Tip #7

Sh*t Always Breaks

Written on August 22, 2012 by , updated on August 5, 2014

Sh*t Always BreaksWhen 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.

photo credit: cote via cc
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2 CommentsLeave a Comment

  • Brian

    I have setup four separate bank accounts. Operating Expense, Taxes/Insurance, Capital & Security. Obviously the secutiry one just sits there, but the others allow me to funnel my funds to these accounts and therefore I know I am safe at the end of the year when taxes/insurance are due. Most landlords, locally, have stressed to me that they spend their money and just “don’t remember” to set aside the money. Whether it be maintenance or personl use, it’s usually gone. I have a total of every property and every expense of what to dispurse into these accounts so I know when the government goes reaching into those pockets, there’s just enough there to make them continue on to the next hard working body.

    • Lucas Hall

      Hi Brian,
      You have 4 separate accounts for each property, or is that 4 account for all the properties that manage?

      Do you manage just your own, or also other peoples properties?

      I’d love to know more…

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