reserve fund per unit?

[bigbabba]

I have yet to purchase an investment property but I always believed that for every house/unit you own you should have a reserve fund of about $10k. This number might be generous so I am wondering what the experts say about this?

I met someone a few years back through a mutual friend who bought and lost 4 properties in a span of 8 months due to having no money to cover unpaid rent, maint, and repairs. He had 2 silent investors who put up the DP`s for the houses but I guess they didnt`t factor in the above either.

 

[gwasser]

I think 10K per unit might be a bit much. You could use the vacancy rate for the property type and area that you invest in as a starting point and double it. Thus you could estimate the number of months you would not expect to rent per year and put that in your contingency fund.

Another way is just having a reserve of 3 months rent. So if you have a property with a monthly rent of $1000, you`d need a contingency fund of $3000. Having said that, if your property is truly vacant for 3 months every year, you may have to wonder whether you have a problem property or if your rents are too high.

You may also have some reserve money for unexpected repairs. However, I just renovated an entire apartment for $5000 and that included a new fridge and stove. So... 10K for a modest rental unit sounds a bit steep to me.

Hope this helps.

 

[bigbabba]

QUOTE (gwasser @ Oct 4 2008, 09:04 PM) I think 10K per unit might be a bit much. You could use the vacancy rate for the property type and area that you invest in as a starting point and double it. Thus you could estimate the number of months you would not expect to rent per year and put that in your contingency fund.

Another way is just having a reserve of 3 months rent. So if you have a property with a monthly rent of $1000, you`d need a contingency fund of $3000. Having said that, if your property is truly vacant for 3 months every year, you may have to wonder whether you have a problem property or if your rents are too high.

You may also have some reserve money for unexpected repairs. However, I just renovated an entire apartment for $5000 and that included a new fridge and stove. So... 10K for a modest rental unit sounds a bit steep to me.

Hope this helps.


yeah that is helpfull, I`m still doing my research so my thinking is still more conservative I guess