Reserve Amount - House hacking in Atlanta

[Sean Chua]

Hi guys!

I'm trying to analyze deals for house hacking (renting by the room) and am re-evaluating the way I calculate reserves. Currently, I use a percent multiplier by rent: 5% for repairs/maintenance, 8% for vacancy, and 5% for capital expenditures. Assuming I'm getting $4,000 gross rent, that means I'm putting $720 away in reserves. Is this too much? How do you guys calculate reserves?

[Michael Dumler]

@Sean Chua, since your maintenance cost and capex are variable expenses, you can further analyze and adjust after receiving the inspection report. Also, keep in mind, that rent by the room investments are heavier on utilities, which you will be responsible for covering. Tenants/roommates are more frequently using water and electricity than if the property were to be purposed as a traditional rental, in which case the tenant usually pays. Make sure you are accounting for this and bake it into the rent. Hope this helps!