How much for repairs and vacancies

[Seth Mosley]

Wondering if any of you out there have some sort of "formula" you use to estimate repairs/maintenance and vacancy reserve costs when evaluating a new property? I have been sort of guessing on mine so far and doing 5% for vacancies and 6% or so for repairs Thanks

[Joe Villeneuve]

My magic number is 0%, because I don't see the point.  If I'm renting a house for $500/month, that means (at 5%) I'm saving a whopping $25/month...or and enormous $300/year just in case, just in case what?  If my roof leaks and I have to replace it, at month 6, am I going to be able to with all that money I'm saving per month up to that point ($150 = 6 z $25/month)?

OK. let's say I'm renting for $1000/month.  Now at $100/month I'll have some big time dollars saved up (at month 12) = $1200.  Still can't replace my roof, and at 6 months, with $600 I can do a half way decent "patch job"...maybe.

Another reason I don't take anything out is all it will do is take me out of a good deal...for no good reason.  

1 - Before I factored in the "fudge factor", I cash flowed at $350/month...and the house passes one of my criteria.  

2 - After I factor in the "fudge", it cash flows at $250/month...and I pass, when I shouldn't.

The answer is to calculate how much the big three would cost you to replace (roof, HWH, furnace-A/C) and set it aside from the beginning as part of your purchase/rehab cost. One great source for this is a LOC. ANother great source is the extra money you get when you "cash out" refi.