What to do with the money we set aside for Cap Ex, Vacancy, Maint

[Mailei Maloa]

Hello Everyone,

My question is what do we do with the money we calculated for the Cap Ex, Vacancy %, maintenance repairs, and miscellanous when we get them in our monthly payments from the management team? 

Do we set up seperate accounts for this money knowing it will be used later for this purpose?

Do we use it to reinvest into something else until needed?

I am looking to see how people are using this calculated money when it is not in use. I was going to set up another account to store it in and wait for the use but it seemed like a waste of the money and I felt I should be using it to reinvest into something else until it is needed. 

Please let me know what people are doing with these calculated $$$ when they are not in use. 

[Bill B.]

Personally I quit having reserves once I got to 5 properties and at 12 it would be too much money sitting around. When you get to the point where you have enough rent coming in to cover any possible “foreseeable” event I just thought of a new idea for investors with just 1-3 properties. I haven’t tested this theory so feel free to poke wholes in it. 

Instead of paying extra principle on a mortgage payment you could send a few extra months of payments as future payments instead. So you’re making payments for a few months in advance. The benefit here would be that if a big expense came up you could skip 1-3 mortgage payments while you caught back up or paid for the expense. 

While it wouldn’t provide a great return, it would certainly be better than having the cash sitting in the bank earning less than 1%.