Budgeting for repairs and capex?

2 Replies

For those of you that have a buy and hold strategy, how much do you budget monthly for repairs and capex?  

10% each.

That can change over time as you build your portfolio. I have three houses and 11 apartments. I don't save 10% of the income every month for each of these properties. I started out doing that but once I reached the dollar amount I'm comfortable with, then I stopped saving.

Everyone should crunch their own numbers. If you are a surgeon making $200,000 a year, you can probably handle replacing a furnace without keeping a reserve. If you live paycheck-to-paycheck, you'll need that reserve or a broken furnace could sink you.

For me, I built a reserve equal to my two largest possible expenses. If both events happened simultaneously, I could cover them without dipping into my personal funds or pulling out the credit card. As I add properties, I will have to adjust the numbers and build the reserve a little higher. I do not keep a separate reserve for each unit and I do not save 10% for repairs and 10% for capex every month for eternity.

I hope that helps.

@Kyle Davis newbie here.  I have seen on the forums a good point I hope to implement with my buy and holds. If your going to be holding and you do the big repairs needed up front ( roof, hvac, plumbing/sewer, elec up to code ect..) It buys you the time to build up the reserves @Nathan G. is speaking about.

I still run the numbers with 10% both Capex and Repairs for the property. However once the reserves are where you want them, its additional cash flow from there on. At least till you need to refill the reserves.

Kirk

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