Chugiak, AK · Member since 2017 · 6 posts · 0 votes
I have been using the 4-Square method for analyzing rental properties for a couple of months.
My question is at what point in time to you feel that you no longer need to stash 15% per month in savings for repairs for a property?
Do you save until you have xx% of the property value saved up?
Do you just save the 15% in an account indefinitely?
Do you want $x.xx saved per door in an account and when you hit that number you stop saving and move that money to additional income for yourself or use it to finance other deals?
I'm trying to look past the first 3 - 4 years without getting too far ahead of myself. My personal goal is to have around 75 - 80 doors renting in my local market within the next 6 - 7 years while starting from Zero today.
Thanks for your opinions and personal experience on this topic.
Rental Property Investor · Oconomowoc, WI · Member since 2016 · 996 posts · 431 votes
9y
Indefinitely. But I audit the bank account at about October to begin a plan to spend the money on upgrades and cap ex improvements before end of year. Or take a little extra out for myself.
Real Estate Investor · Encinitas, CA · Member since 2016 · 3k+ posts · 3k+ votes
9y
@David Murphy This isn't "scientific" so take it for the anecdote that it is: I have a separate account with enough to cover the largest cap-ex expenditure (read: roof) for the largest property. That number is (for me) more than 9 months of reserves, more than monthly maintenance bills, etc. I don't really need to save money for "repairs" because those are pretty steady on a monthly basis as I think I have enough units where something is always going wrong. It's easy to argue that's a poor use of money (it's getting basically zero return sitting in a money market account) but it does let me sleep well at night. But beyond that giant lump I can basically use any excess as additional income. If (when) that fund gets depleted I just forgo taking income until it's "full" again. Again, completely anecdotal.
Investor · New Hartford, CT · Member since 2016 · 282 posts · 104 votes
9y
I think most will tell you indefinitely although it may be something that you can figure out for yourself - there is a school of thought that says what are the odds that a place will need a roof and another unit will be empty etc all at the same time?