What do you do with estimated repairs?

Question

John Leavelle · Answer

Howdy @Laramie Hiebner

That $200 or what ever is left over stays in the cash reserves account.  The amount I budget for Maintenance/Repairs, CapEx, and Vacancy all go into a cash reserves account.   I want to build enough to cover 6 months of mortgage payments.  After the first year I reevaluate my withholding requirements.  That is when my Cash Flow may change.  Don’t adjust month to month.

Jeff Bridges · Answer

Are you talking about in reference to taking cashflow as income to use for living expenses? I personally average out the repairs I would expect over the year based on how old items are within the house and understand that I cant anticipate what month each item might break down, so it would be foolish to take a single months expected repair cost as cashflow, when a repair could come up in november for 900 (I had a HVAC compressor need to be replaced) when I budgeted 1000 for annual repair costs. But as far as budget planning, the priority should be establishing 6 months reserves first for each property including repair budget, then you can take your budgeted cashflow. This way you are not expecting to have to cover a repair from personal expenses when a single months rent wont cover that repair that pops up. You can reassess at year end to see if your repair budget needs to be adjusted for next year and take additional cashflow then if repairs were mininal and your reserve fund is funded adequately.

Kristina Heimstaedt · Answer

Up to you. We try to analyze the numbers for each property. Our best performers get cap ex when they don't have repairs. Maybe it goes in your pocket as a nice little bonus. Maybe you choose to put it in a "no repair" jar and it goes towards a new property or something else. Maybe you set it aside for rainy day policy in the off chance that you might have a more significant problem down the road such as roof, HVAC, etc. 9 times out of 10, there is no wrong answer, it's just how you choose to appropriate the funds.

What do you do with estimated repairs?

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