What do you set aside for capex and repairs?

[Billy Archer]

Do you have a rule of thumb when you’re searching for buy and hold deals? Are you setting aside 10% of prospective rental income for capex and 10% for repairs regardless, or fine tuning it based on factors like the age of the house/equipment?

I tend to err on the side of caution so I’d like to overshoot my potential budget expenses, but I don’t know if 10% for each is prudent.

[Jeff Copeland]

If you really want to fine tune it, the math is not that difficult. Just take the cost of the capex (which will differ for each property based on size and number of components), divide it by its expected service life, and then add up the various components. 

For example:

Roof: $15,000 / 30 years = $500 per year

HVAC: $5000 / 15 years = $333 per year

Water Heater: $750 / 15 years - $50 per year

For these three items, your reserve for capex would be $883 per year, or $74 per month.