Welcome to short-term rental riches will discuss investing in real estate but with a specific focus on short term rentals quick actionable items to acquire manage and scale your portfolio I’m your host Tim Hubbard.

Welcome back to Short-term rental rich’s family ladies and gentlemen we are back. And I am back in an airport lounge story of my life. What I love to travel and so. I’m often in airports and I’m in this lounge there’s not really one here’s the figure you know what this is a good time this is a good time to record another episode and hopefully not the so that you guys will enjoy initial find helpful and that’s very necessary and relevant to any real estate investor really any business owner to protect ourselves from unforeseen issues or challenges are things that come up that we aren’t expecting and it could hurt us financially and protect ourselves from these types of things we want to have reserves. Or savings rainy day funds whatever you wanna call it and when we are buying properties a lot of times these are gonna be required right right in the on set from the lender they may want to see you know a few months reserves actually most often they always want to buy I just wanna take this time to remind all of you how important it is so that we don’t find ourselves in a position that is stressful and the ditch Turner’s Astor intimidates us from continuing on in our our investment journey and I think this podcast is is more relevant or timely as well because I just I close on a property recently that need some pretty big repairs and now these are things that I already knew ahead of time because the don the due diligence and done inspections but one of the items that sort of lingered on even after the closing was the roof I apologize by the way too if you’re hearing background noises I’m in Rio de Janeiro right now and I was in it he’d been here the last couple weeks and I’m heading to Florida office cool cool little island in the southern part of results will be there for a few weeks before coming back here actually a live results it’s one of my favorite places in the world and learn Portuguese and I guess I’m going on a tangent here but just as it said in the background so Paula Jones again for any noise in the background.

But anyways back to this property so I close on the property I knew needs a bigger bears and one of those was the roof and it’s not a cheap roof this is a 9 unit apartment building and I did get bids before and it’s probably gonna be about $60000 for this roof it’s very high up it’s pitched steeply and it’s on a historic building so it’s not like your everyday roof now we closed on the property it was one of the items that I was negotiating on and what we’re trying to do was have the current owner.

The person I bought it from file an insurance claim because it did have hail damage and in this city this is in Oklahoma if there is enough hail damage the insurer could count as a total loss replaces. So this sort of worked out well for both the seller and myself so that I can get stuck with the $60000 Ruth so because of that would have taken a lot quite awhile to figure out if they were gonna change it or not we close on the property first. But had a condition in our contract that said if the roof was not able to be replaced after the inspections after the engineers from insurance company go out they would discount the sales price by 20000 so here we are a couple months later actually it’s been almost 3 months now got a phone call and getting updates you know waiting around waiting around and they said that they were not going to replace the roof want Walt WA $60000 roofs is not a cheap one now it’s not leaking really you know it’s it’s in good shape there hasn’t been any major issues with it but it’s on its last leg and so we will need to be replaced at some point in the near future now on the bright side part of the contract that we negotiated said if they didn’t change the roof that they would credit $20000 to me off the sales price so that money was held in escrow after the close. And they just wrote me a check for $20000 so that will go towards it but I need to make sure that I have funds available for this roof and for other groups and for plumbing and all sorts of things that may happen in the future so that’s what we’re talking about today the reserves that we need for properties end for short term rentals because there’s lots of little things that can happen with short term rentals we want to make sure that we have reserves and we’ll talk about short term rental reserves what I think you may want to budget depending on the size of your property. But in regards to properties in general. We want to first have a good idea of what these things cost we can do that just by getting estimates from contractors. And those big capital expenditures on your properties are going to be things like the roofs or your H. fax system your he ventilation air conditioning and depend on where you’re out in the country in the world you may or may not need this or may only be part of it but it can be a big expenditure and Japan where at can cost a lot of money or can be a little bit of a. You also want to make sure the just have just a rainy day fund one if the plumbing backs up or a tree falls on your property or there’s a natural disaster and you have a deductible on your insurance only covers after a certain amount you just want to make sure that you are keeping a reserve for these types of things now that the beautiful thing about acquiring more more properties is that the reserve you need for each property can go down essentially because let’s just say you were keeping 5 or 10 percent of maybe the property value that could be way too much in a lot of cases but. The more properties you have if you’re keeping the equal reserve the chances of something happening to all those properties at the same time is very unlikely so the more properties you have the last reserve you can have her property but you still want to make sure that you can cover all those big expenditures and at least a handful of any of them if they were to happen at the same time when you’re getting your loans for these properties a lender’s gonna want to see this research to to protect themselves to make sure they can get their their mortgage payments their loan payments and some of them may require 3 months some of them may require 6 months or even more they will let you count things such as retirement funds any sort of funds that are more or less liquid usually they’ll let you count but you want to have them anyways there’s nothing more stressful than getting caught without the funds especially if you have tenants in a property where there’s issues and it’s making it unpleasant for them to live there you gotta make sure you have some reserves some savings some rainy day funds now when it comes to short term rentals these things are usually a lot smaller but they happen more often so those can be things like in our gas brake glassware or the linens get stained or make up on the towels you may find that one more than all of the others but I think just an easy rule of thumb is that if you have a one bedroom property maybe budget an extra $0 a month for these items the wear and tear it’s a 2 bedroom add another 0 Bucks 3 better mad another 0 Bucks so 3 bedroom let’s just say $300 a month now that’s $3600 for the year but 3 bedroom you know you’re probably running out a pretty decent rate and just good to have that set aside now if you have big issues with their short term rentals.

In TV goes missing someone punches a hole in the wall we have ways to recoup these funds through the resolutions the Airbnb or their insurance policy which you know I hear lots of different opinions for your own insurance and I can do a whole separate podcast on these other types of protections will do that will break those down in the future but just at the at the minimum level for your short term rentals you wanna make sure you have some funds set aside for all these small little items that may go missing because you never know what may go missing. In that would blow your mind I mean a toaster for example do you ever picture yes stealing your toaster.

Well I didn’t either but you never know but how much is a toaster cost 15 Bucks 17 Bucks 20 Bucks on Amazon it’s not a lot it might happen but all these little things can add up so you want to have some funds to replace them. And on that note is it worth going through all the trouble to messaging gas and trying to recoup your $17 for toaster. Maybe maybe not I don’t think it is I just kinda right the small things off because you also risk getting a bad review of this at all I didn’t steal your toaster it could just lead them to write maybe not as pleasant review as they would have originally so I kinda just let the small things go if there’s a talent got stained and it was accidental or something like that we’re not charging our guest for that but if they room 3 or 4 at the same time then absolutely we want to reach out to them for that.

So hopefully you have some fun stored away for a rainy day. For your properties for your business for whatever it is so that you can withstand some unforeseen circumstances the more comfortable and be able to live just a little more stress free without that worry up there it’s a short term rental unit under Bucks per bedroom I think that’s a good rule if it’s a large capital expenditure for real estate property gets investments know in advance how much these things cost so much a roof cost how much your H. back because the water heater kitchen appliances have a good idea of how much these things cost and keep a good fund to prepare for those things because you’re gonna need anyways you’re gonna need it anyways if you want to continue real estate investments because the lenders are gonna want to see it.

So I hope you guys are having an awesome day wherever you are in the world talk to you next time.

Want to get on the fast track to financial freedom through short term rentals what all searching the properties you. You want to make sure that you acquired the right properties I want to give you my. Yes there is no charge to my gift to you for being one of our subscribers just the rest methods.com that’s R. E. S. T.. methods.com.

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