When faced with expenses associated with an income property, many owners find themselves financially unprepared. To avoid this awkward, and unpleasant situation, it is recommended that owners set aside 10% of the monthly disbursement for routine maintenance, and capital improvements.
For instance, a home has been rented for 5 years, and is being vacated by the current tenant. The property requires paint, carpet, and some small repairs adding up to $5000. This would be a large “out of pocket” expense for an owner. However, assuming a rent amount of $1500 had been collected over the 5 year tenancy, and 10% had been set aside, there would be 9000 in reserves available.
In this scenario, the owner can easily cover the expenses without incurring financial hardship, and has $4000 remaining at their disposal. These funds can be held in trust by a property manager, and may even provide some tax benefit.
Call (805) 937-9900 today to discuss how Walker & Associates can help you be a successful income property owner.
Walker & Associates Property Management