Duplex Questions - Saving For Repairs

[Rob Randle]

I'm analyzing a duplex deal that I see in my market.  I plan to live in one unit and rent out the other.

Analyzing this multi-family deal there is a separation between repairs that need to be made and repairs that will be beneficial to make.  A repair that I would like to do but may not be in the budget yet is install vinyl plank flooring and removing trees around the yard to create less maintenance.

1. Do you feel that saving for these repairs as a percentage of monthly rent is the best approach if these types of repairs?  My goal is to not sacrifice initial cash on cash returns while creating a plan to create a solid rental.

[Kalo (Kyle) Atanasoff]

1. When you buy an old (older than 20 years old property) and you do not have a proof of any repairs/updates, it's all depends of your comfort zone level. You definitely need to set a side an X amount of dollars for capEX and maintenance every single month. How much ? Well, we always said % of X amount, but the true is that you calculate the amount first and then you put % in your spreadsheet. Here is what i mean to say: On 35k property, which makes 500$ rent, 5% is only $25, which clearly is not enough. Well, on 500k property, which produce $4000/month rent, 5% is $200 which could be a little too much....so you really have to answer what you are conformable with, how much is your cash flow and how much you an afford/want to put a aside. I usually try to put $100 cap ex and $100 maintenance every month regardless of the percentage. It's just happened to be around 5%-6% in my case...
2. Also, for emergency fund....well again...this is why you do a property inspection. If on the inspection everything looks decent, than may be put a side $2000 - $3000 on 100k property. Well, if you see that the roof is duo for repair soon, and AC is acting up and water-heater is 20+ years old....well..then may  want to have at least 8k-10k ...