Holding Repair Capital

[Andy Tomaswick]

Hi All,

I know it's standard practice to count a certain percentage (I've heard 10%) of the rent you get from a property as going towards repairs.  However, as I'm sure everyone is aware, these can be very "chunky".  You could go several months with no costs whatsoever, and then get hit a $3000 air conditioning bill.

My question regards how people handle this with capital.  Is it standard practice to just continually put away that 10% in a special account that's for "repair funds" for each property?  Do people just have a capital account that they keep at a certain level and replenish from the rent from all of their properties when it dips below a certain level?  If so, how do you calculate what that capital amount is?  As a percentage of the assessed value of the properties?

Any insight on this is much appreciated.  Thanks in advance for the advice!

[Max T.]

Yes. Always stash that percentage away for a rainy day. Keep adding to it. You will need it someday.