Instead of doing an 8% vacancy loss every month, does anyone just keep a total reserves amount?
For example: Say your mortgage payment is $400 monthly so 6 months worth of rent is $2,400 and another $12,600 for CapEx repairs for a total of $15k and just place that into a savings account until needed.
I’m assuming there’s no issues with that, but no one really discusses that, all spreadsheets calculate a vacancy loss rate.
@Evelin Montenegro it is just a reserve account for vacancy,repairs,capex, not three separate accounts. You would just move things around if you had different accounts. You have a vacancy and the unit needs painting. Which account would you choose to take the money out? It could come out of any of the accounts.
@Evelin Montenegro it is just a reserve account for vacancy,repairs,capex, not three separate accounts. You would just move things around if you had different accounts. You have a vacancy and the unit needs painting. Which account would you choose to take the money out? It could come out of any of the accounts.
Instead of doing an 8% vacancy loss every month, does anyone just keep a total reserves amount?
For example: Say your mortgage payment is $400 monthly so 6 months worth of rent is $2,400 and another $12,600 for CapEx repairs for a total of $15k and just place that into a savings account until needed.
I’m assuming there’s no issues with that, but no one really discusses that, all spreadsheets calculate a vacancy loss rate.
I believe that people don’t have 15k laying around to park in a reserve fund, plus if I had that laying around I’d rather buy an additional property.
I look at all of those items, repairs, vacant, capex, and any other set aside money as just slowly building your reserves. I agree if you hit a astronomical amount in your reserve fund I’d start moving the excess to other things like additional savings for other properties or if you are done buying properties start taking some extra cash in your pocket monthly until you have to replenish your fund.
@Evelin Montenegro It is a matter of having money to cover those things when they arise. I don't put aside set amounts of money every month, but if something happens, I have money that I can use to cover those costs.