How much do you put back in reserves for your properties on average? I know each situation is different.
250 per unit per year is the average we use. Most of ours are 50 units and up so if yours is below that you might require more.
Thanks James. Any more examples?
Depends on existing condition of the asset when you buy it and cost reserve stable of when the large tickets items are going out during your ownership time horizon.
6 months saved up is a good number to go with. Especially when looking to get more properties in the future.
Instead of using a static dollar amount I set aside 10% of profits into a sinking fund to cover expected (new roofs are the big ones) and unexpected expenses. I think that's a good percent to start at.
I invest in SFRs and im a bit conservative because of all the horror stories ive read about people who have failed at real estate investing and one of those reasons were because they didnt have enough cash reserves. I dont ever want to be one of those stories so with that being said I like to keep 3k per house on standby at all times.
but i do calculate 10% for vacancy and 10% for maintenance and set aside that money from each payment into these accounts. So the 3k includes the 20% from each payment every month. Once im passed the 3k reserves on each property, i use every penny for reinvesting/saving on the next property.
The banks like to see 6 month's worth of payment reserves. This should be way more than enough to cover any expenses you have.
I am a conservative investor and just feel better having that much in store at any given time, plus I am ready to buy anytime a deal comes along as far as the banks are concerned.
Join the Largest Real Estate Investing Community
Basic membership is free, forever.