are getting the funds from. This is a timeline for repair items. I would always put money into reserve funds. You are always able to pull cash out at any time but its harder to put it back in once its spent.
@Jim Adrian Thank you for the input, do you know of any resources that list common repairs, timelines, and cost of replacement? I feel like there ought to be something out there like this. Something like a car maintenance schedule but for properties.
Brandon Turner covers that pretty well in his book on Rental Property Investing. I'm not sure if there is anything like it in the fileplace on here, but you can check.
Search the blogs for Ben Leybovich and capex and you should find his guide. You'll need to adjust his costs for your area, but the timelines should be accurate. You may also need to account for other items that are or are not common in your area
Here are some links I have found. You many want to spend some time googling. As for cost there is a RS Means Estimate guide, though its not free. Some of these things will cost the same as what you would do for your house.
Paint $1per sf, Carpet $4 per sf, Contingency 25%
https://icap.sustainability.illinois.edu/files/projectupdate/2289/Project%20Lifespan%20Estimates.pdf
@Peter Bowring, @James Stevens, @Jim Adrian
Hey thanks guys, I'm going to have to check out all these resources. I haven't checked the file share, completely forgot about it. Thanks Jim for going out of your way and finding some links. Do you all recommend Brandon Turners book as well?
I, personally, would recommend Brandon's book. I bought it the day they released it and I think it has a lot of great and helpful information.