Updated over 1 year ago on . Most recent reply
Reserve Fund Contributions
I've been house hacking my place (I rent out a 3-bed 2-bath residence and live in a small in-law unit in the back) for just about 3 years and have been setting aside money each month for my reserve fund. I'm getting to the point where I have a good chunk saved and am wondering what guidelines people follow to know when they can start tapering off the contributions or stop them altogether.
What rules of thumb are out there that people use? Let me know your thoughts.
Most Popular Reply
I agree with the "it depends" approach when it comes to determining reserves, but generally, it should align with the age and anticipated maintenance needs of the property.
For example, we have a duplex built in 2003 with the original AC units and roof. Given its age, we’re planning for a roof replacement and two new AC units within the next few years, which we estimate will cost around 15 - 20k in total.
Our single family rental, built in 2020, is newer, so we don't expect major repairs anytime soon.
On average, the duplex runs about $400–500 per month in maintenance and repairs (including significant repairs like AC replacements), whereas the SFR averages under $100 per month. To cover these costs, we keep approximately $15,000 in reserves for the duplex and $5,000 for the SFR. This reserve amount represents roughly 2–3 years of projected repair costs, which might be a conservative approach, but it gives us a buffer for unexpected, high cost repairs when they pop up.
With a larger portfolio, the reserve pool wouldn’t need to grow proportionally, as funds and repairs can be balanced across properties, allowing costs to offset each other over time. In other words, if one property requires a major repair, reserves from other properties can help cover the expense, reducing the need for each individual property to have a fully stocked reserve at all times.