All Financial Wisdom
Evaluating a Buy and Hold Property
When evaluation a potential investment rental property, following the “Buy and Hold” investment strategy, you should make sure you budget in major capital expenses, property management, vacancy, and common repairs.
Each market will have different numbers, but in general:
- Capital expenses (CapEx): $150/month/roof. This is rather minimum, but of course you would have some of this money already saved up for when the furnace, AC unit, or roof needs to be replaced.
- Property Management: 10%. Even when you do it yourself, you should still put in the 10%, since you don’t work for free and you might need to get one later on.
- Vacancy: 1 month rent or 8%. Usually you don’t need to try too hard to keep this lower than 1 month, but you should prepare for it.
- Common repairs: $50/month. This would include the general wear and tear that a tenant brings and those random leaks and things.
Do you follow similar numbers? Are there other things you account for in your units?