When trying to come up with a name for Landlordology, my wife thought “Sh*t Always Breaks” was the perfect name for an educational website for Landlords.
I politely told her that “it wasn’t going to happen”, but that the point she was trying to make was a valid one.
Whether it’s a toilet flapper or a furnace, stuff is always going to break! What you need to realize is that these repairs don’t have to be headaches, and definitely don’t have to be unexpected.
Here are two tricks to handling the inevitable truth that “Sh*t Always Breaks”.
Keep the Money Separate
To mitigate this risk, you should have a separate bank account to handle the money to and from your rental properties. When you collect rent, deposit it in this account. When you pay contractors, use this bank account.
Keeping everything separate will make tax-time easier to manage, and you’ll receive more favor from the IRS is they ever audit you. If you allow some of the profits to remain in this account, then you can easily pay for unexpected repairs when they arise.
Plan to Replace Appliances
Use a standard appliance life expectancy chart (example 1, example 2) to determine the life of your appliances. Plan for them to break down and keep an emergency fund of at least $1000.00 for repairs.