Maintenance on buy-hold SFR

[Douglas Pollock]

What percentage should be set aside for property maintenance for single family residential. Some people are telling me 10-12% for Property Management and 10% for maintence/upgrades. I pay 10% for PM now, and don’t get calls for running toilets. However, I do get calls for major plumbing repairs, air conditioners, and hurricane damage - hence the need to factor in maintenance. At some point, the remodeled kitchen will need to be remodeled again, and the new roof will need to be replaced, and I’ll need new siding, windows, etc. I see many of the property analyzer spreadsheets only use 2% for maintenance and upgrades.... are they planning on tapping equity for the major upgrades?

[Michinori Kaneko]

hi @Douglas Pollock

By Maintenance, I assume you mean CapEx. There is a great article here on BP that I read few months ago when I first started as well (and had the same question you had).

Click Here

In general, most people would say be conservative and put in 1 months of rent, but that would totally depend on your property. For instance, 1 month of rent on a property that generates $400 rent vs $1500 rent is very different reserve (but cost of replacing a roof isn't THAT different). So the answer is, know when your roof was last replaced (and all other major CapEx) and plan to replace them 1 or 2 years ahead of its actual life. Then you can straight line and estimate.

I think the 2% you are talking about is to fix general wears and tears, not capital expenditures like roofs.  Hope that helps!