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With HVAC replacements reaching $15,000, landlords are advised to save for unexpected major repairs.
How much should you set aside for your rental property's emergency fund? It's a huge question, and the answer might surprise you: You need at least $15,000.
Why $15,000 is the magic number. The amount you should budget for your property repairs is $15,000. This figure represents the cost of replacing one or two HVAC units, which is likely the most expensive repair that could come out of your pocket. In my market, HVAC units used to cost around $6,000. Today, they're closer to $15,000. That's a significant jump, but preparing for such expenses is essential.
Other big-ticket repairs. Of course, HVAC units aren't the only potentially costly repairs. Water heaters, for example, used to be about $1,000 but now cost much more. However, these costs are still well under the $15,000 you should have saved. You'll unlikely need to simultaneously replace a water heater and an HVAC unit. Therefore, maintaining that $15,000 in your emergency fund should cover most major repairs that could arise.
"Being financially prepared ensures you can handle unexpected repairs without stress."
Insurance and other considerations. I'm assuming you have insurance on your property. Your roof, for instance, should be covered by insurance, so you won't typically have emergencies there. However, HVAC units can fail unexpectedly, especially in the middle of summer, requiring immediate attention and funds.
So, save that $15,000 and have it ready for significant repairs. If you need to dip into it for expenses like siding or other maintenance, rebuild your emergency fund up to that amount.
I hope this recommendation makes sense. Being financially prepared ensures you can handle unexpected repairs without undue stress. Contact me if you have any questions about budgeting for your rental property. I'm here to help you make informed decisions about property management.