How much do you take monthly from rent?

Question

What is a good rule of thumb for putting money in your pocket/ to RE invest etc vs leaving in account for maintenance etc? Say you gross $1500/month in rent and after all bills are paid every month you are left with $1000 net profit. What percentage should you take vs leave in account for maintenance and repairs?

Jaron Walling · Answer

If you're just starting out like I was a few years ago my advice is to take NOTHING. Growing a rental business requires funds and pure cash-flow (after expenses). It's going to be hard to aim for the next deal if you're pocketing money. Rentals are full of surprises including $5K HVAC's that suddenly go out with parts you can't buy. Build a reserve for each property and stabilize the investment before paying yourself anything. That's just my opinion.

Kevin Sobilo · Answer

@Daniel Vishnefski, you ask an excellent question and one not nearly discussed enough. I think an entire book could be written on the subject.

I'll give you a simple answer because its a good place to start.

I generally estimate 5% EACH for vacancy, maintenance and cap ex. So, 15% is what I estimate when I'm buying, but I think more realistically I could be close to 10% if I manage things well.

You're other bills are easier to estimate based on the actual costs of the bills.

The difficulty comes in the unevenness of the income and the costs. You might incur a $2k maintenance bill only a couple months in or a bad tenant or whatever. So, generating some estimates to go by is a start, but managing the cash is a whole other topic.

I recently read a book called "Profit First" and am implementing that for my rentals.

https://www.amazon.com/Profit-...