Saving for new appliances for your property 10-25 years from now

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Saving for new appliances for your property 10-25 years from now

Freddy T.
Member since 2020 · 12 posts · 2 votes

How do you save for appliances that you are probably going to need down the road 20 years from now?

For example,

Furnaces last approximately 20 years if well maintained.

Air Conditioning units last 10-15 years

Asphalt roofs last 15-20 years

Water Heaters last 6-13 years

All of this isn't cheap. Do you deduct from rent each month and put into a savings account, if so how much?  I have a duplex and I need 2 of everything but Im looking long term here knowing that this is something I have to look forward to sadly.

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  • Aaron W.
    Rental Property Investor · Northern Virginia · Member since 2019 · 793 posts · 620 votes
    5y

    @Freddy T. Great question! Many inexperienced investors fail or don't know to consistently save for capital expenditures every month. This should be deducted from your rent collected and can be saved anywhere accessible when it is needed, typically a savings account.  

    The amount to save depends on the year and condition of your property and appliances. 5%-10% of gross rents is very common. If they are mid to end of life, then I'd save more than if you have a new or newly rehabbed building or appliances.

    Good luck!

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  • Nathan GesnerBusiness Member
    Moderator
    Real Estate Broker · Cody, WY · Member since 2010 · 28k+ posts · 41k+ votes
    5y
    Originally posted by @Freddy T.:

    How do you save for appliances that you are probably going to need down the road 20 years from now?

    For example,

    Furnaces last approximately 20 years if well maintained.

    Air Conditioning units last 10-15 years

    Asphalt roofs last 15-20 years

    Water Heaters last 6-13 years

    All of this isn't cheap. Do you deduct from rent each month and put into a savings account, if so how much?  I have a duplex and I need 2 of everything but Im looking long term here knowing that this is something I have to look forward to sadly.

    Have you watched any of Brandon's podcasts or read blogs about how to calculate cash flow? If you have, they teach how to set aside a certain amount of the rent income for future expenditures.

    Blog: https://www.biggerpockets.com/...

    Generally speaking, investors will "set aside" around 50% of the rent income to cover expenses like taxes, insurance, property management, vacancies, regular maintenance, capex (big-ticket items like roof, driveway, siding, flooring, etc), and other costs. After setting aside 50% for costs, then you pay the mortgage (principal and interest). What's left over is cash flow.

    Too many people make the mistake of thinking they can pay their mortgage and anything left over is cash flow. Big, big mistake. 

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