Best guess for maintenance and replacement reserves? SFH

[Account Closed]

Hello-

Appreciate everyones best guess for conservative maintenance projections for a 5yr hold of the following portfolio.  Also would like to see reasonable reserve estimates for capital expenditures

-10 homes

-Built after 1980

-recently rehabbed

-block construction

-one family in each home (less then 5 people)

-1200-1400 sq foot

-5 year hold with annual tenants

-Tenants are either blue collar or young professional

-Located Florida

Thank you.

[Bill Gulley]

Recently rehabbed may not have any applicable maintenance record, and past maintenance is not an indicator of expected costs, the past issues were likely repaired and won't be an issue again.

Expected maintenance issues are based on a good inspection of a SFD, major items, like HVAC, septic tanks, wells and roofs need inspection and the condition and age should give an indication as to the probability of future performance.

Reserves not only include cash on hand but also the ability to cover unexpected expenses. Do you have the ability to borrow, at what point can rents cover additional debt over a short period, will the place carry a $5K loan, can you make up the difference for the payment. Are you in a position to refinance a property after costly repairs?

Cash on hand for most SFDs should be about 3 months PITI, I suggest, additionally that you have your insurance deductible available in short order. A tree falls on the house your tenant may need to move to a motel for repairs, the won't be paying rents! Also, look to your policy for loss of rents and coverage for tenants expenses.

Lenders generally want 6 months PITI, this is for vacancy and maintenance.

As you acquire more units, the probability of losses or expenses arising from each property go down, a tree isn't going to fall on 6 different properties within a week. How you arrive at reserves might be viewed at 3 months PITI on 6 properties in reality and the ability to obtain other funds needs to be kept in mind.

A newly rehabbed property with new mechanicals or in good condition probably won't have any significant issues within a couple years, just do a good inspection and determine condition and estimate costs and begin a schedule to avoid deferred maintenance issues.  :)