That’s an excellent question, and one that beginners often overlook when trying to assess their rental property cash flow. And the short answer is that there is no perfect figure, but here are some quick guidelines to help you decide how much should be set aside.
First, consider your fixed expenses. Do you pay $50 per month for lawn maintenance? Do you pay a pest control company? The monthly cost of these expenses is easy to budget for. Also, estimate any variable expenses that are recurring — such as landlord-paid utilities.
Where it gets tricky is trying to budget for vacancies and maintenance.
Let’s start with vacancies. I tend to budget 10% of the rental income from all of my rental units to cover vacancies. Your actual vacancy rate will fluctuate up and down, and there may be stretches where there are no vacancies at all. In my experience, 10%