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

How much to set aside for expenses

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