How much money should I set aside for maintenance?

[Zack Welch]

I recently inherited a triplex where I live in one unit and rent the other two. The property is payed off and I would like to begin focusing on buying another property. How much money should I set aside for expenses such as maintenance, repairs, improvements, etc. before I start using the money to buy another property?

[Randall Alan]

There are actually 2 items to consider under "maintenance"... First are repairs when typical things break. We allocate about $75 -$100 per door per month for those items and it seems to serve us pretty well. It's $75 when it is a duplex, and $100 when it is a SFH. We have about 40 doors and our repairs and maintenance account usually holds out throughout the month. Obviously each house you have isn't going to cost you $100 a month, but in volume what happens is one house will cost you $500 one month and another 4 won't cost you anything (hopefully). For instance, I had to have an AC coil pulled and cleaned and the drain pan replaced. The cost was $450. But I hadn't had an expense on that property in the better part of a year. So shared maintenance allowance helps all the units float along throughout the year. We maintain a separate account for repair funds, and carry forward any that are left over at the end of the month.

The other item is capital improvements.  The big things... the roof, the AC, etc.  You can quickly create a budget for this by estimating a roof cost and an AC cost, such as:  Replace roof in 20 years, replace AC every 15 years.  Say the roof is $10,000, and the AC is $4,000.  20 years is 240 months.  $10,000/240 months is $41.66 per month.  The AC across 15 years is $22 per month.  So if both were new today, you would need to budget about $63 a month.  If the roof is 1/2 gone already, you would need to double your roof budget to replace it in 10 years, etc.

The other option is to plan to sell your homes before you have to incur the roof expense!  lol!

Hope it helps!

Randy