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Updated almost 12 years ago on . Most recent reply

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Tony Legendre
  • Rio Rancho, NM
1
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8
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How much are you keeping in reserves?

Tony Legendre
  • Rio Rancho, NM
Posted

I am sure that there is a spectrum of risk that we could all chart ourselves on and therefore I am not looking for right or wrong answers to this but am curious: How much are you keeping in reserves for each of your rentals? And, are you adding a certain amount per month per property to you reserve account for vacancy, repairs....?

Thanks,

Tony Legendre

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Kyle Hipp
  • Investor
  • Appleton, WI
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1,057
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Kyle Hipp
  • Investor
  • Appleton, WI
Replied

well I am on the low end compared to the other replies. I have 11 units. One property is a duplex in which I have a 50% partner on and one is my single family residence.

I usually purchase fixer upper type properties to build equity with remodels and proper upkeep. With this I get a good feel for what type of work needs to be done on a property. I keep very little in true reserves normally. I do however have a orderly plan for each property on what needs to be done and attack projects with value, longevity, and efficiency in mind. I carry no consumer debt and still have my day job in which I can work essentially an unlimited amount of overtime to come up with quick cash. I have excellent access to credit currently. I do cashflow quite well each month because of the way I structure my holdings and how I handle my finances as a whole. I could be hurt with compounded large expenses but do see it as unlikely. I have an extremely low vacancy rate, about 20 days over 7 years. If a water heater or furnace goes out it is not something I would have to go into debt for as they are relatively inexpensive. I upgrade trouble areas and run a pretty lean operation by doing a lot of the work myself at this point. It has not bit me yet, Iwould say the worst was probable 3-4 years ago when I was not in as good of a position and a duplex had both aging furnaces need replacement at the same time. That was $5,000 and even though it was known that at some point it was not the time I wanted. We did it right though and that dramatically reduced our heating costs going forward. THis year I purchased a single family home for my family and have been very busy there with new driveway and teardown of falling apart 1 car garage to a new 2.5 car garage, stsrting 3 weeks after purchasing the home. Then took on a whole single family house rehabilitation which took 31 days straight to complete, did't sell for two months during which time I redid the siding on my house, new large back deck and quite a few small projects along the way. Then september first had a girl move out after I advised her that that would be her best choice and redid that in a week, new floors throughout, lots and lots and lots of cleaning, tub resurfacing and new tub surround, full paint job. Then slowed down and rented out the remodeled house. Looking back I could tell you how we did it but it always seems to work ;)

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