What do you budget for reserves and CapEx?

[Mindy Jensen]

Reading another thread, @Nathan Gesner said "I suspect it's in the neighborhood of 20% (of landlords) that hold reserves and even fewer that hold the proper amount."

I see a LOT of people asking how to start investing with no money (and usually bad credit) and that makes me cringe, knowing that one big repair could wipe them out.

@Scott Trench said that when he bought his first Duplex, he put $10,000 into a bank account to cover unexpected expenses. When he bought a second duplex, he put in another $10,000. When he bought his four-plex, he didn't add additional funds, as he already had $20,000 in his reserve fund and a stable job that paid well. This makes sense, and if you have an excess of money every month after expenses, the reserves don't need to be quite so well established.

So how much do you hold in reserves? What do you budget for CapEx every month?

[Mindy Jensen]

As soon as you close, something needs repaired. It's a Real Estate Law. The cost of that repair is inversely proportionate to how much you have in reserves. Nothing? You're looking at a new roof, AC, furnace or heck, maybe even all three!

Tons in reserves? You need a new outlet cover.