I went in using the % rule, since I had a good understanding of rehab costs and enough cash to carry me through even if the rehab cost double.If you truly reserve for everything, i.e. a roof has a 25 year life and will cost about $7,500, that's $25/mo each month if you have a new roof. 

In practice, I have seen roofs that were well beyond their service life and needed immediate replacement pass a conventional appraisal without being mentioned by the appraiser.

Seller financed deal at $40,000 bathroom was down to studs, kitchen had no flooring and cabinets were falling off at the hinges, no gutters on rear of home, rear entry door suffered a break in and roof was leaking prior.

Water intrusion into any part of any physical structure on the Property; leaks from or in any appliance, pipe, slab or roof; standing water, drainage, flooding, underground water, moisture, water-related soil settling or slippage, on or affecting the Property?

All the "boots-on-ground" agents I have talked to encouraged me to go for it as that it very rare to find 1% rules properties in Austin MSA and this will be appreciation play. is this true?

I'm looking at using Formula Roofing to replace my roof and install a skylight in my rental property.  

We also do preventative maintenance, make sure gutters are clear, downspout extensions are on propperly, check the roof and flashings, HVAC (filters!)

( That can include large unexpected repairs, for example, like finding out you’ll need a new HVAC system or a new roof, which can cost upwards of $500k plus).In addition, some of the investors who expressed an interest will end up backing out, and having an excess or reserve will help fill in the amount you lost.

Do you use Operating Capital to replace a leaking roof or Busted HVAC? 

Looks like furnace and water heater is good for now, and no description on when the roof was built.Any advice would be appreciated.