Andrea and Alissa tackle a topic most real estate investors oversimplify: the difference between maintenance budgets and reserve funds — and why treating them as one bucket can cost you dearly.
🔑 Key Takeaways
- Maintenance Budget = day-to-day repair costs
- Covers small fixes: broken toilet, floor repair, minor plumbing
- A starting point of ~10% of monthly rent is common
- Over time, as the property stabilizes, this may drop to 3–5%
- Reserves = long-term capital expenditure fund
- Built to cover big-ticket items: roof replacement (~$12,000), furnace/boiler, HVAC
- Most lenders require reserves when buying apartment buildings
- Recommended: 10% set aside monthly, grown consistently over time
- The Core Distinction: Maintenance covers what breaks today; reserves protect against what will need replacing in 2, 5, or 15 years.
- Real-Life Lesson: A mentee had only a small maintenance bucket with no reserves — 2 years into ownership, the furnace failed and they had to take out a loan to cover the new boiler.
- Fiscal Responsibility Framing: You may not be "making money" the first 5 years — and that's okay, because those funds are building your safety net.
📊 Tools Mentioned
- Spreadsheet tracking mechanical install dates, projected replacement timelines, and separate budget line items
- Free downloadable PDF covering 7 systems for a real estate investment business
📚 Resources & Next Steps
- Real Estate Investor Intensive – 8-week course
- 📧 Contact: teams@ownyourincome.co
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