How much do you set aside for repairs each month when analysing?

9 Replies

Hello everyone, how much do you set aside for repairs each month when analyzing a property?

The property has not be bought yet, has not been seen in person, the property is just listed on a website.

This question is specifically for when you analyze a property. How much do you factor in to know if a property will cash flow before you actively pursue it... Is there a ball park you use, or specific percentages?

Thanks in advance for your response.

Hi I personally allocate 5% of the monthly rent every month for day to day fixes and another 5% of the monthly rent every month for large capital expenses. So overall I allocate 10% of the monthly rent. Lets say monthly rent is $1000. I will allocate 1000*0.1*12= $1200 per year for repairs.

I still use Jay DeCima’s pro forma - 25% of gross overall. That comes 5% each in the buckets of loss of income, vacancy, repairs, maintenance, and management. I know 25% seems high, but if the numbers works with that, you usually have some good cash flow each month. 
- Dan 

I guess this means you got to work that extra bit harder to find a better deal? 😂 I love it. Thank you for sharing that Dan

Originally posted by @Dan Armich :

I still use Jay DeCima’s pro forma - 25% of gross overall. That comes 5% each in the buckets of loss of income, vacancy, repairs, maintenance, and management. I know 25% seems high, but if the numbers works with that, you usually have some good cash flow each month. 
- Dan 

Hey Ammar thabk you for replying, could I ask you what else you would allocate and take off your monthly rent? Are you also accounting for vacancy, property management etc?

Originally posted by @Ammar Muhammad :

Hi I personally allocate 5% of the monthly rent every month for day to day fixes and another 5% of the monthly rent every month for large capital expenses. So overall I allocate 10% of the monthly rent. Lets say monthly rent is $1000. I will allocate 1000*0.1*12= $1200 per year for repairs.

@Amandeep Singh Bassi

It can highly depend on the condition of the property. I normally set aside 5-10% of monthly income. If you rehab the house first then rent it then you are looking at a lower cost but if you get somebody in there and it is a little rougher then I would say factor in a bit more. Don’t forget to factor in vacancy and cap ex as well.

Hey Cody, thank you for going through that with me. It gives me a more outlined approach for working out expenses.

Originally posted by @Cody Neumann :

@Amandeep Singh Bassi

It can highly depend on the condition of the property. I normally set aside 5-10% of monthly income. If you rehab the house first then rent it then you are looking at a lower cost but if you get somebody in there and it is a little rougher then I would say factor in a bit more. Don’t forget to factor in vacancy and cap ex as well.