Real Estate Investor · Raleigh, NC · Member since 2016 · 10 posts · 1 vote
I'm looking to invest in my first rental property and have been researching how to accurately estimate cash flow. I've seen some different advice for estimating maintenance and repairs and CapEx and was wondering if anyone has good advice to share. The most common way I've seen is 5-10% of the monthly rent for each one, but that doesn't seem like it would always be accurate. In my area, two similar homes (size, age, etc.) could have a rent difference of $300-400 depending on location, but the maintenance and CapEx wouldn't really be affected by location so basing the estimation off of the rental income doesn't seem accurate. Does anyone have a different method that they have found to work? Thanks!
It depends on the condition of the property you're buying, the price point and how conservative or aggressive you want to be. You can use 5, 10 or even 15%.
The number is arbitrary. Just like vacancies and repair expenses. If you have a new construction or newly rehabbed, you can probably use lower percentage for CapEx and repairs. There is no right answer, but as long as you are planning for it, it will only help you.
The key point is to have reserves set aside so when something comes up, you have money set aside for it.