Income & Expense Management

[Charlie Fullerton]

Hello -

So my monthly income vs. expense worksheet looks like this on a 6-unit rental property.    

Income:         $8200 (full occupancy)

Expenses:     $2910 (includes 10% for vacancy & 10% repairs, utilities, trash, taxes, insurance, landscaping)

Debt Svc:      $2615

Profit:           $2674 (pre-tax)

The reserve is currently approaching $30k.    

I am thinking once at $30k, to stop setting aside the vacancy and repair ($1640), and add it to the profit to be 

used to pickup the next rental property.    I think $30k, is more than enough to cover any emergencies that 

may pop up and cover a vacant unit for 6-7 months (which is highly unlikely in my market).  If something pops 

up, I then tap into the $30k to address it & start setting aside the vacancy/repair $$ again until reserve is back 

to $30k, then begin scraping off the difference for more investing.   I originally was thinking of building up to 

about $50k, but the more I think about it I'd hate to have excess $$ sitting idle for any longer than it needs to. 

Does $30k sound like a reasonable reserve for a 6 unit building in fair shape to those of you that are more 

experienced?   I feel as though it should cover any major repair that may come up.   I think this would be a 

good strategy to begin scaling.    I am new and have owned this building for about 10 months.   Am I missing 

anything?  Can anyone think of a better scaling strategy?  

Thanks

Charlie