Maintenance Reserve ??

Question

Hi all, what is the typical maintenance reserve you set aside when analyzing a deal or maintained in the bank account?  I believe I read somewhere 30% of the gross monthly rent but it seems fairly high.  I would like to be conservative however I want an accurate representation.  I appreciate any insight.  Building we're considering was built in 1967 and has some deferred maintenance.

Bill B. · Answer

Depends on how many properties you have, their type and age.

Once I got to 6 properties I didn’t bother with reserves. But properties in Las Vegas are newer, have tile roofs and stucco sidings. In 20 years with 14 properties I’ve never had a repair over $1,000 water heater or $2,500 ac unit and even with 14 properties it might be 1 per year.  But if you have asphalt roofs or cedar siding, or boilers you have to plan for them. This is more important when you have 1-3 properties and little non-rental income.

Sharon Rosendahl · Answer

I know this is probably too late for OP but I use 5% of monthly rent as rule of thumb for maintenance. Older buildings may bump that up, better condition down. For the last 12 years or so I have never had to do much but I always figure if I have enough to replace a roof, I'm good. Although the last time I had to replace a roof was storm damage and the insurance paid all but the $1k deductible. The more units I have the more I look to being able to replace a roof on 50% of my units in the same month. Probably overkill but lets me sleep at night.