How much Cap Ex do you hold?

[Amanda G.]

It seems to me that Cap Ex is a very important part of evaluating a deal which investors tend to under-estimate. My current rule of thumb is to plan $1,000/year per unit.

First- do you agree with that as an estimate?

Second- That's all good for evaluating deals, but in real life, how much reserve do you keep in hand for roofs and AC and the other big items?  I imagine that this changes with the scale of your portfolio. With 1-3 properties, you probably want to keep a portion liquid. But with more does your ratio change? 

Third: I imagine that HELOC's are a good option for this kind of thing. What is your experience?

[Andrew Johnson]

@Amanda G. It's not "scientific" but I have enough to do a full roof replacement on my largest multi-unit property.  It's quite a bit and odds are the roof was 20+ years of life left in it.  Still, the money is there just in case because...well...you never know.  So it's basically enough cash-on-hand to handle the largest cap-ex item (the aforementioned roof).  I can always use subsequent rental income to replenish the cap-ex "fund" and it's unlikely that I'm going to have a roof failure AND 3 HVAC units completely die out AND have to resurface the shared parking all in the same month.  And, not for nothing, but I can take care of minor cap-ex expenses like replacing a dishwasher with the rental income.