Do you pool reserves, or keep them per property?

Question

Four properties in, and I've always kept one combined reserve number instead of separate buckets per address. Made sense when everything was roughly the same age, a dollar saved was interchangeable no matter which roof it might eventually go toward.

Started questioning that lately. One property's systems are aging out faster than the others, but the pooled number doesn't show that, it just shows one healthy total. If that property's roof goes first, I'll be pulling from money that was "saved" for the whole portfolio, not for that specific address.

Feels like there's a real tradeoff either way, pooled is simpler and smooths out bad luck, per-property is more accurate but more to manage. Curious which way people land once they're past two or three properties, and whether you ever regretted the choice.

Garth Huxtable · Answer

@Giuseppe Cavucci

When you started noticing that one property's systems were aging faster, how did you decide how much additional reserve that property should really have? Do you estimate the remaining life and replacement cost of things like the roof/HVAC, or do you still use a percentage-based reserve and adjust it somehow?

Richard F. · Answer

A "pool" of money is just that...a pot of unallocated funds or credit lines with no definite purpose. It is just a "feels good" number. "Reserves" are line items for specific elements, each with an estimated replacement schedule based on facts such as age, statistical useful life, current estimated cost, and visual observation of the element and environment.

The larger your pot of unallocated funds, the less you need to be concerned with those pesky details. If, OTOH, you are operating on a shoestring, you better know your true exposure, and have a plan for it.