Capital Expenditures..Save for Big repairs vs Not

6 Replies

.....so how much or what % of your gross rent roll should be put away for capital expenditures such as a new roof, driveway, leaks or whatever large repairs that need to be made to your multifamily investment properties?

Let's say you've been saving for years and you never really need big repairs; how much $ saved is enough? 

I know one thing for sure, one super expensive unexpected repair can ruin your glorious investment.

Please chime in on this one.

Billy T.

Saving anything at all per month is a feel good solution...which means it isn't a solution at all.  You already know that though..."I know one thing for sure, one super expensive unexpected repair can ruin your glorious investment."

Don't expect, or bother to, have any monthly savings cover anything when that big expenditure comes up.  You need to have an LOC, not connected to the property...the bigger the better.  Don't use it for anything else but this.  The money will be there when you need it, and you won't be "Squirreling" money away for a rainy day...and when it does rain, it pours...and you find out the only umbrella you have is one you might find on a mixed drink.

Typically investors account for 5-10% for CapEx and 5-10% for Maintenance.

Get away from generic formulas and either pre-fund the reserves or ............ save based on the condition of your asset. Everything has a price and useful life.... based on it's current condition you can adjust up/down what your budget should be. Also, be mindful of your goals, if you have a newer 30 yr roof but you're not keeping the asset say more than 10 yrs you might not even need a new one prior to disposing of it.

@Matt K. that makes a ton of sense I don't know why that hasn't clicked with me until I read that in your comment just now. To consider my goal for the property and divvy things up based on that, guess I've been so hardwired to have it in my budget I kind of lost sight. 

@Brian Garrett 

I like the ball park estimated savings for CapEx and Maintenance. Thanks for that. I also like having a goal in mind for yiur particular investment and saving accordingly.

Thanks for everyone chiming in. See you on the flip side.

Best,

Billy T

Originally posted by @Matt K. :

Get away from generic formulas and either pre-fund the reserves or ............ save based on the condition of your asset. Everything has a price and useful life.... based on it's current condition you can adjust up/down what your budget should be. Also, be mindful of your goals, if you have a newer 30 yr roof but you're not keeping the asset say more than 10 yrs you might not even need a new one prior to disposing of it.

 Yep, not to mention you can have two identical houses in every way except location. One in a war zone, one in an A neighborhood. Cap ex would be the same, but rents and purchase price very different (thus percentages based in those different too). 

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