Advice for first time landlord (reserves?)

Lender · Fort Worth, TX · Member since 2016 · 8k+ posts · 6k+ votes

1y

@Rafael Ro so, a single family home will have more cap ex/repair costs because things like roof and foundation are on the home owner but since a condo, yours will be lower (since the COA fees kind of cover those). So, I would use 15% for my complete expense ratio. Meaning, from my rent, I get 85% of the rent. Hope all of that makes sense.

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Rod HanksBusiness Member

Insurance Agent · Dallas, TX · Member since 2013 · 743 posts · 462 votes

1y

Congratulations and you would want to include 10% for repairs and 10% for vacancy. Hopefully the hvac roof plumbing and electrical are in good shape. But with so much that could go wrong on a rental, just curious why would you buy a property with negative cash flow on the purchase.

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Jonathan Taylor SmithBusiness Member

Rental Property Investor · Durham / Raleigh (Triangle), NC · Member since 2015 · 840 posts · 801 votes

1y

@Rafael Ro - You make money from rental real estate investing 5 ways, and positive cashflow is just one of the 5... I caution clients against purchasing negative cashflow properties, but it can make sense for a person with high income - especially if they'll save greatly on taxes and appreciation is likely to be positive over 3 to 5 years (2 more of the 5 ways). But that negative cashflow is normally AFTER considering reserves for: Repairs & Maintenance; Capital Expenditures; Vacancy and Property Management. If you're going to be negative $300/mo before even considering reserves, then you're really negative more like $600/mo - and that assumes you'll be managing yourself. If having to feed the property that amount each month is nothing to your finances, you've got existing cash reserves and you'll benefit otherwise (such as on taxes), then maybe it makes sense... But I might advise looking for something that is somewhat LESS NEGATIVE (if you cannot find anything that is positive in cashflow).

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Benjamin Louie

Property Manager · Erie & Millscreek PA | Maggie Valley & Haywood County NC · Member since 2024 · 264 posts · 118 votes

1y

@Rafael Ro Congrats on going for it!, Your numbers and expectations seem pretty realistic, especially for a first rental.

$2k a year for repairs is reasonable, but keep in mind some years you might spend a bit more if appliances or plumbing act up. Turnover of 4–6 weeks sounds about right if you price slightly under market and screen tenants well.

Also, don't forget about HOA surprises; sometimes they do big repairs or assessments that hit everyone. Make sure you have good landlord insurance to cover liability and unit damage.

Other than that, having a small monthly loss early on while you build equity, get tax benefits, and watch rents grow is totally normal. Just keep a little reserve for unexpected stuff; it makes everything way less stressful.

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Ken M.

Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes

1y

Quote from @Rafael Ro:

Hello all,

I'm about to purchase a condo at 240k, with 20% down, and $400 HOA.

This will rent at $1800, and my mortgage, insurance, property tax and HOA will be about $2000.

If I can own this property and lose roughly $300 per month for the first couple of years then I'll be happy (because I'll save some taxes, rents should keep going up, and I'm aiming for some appreciation too).

This is a condo - the setup is like a 4plex, where they all share a laundry room and each 2 units share a 2 car garage - I'd only own the 1 unit.

Now - **** can happen anytime and with anything - but realistically, what would you say is the expected performance? I've never been a landlord but I used to be a tenant and I barely had any repairs needed... I took care of the occasional small things. But what should I expect as a landlord?

Is it realistic to estimate maybe 2k in repairs on average per year? I'd also estimate 4-6 weeks turnover, every 2-3 years... but the rent I'm sharing is slightly under market so I should be able to rent quick and choose good tenants.

Anything else I should consider?

I take it you haven't read about what has happened with Condos in Florida? Why do you think California is immune? Maybe profit and expense mean nothing to you?

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Rafael Ro
OP
Member since 2020 · 52 posts · 14 votes
1y
Quote from @Ken M.:

Quote from @Rafael Ro:

Hello all,
I'm about to purchase a condo at 240k, with 20% down, and $400 HOA.
This will rent at $1800, and my mortgage, insurance, property tax and HOA will be about $2000.
If I can own this property and lose roughly $300 per month for the first couple of years then I'll be happy (because I'll save some taxes, rents should keep going up, and I'm aiming for some appreciation too).
This is a condo - the setup is like a 4plex, where they all share a laundry room and each 2 units share a 2 car garage - I'd only own the 1 unit.
Now - **** can happen anytime and with anything - but realistically, what would you say is the expected performance? I've never been a landlord but I used to be a tenant and I barely had any repairs needed... I took care of the occasional small things. But what should I expect as a landlord?
Is it realistic to estimate maybe 2k in repairs on average per year? I'd also estimate 4-6 weeks turnover, every 2-3 years... but the rent I'm sharing is slightly under market so I should be able to rent quick and choose good tenants.
Anything else I should consider?
I take it you haven't read about what has happened with Condos in Florida? Why do you think California is immune? Maybe profit and expense mean nothing to you?
I did not - what are you referring to?
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Ken M.
Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes
1y
Quote from @Rafael Ro:

Quote from @Ken M.:

Quote from @Rafael Ro:

Hello all,
I'm about to purchase a condo at 240k, with 20% down, and $400 HOA.
This will rent at $1800, and my mortgage, insurance, property tax and HOA will be about $2000.
If I can own this property and lose roughly $300 per month for the first couple of years then I'll be happy (because I'll save some taxes, rents should keep going up, and I'm aiming for some appreciation too).
This is a condo - the setup is like a 4plex, where they all share a laundry room and each 2 units share a 2 car garage - I'd only own the 1 unit.
Now - **** can happen anytime and with anything - but realistically, what would you say is the expected performance? I've never been a landlord but I used to be a tenant and I barely had any repairs needed... I took care of the occasional small things. But what should I expect as a landlord?
Is it realistic to estimate maybe 2k in repairs on average per year? I'd also estimate 4-6 weeks turnover, every 2-3 years... but the rent I'm sharing is slightly under market so I should be able to rent quick and choose good tenants.
Anything else I should consider?
I take it you haven't read about what has happened with Condos in Florida? Why do you think California is immune? Maybe profit and expense mean nothing to you?
I did not - what are you referring to?
Nothing to worry about. If you are not involved in Condos

https://www.youtube com/watch?v=r2lb8Bc4rxw
Insert a . so it's .com
0 Reply
Rafael Ro
OP
Member since 2020 · 52 posts · 14 votes
1y
Quote from @Ken M.:

Quote from @Rafael Ro:

Quote from @Ken M.:

Quote from @Rafael Ro:

Hello all,
I'm about to purchase a condo at 240k, with 20% down, and $400 HOA.
This will rent at $1800, and my mortgage, insurance, property tax and HOA will be about $2000.
If I can own this property and lose roughly $300 per month for the first couple of years then I'll be happy (because I'll save some taxes, rents should keep going up, and I'm aiming for some appreciation too).
This is a condo - the setup is like a 4plex, where they all share a laundry room and each 2 units share a 2 car garage - I'd only own the 1 unit.
Now - **** can happen anytime and with anything - but realistically, what would you say is the expected performance? I've never been a landlord but I used to be a tenant and I barely had any repairs needed... I took care of the occasional small things. But what should I expect as a landlord?
Is it realistic to estimate maybe 2k in repairs on average per year? I'd also estimate 4-6 weeks turnover, every 2-3 years... but the rent I'm sharing is slightly under market so I should be able to rent quick and choose good tenants.
Anything else I should consider?
I take it you haven't read about what has happened with Condos in Florida? Why do you think California is immune? Maybe profit and expense mean nothing to you?
I did not - what are you referring to?
Nothing to worry about. If you are not involved in Condos

https://www.youtube com/watch?v=r2lb8Bc4rxw
Insert a . so it's .com
That's fair. I can totally see that happening in CA too. It has definitely started. But the way I look at it (and please tell me if you disagree) is that I should be able to get this type of condo at a small discount - possibly at $220k or so - because it's been sitting for a while.

Can the market go lower? Sure. But how much lower? If it drops to $200k or $190k then it wouldn't be a game changer.

Obviously I would love the savings, but the monthly would be similar, and I believe in the area so I would expect that it will eventually go back up and then some, as long as I'm able to hold long term (which is my plan).

And of course there is a chance that it won't dip further and it will bounce up - there really is so much happening in this area, they're zoned for the best elementary in the area, and would make one of the cheapest 2bd condos too. Those units were selling for $250-275k within the last 6-12 months), and now you can see a few for $240k.

What do you think?
0 Reply
Ken M.
Investor · Get yourself trained before doing something inadvisable. · Member since 2024 · 3k+ posts · 1k+ votes
1y
Quote from @Rafael Ro:

Quote from @Ken M.:

Quote from @Rafael Ro:

Quote from @Ken M.:

Quote from @Rafael Ro:

Hello all,
I'm about to purchase a condo at 240k, with 20% down, and $400 HOA.
This will rent at $1800, and my mortgage, insurance, property tax and HOA will be about $2000.
If I can own this property and lose roughly $300 per month for the first couple of years then I'll be happy (because I'll save some taxes, rents should keep going up, and I'm aiming for some appreciation too).
This is a condo - the setup is like a 4plex, where they all share a laundry room and each 2 units share a 2 car garage - I'd only own the 1 unit.
Now - **** can happen anytime and with anything - but realistically, what would you say is the expected performance? I've never been a landlord but I used to be a tenant and I barely had any repairs needed... I took care of the occasional small things. But what should I expect as a landlord?
Is it realistic to estimate maybe 2k in repairs on average per year? I'd also estimate 4-6 weeks turnover, every 2-3 years... but the rent I'm sharing is slightly under market so I should be able to rent quick and choose good tenants.
Anything else I should consider?
I take it you haven't read about what has happened with Condos in Florida? Why do you think California is immune? Maybe profit and expense mean nothing to you?
I did not - what are you referring to?
Nothing to worry about. If you are not involved in Condos

https://www.youtube com/watch?v=r2lb8Bc4rxw
Insert a . so it's .com
That's fair. I can totally see that happening in CA too. It has definitely started. But the way I look at it (and please tell me if you disagree) is that I should be able to get this type of condo at a small discount - possibly at $220k or so - because it's been sitting for a while.

Can the market go lower? Sure. But how much lower? If it drops to $200k or $190k then it wouldn't be a game changer.

Obviously I would love the savings, but the monthly would be similar, and I believe in the area so I would expect that it will eventually go back up and then some, as long as I'm able to hold long term (which is my plan).

And of course there is a chance that it won't dip further and it will bounce up - there really is so much happening in this area, they're zoned for the best elementary in the area, and would make one of the cheapest 2bd condos too. Those units were selling for $250-275k within the last 6-12 months), and now you can see a few for $240k.

What do you think?
I would spend some time on Redfin.com looking at DOM (Days on Market) and reduced "asking to closing prices" to get an idea of what is going on in the area. If you are using a real estate agent, they can get that information for you. But, if prices are actually going up on closing amounts, you have to look at that too. These things can be market specific, and change quickly.
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Rafael Ro
OP
Member since 2020 · 52 posts · 14 votes
1y
Quote from @Ken M.:

Quote from @Rafael Ro:

Quote from @Ken M.:

Quote from @Rafael Ro:

Quote from @Ken M.:

Quote from @Rafael Ro:

Hello all,
I'm about to purchase a condo at 240k, with 20% down, and $400 HOA.
This will rent at $1800, and my mortgage, insurance, property tax and HOA will be about $2000.
If I can own this property and lose roughly $300 per month for the first couple of years then I'll be happy (because I'll save some taxes, rents should keep going up, and I'm aiming for some appreciation too).
This is a condo - the setup is like a 4plex, where they all share a laundry room and each 2 units share a 2 car garage - I'd only own the 1 unit.
Now - **** can happen anytime and with anything - but realistically, what would you say is the expected performance? I've never been a landlord but I used to be a tenant and I barely had any repairs needed... I took care of the occasional small things. But what should I expect as a landlord?
Is it realistic to estimate maybe 2k in repairs on average per year? I'd also estimate 4-6 weeks turnover, every 2-3 years... but the rent I'm sharing is slightly under market so I should be able to rent quick and choose good tenants.
Anything else I should consider?
I take it you haven't read about what has happened with Condos in Florida? Why do you think California is immune? Maybe profit and expense mean nothing to you?
I did not - what are you referring to?
Nothing to worry about. If you are not involved in Condos

https://www.youtube com/watch?v=r2lb8Bc4rxw
Insert a . so it's .com
That's fair. I can totally see that happening in CA too. It has definitely started. But the way I look at it (and please tell me if you disagree) is that I should be able to get this type of condo at a small discount - possibly at $220k or so - because it's been sitting for a while.

Can the market go lower? Sure. But how much lower? If it drops to $200k or $190k then it wouldn't be a game changer.

Obviously I would love the savings, but the monthly would be similar, and I believe in the area so I would expect that it will eventually go back up and then some, as long as I'm able to hold long term (which is my plan).

And of course there is a chance that it won't dip further and it will bounce up - there really is so much happening in this area, they're zoned for the best elementary in the area, and would make one of the cheapest 2bd condos too. Those units were selling for $250-275k within the last 6-12 months), and now you can see a few for $240k.

What do you think?
I would spend some time on Redfin.com looking at DOM (Days on Market) and reduced "asking to closing prices" to get an idea of what is going on in the area. If you are using a real estate agent, they can get that information for you. But, if prices are actually going up on closing amounts, you have to look at that too. These things can be market specific, and change quickly.
They're dropping. And they're sitting on the market for a while too, most for 50+ days (these used to sell at 250k within a weekend 2 years ago).

But how bad could it get? If I could lock one in at 225k or so, then would a further drop really make a big difference in my situation (a long term hold)?

I've been holding back for a couple of years, finding excuses.. and the truth is that my business is not doing as well this year so I would feel the potential loses harder... So I can name a few reasons why I shouldn't pull the trigger... But the reality of it is that I can afford this mortgage (unless if my income changes substantially) and in my local market this seems to be both a more affordable option and also a property where the costs are are close as I could find to the rent (without renovations and such). That's the reason I feel like it's a good opportunity for me.

"Lower risk" (because I can afford the payment, even though I'm of course hoping/expecting that my tenants will cover 80% of it), best return locally, without risky renovations (it's my first investment property so I would rather avoid doing too much), and finally a start as a landlord...
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Arman AhmedPro Member

Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 917 votes

1y

@Rafael Ro

Congrats on the first deal—sounds like you're already running the numbers thoughtfully. A lot of new landlords underestimate reserves, so it's good you're thinking about it. A common rule of thumb is to set aside 5–10% of rents for repairs/maintenance and another chunk for capital expenditures (roof, HVAC, water heater—stuff that won't hit every year but eventually will). For a condo, some of that is covered by the HOA, which helps, but don't assume $2k/year will always cover it—one big repair or turnover can blow through that. I also budget 1 month of rent per year for vacancy just to be safe, even if it often ends up better. The key is having cash on hand so a surprise expense doesn't make the property feel like a burden.

[email protected]614-418-6081

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Kate Sanchez

Member since 2025 · 242 posts · 98 votes

1y

@Rafael Ro Great first step Keep at least 3-6 months of expenses as reserves. Plan for capex & vacancies even in condos -$2k/yr repairs is a fair estimate. You’re thinking right!

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Advice for first time landlord (reserves?)

Advice for first time landlord (reserves?)

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