Reserves for Repairs

[James LaFarr]

For repairs, do you use a percent of gross rent or do you use a flat number, like say $100 per unit? To me, it seems to make more sense to use a flat number since repairs don’t seem like they’d cost more in a 1000 sqft home that rents for $1800 than one of the same size that rents for $1200.

[Charles Carillo]

@James LaFarr

Typically, reserves of $250-$350 per unit, per year are held for future capex items (roof, parking lots, updates etc.). This does not include the money you will spend on repairs and maintenance for normal repairs. If your property is in tough shape or is older; I would increase this reserve, but this is a rough calculation for a property that is in good condition, not in need of major capex.

You can also increase this annually or do it on a monthly basis; i.e. $25 per unit, per month goes into a savings account and I will increase that x% per year.