How Much Money Should you Put Aside for Rental Repairs?

(Excerpt from Rentals.com May 2010 Newsletter)

Becoming a landlord doesn’t just mean worrying about keeping your property rented and to the right tenants. You also need to be sure you have budgeted for necessary repairs. Read on for some tips on how to plan ahead for the inevitable repair bills.

How much to put aside

Prevailing wisdom recommends saving 1% to 3% of the value of your rental property for repairs each year. Though repair totals will vary from year to year, leftover funds from one year can help cover you for big expenditures during another one. Just be sure you set down a dollar amount to hit annually for savings. On a rental property worth $250,000, for example, try to reserve $2,500 to $7,500 for repairs each year. Hitting your annual repair-fund goals will also help you prepare for the unexpected, such as storm damage.

Be realistic

Ideally, you had your property inspected before purchase and so are aware of the age of big-ticket items like the roof, HVAC system and kitchen appliances. Accounting for normal wear and tear, you’ll have a basic idea of when you’ll need to repair or replace these items, so start socking away funds for those major repairs.

Preventative measures

You can keep small repair issues from turning into big ones with regular maintenance, so be sure to budget for maintenance as well. Everything from chimney cleaning to tree or limb removal can save you big money down the line, so be sure you’re planning for the expense. Other maintenance practices to implement are yearly HVAC checks and regular gutter cleaning.

Don’t be caught off guard by repair bills for your rental property. Prepare now by starting a savings fund to take care of regular maintenance and the cost of repairs to and replacement of systems, appliances and structural items.