When property values were shooting up like crazy every year, cash flow wasn’t quite as important to investors as simply acquiring properties. Now with flat or even negative markets the realization for many is that without cash flow your business of being a landlord can grind to a halt.
When analyzing properties cash flow should be the number one priority for investors right now. Appreciation of properties may be the gravy that helps make a property even better and that will come with time, but cash flow is the meat and potatoes that will carry you through good times and bad.
If you haven’t established a reserve fund from the start, your main priority for the first year with a new property is to ensure that you start saving up all the cash flow from the property you can until you have a nice comfortable reserve to fall back on in case of need. This reserve can be used to replace a furnace, fix a roof and even cover a few months of vacancies in tougher times and most importantly, it takes the pressure off you as the landlord if something does come up unexpectedly.
This reserve amount can vary from property to property, but a safe amount to have set aside is typically somewhere between $3,000 and $5,000. This is enough to cover major repairs if they should appear and several months of mortgage payments if you have vacancy issues.
If you missed Tip #1, it is available here, Landlord Tips #1, Don’t buy where you live, buy where tenants live
If you missed Tip #2, it is available here, Landlord Tips #2, Spend Extra Time Screening Tenants, So You Don’t Spend Time Evicting Them Later
If you missed Tip #3, it is available here, Landlord Tips #3 – Being a Landlord is a Business, Treat it Like a Business
If you missed Tip #4, it is available here, Landlord Tips #4 – Don’t React, Pre-Act
If you missed Tip #5, it is available here, Landlord Tips #5 – Take The Emotions Out
If you missed Tip #6, it is available here, Landlord Tips #6 – Be Slow to Choose Tenants and Fast to Take Action on Problem Tenants
If you have made it this far, are you interested in two bonus tips? Leave me a comment or tell me what you think of this information so far and watch for two more tips that explain two more essential aspects of being a landlord and Real Estate investor.
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This is Great stuff, you should put all these tips together and publish small handbook for investors??
Stef
I agree with Stef. You have a lot of valuable information. Thanks for sharing.
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