First property rented. Now what?

[Jose Sandoval]

I just signed a one year lease on my first rental property. Should I save the income for future expenses aka reserves or reinvest?

[John Teachout]

In your "rent roll" you should have line items for a variety of items. Things like property tax, mortgage, insurance, maintenance, utilities, pest control, capex, management, etc. Those amounts should be set aside each month and designated for the purpose intended. Some bills only come annually or semi-annually such as taxes/insurance, and I break everything out into a monthly amount. Each month, that money gets swept into a bank account designated as "set asides" as that money needs to be there when the bill comes due.

I have a separate account for capital expenses. For one single family home, about $10,000 should be enough to keep in there. ie, that would cover any typical major expense such as roof, HVAC, sewer/septic system.

Once you have your $10k saved up, then additional funds go into your savings towards the next property. If you spend it down, then you feed the account again until it fills up.