How do you handle your vacancy/maintenance/capex reserves?

3 Replies

I'd first like to note that I am not yet a landlord, but looking to buy a property to rent out before the end of the year.

I have some questions on how you handle your vacancy/maintenance/capex reserves?  For example, let's say you conservatively budget 10% for each one.  I'm mainly talking about what you do with the actual cash, not how you track it necessarily (that's another discussion).

  • When your rent check comes in on the 1st, what do you do with each of those 10%'s?  Do you combine them all in to 1 reserve account, and draw from that single account when needed?
  • Let's say a year goes by and you don't have any vacancies or repairs, do you start to draw money out as investment capital towards the next deal (essentially adding to net cash flow)?
  • What do you do when you have 10 properties?  Do you put all of the reserves in to a single account and draw from that general account to use on any other property, or do you keep a separate account for each property?
  • What do you do with the actual cash?  Do you shove it in to a savings account?

#AskBP

Thanks!

-Kevin Trumbull

I keep cash in accounts for each property.  When it hits a certain amount that I feel comfortable with I'll siphon off the rest for myself or other investments. 

All properties pay into single account, any $ over our goal amount is reinvested into properties. I've built fences, adding an egress window come spring thaw to make another legal bedroom, etc. excess is also being saved for another down payment on another property.

I move reserves/capex into a separate account / property and vacancies into another.  Over time, I've found it difficult to track this stuff if it's all lumped sum to one account.