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.
- 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?