How many months after turnover are you profitable?

[Cory Benhardt]

Hey BP, I'm working on doing a full unit rehab (after the inherited tenant moved out). When we're done the rehab & get it rerented we'll conservatively cash flow 600 a month after cap-ex, repairs, etc. 

Do you use the cash flow to repay the rehab costs? If so, how many months of cash flow do you sacrifice when planning how much you're going to spend on a rehab? 

[Bill B.]

Once you have a few reserves become less important. If you have personal reserves that’s fine too. Use the cashflow to pay down mortgages or save up for the next purchase. 

Last month was my worst in more than 20 years.  Full ac replacement $4200, full house repaint $2800, 2x fan motor and compressor motor rebuilds $2,000. This is spread over 3 properties. As I have a dozen properties I still got a check from the PM for almost $7,000. His is my worst month in 29 years and if I had 6 properties I still wouldn’t have had to reach in to my pocket. (Forgetting that the PM has no problem stretching repair bills over 2 months.)

If you have 1 or 2 properties there’s certainly a chance you could need to come out of pocket but back then I just used my personal reserves. Worst case scenario most vendors will take credit cards. Pretend it happened to your personal home. Most people don’t keep a reserve for repairs to their personal home.