How much to set aside for expenses

Question

Hi, everybody. Just out of curiosity, what percentage of rental income do you put aside for maintenance/repairs, vacancies, cap ex, etc.?

Chris Seveney · Answer

I analyze it on a property by property basis. If the property has been newly renovated, I will keep less than reserved than I would for a property that is older and will require more work. I analyze the property in regards to Capex and potential repairs based on the class to determine a value. I know this does not answer your question, which is why it's important to also get a T12 from the seller to see what they were spending

Jules Aton · Answer

Great question and tons of variables. It will depend on how many properties you have, the condition they are in and your personal financial state. When I had less money I would keep a cushion of $5,000 or so in HYSA and use credit cards as needed. As my W2 earnings increased and I had more in taxable account I started using my pay check and if more is needed credit card to bridge until I can sell some stocks.

Caleb Brown · Answer

It'll depend a little on the property, what class it is in, where it's at, etc. Generally 5-8% for vacancy, 5-10% for repairs/maintenance and the same for cap ex. Certain asset classes will be higher while others in rougher spots you'll see higher maintenance, repairs, turnover, vacancy, etc. Outside of % I would have a emergency fund set aside for each property for any major systems until your account gets built up with the rent.

How much to set aside for expenses

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