Save it up for a rainy day: here’s what to know about emergency funds for rentals.
If you manage one or more properties, you likely understand how crucial it can be to have emergency funds available should something happen. While it is not guaranteed that major damages, appliance breakdowns, or other problems will occur, people can have more peace of mind when they have ample funds available to cover emergencies. How does it apply to rental properties, commercial or residential? How much should you save for an emergency fund for rentals?
What Is an Emergency Fund?
An emergency fund is an amount of money that is usually stored in a savings account at a bank or a similar store of wealth. It is enough to cover at a minimum the cost of an emergency, whether it be for an injury, job loss, property damage, or another life-altering event. For rentals, it would cover the costs of property damage, major property repairs, and unexpected vacancies.
How Much Reserves Should You Have?
Even so, you should not have only reserves for emergencies. You should also have savings for ongoing property management costs concerning property maintenance, turnovers, marketing, and anything else pertaining to your rental units. You will need to calculate the maintenance and potential repair or replacement costs of all aspects of your property or properties, and have those amounts in short-term reserves.
Emergency Fund for Repair Costs
What about emergency funds, then? Have an emergency fund for potential repairs and breakdowns from old age or unexpected damage. You will want to be ready with the funds should upgrades be looming on the horizon.
Emergency Fund for Vacancies
You will also need a fund should tenants move out and you have vacancies, which costs property owners several times over their rent for upgrades and repairs in between tenants. If you have a higher turnover rate on average, then you will want a bigger reserve for those times.
What’s the Standard Emergency Fund for Rentals?
The general rule of thumb is to keep six months’ worth of rent in store for every rental unit you own. This sum will take care of most any situation your units could encounter. With the help of Clagett Enterprises or a property manager near you, budgeting can be easy.
Trust the Professionals at Clagett Enterprises for Your Realty Needs
If you’re looking for an experienced property management company, the perfect realtor for your property, or a professional to assist you during your purchase of any home, you can rely on Clagett Enterprises. Clagett Enterprises is a full-service real estate company with almost 30 years of experience in the Frederick and Western Maryland area. For assistance with commercial sales, leasing, management, and development and consulting, contact us online or give us a call at 301-665-6009. To meet our team and see some of our beautiful homes, follow us on Facebook and Linkedin.