We all know rent houses have expenses like: taxes, insurance, loan payments, management fees, leasing fees, etc. But what about: a new air conditioner or hot water heater, a new dishwasher or stove, new oven, new flooring, new roof, new interior paint, exterior paint, yard work, etc. What about a vacancy period when no rental income is coming in? What if you own two or three houses? Triple these expenses?

Some owners do the least possible in repairs and "pocket" the rental income. They "defer" maintenance and do not plan or budget for all the expenses that will eventually come. All items in a house wear out over time. You should plan and budget for this.

Add up all the costs for new systems in a house over 30 years. Account for inflation on top of that number. Divide by 30 years and get the annual pro-rated cost. A general rule of thumb is 1% of the value per year.

$350,000 x 1% = $3,500 in reserves or used for maintenance and repairs.

It is better to overestimate rather than underestimate. The age and current condition of the house could be a factor. If you are selling or renting and have needed repairs, talk to us about options we can help you with.