Maintenance fund for larger multifamily

[Nick Robinson]

Quick question for my apartment owners. How much money do you set aside for maintenance? For single family houses I usually plan on keeping 10% of the purchase price. For example $100,000 keep a maintenance fund around $10,000. This seems to be a good rule of thumb until you move to multi family. If I have a $1.5mm complex should I keep $150k in maintenance? That seems like a little too conservative. For instance I looked at the biggest issue would be the sewer pipe that goes out to the street. When I bought the property I had the sewer lines scoped and everything came back good, but it is a 1964 building. So I thought setting about $30k off to the side and every month I get my disbursement from the PM I take 30% and add it to the maintenance. Example $2,500 disbursement I put $750 into the fund.

Would like to know everyone’s thoughts and what they do for their properties? Do you put a certain amount aside for each unit?

[Rick Martin]

@Nick Robinson. Here are a couple of MF rules of thumb.

Repairs & Maintenance: $1000/unit

Replacement reserves:  $300/unit

Capital Reserves/Operating budget going in (not to be confused with the Capex budget) $1000/unit + 1-month revenues.

All of these are market dependent of course, but these are common, across the board, rules of thumb.