Cashflow management on rental - create cont fund or reinvest?

3 Replies

So we bought a rental, 30 yr amortization, monthly payments. Is it worth increasing payments to 2 per month, bi-weekly, making extra principal payments to reduce the mortgage? We've allocated expenses to everything we could think of so in reality our cashflow will likely be higher than our "estimate". Assuming we won't need to be doing repairs immediately and vacancy is 0% at the moment, should we just put that "extra" cashflow into a separate fund (earning no interest) or should invest any extra, then pull out (if liquid) or use our existing HELOC to cover any major expenses? How do you manage the cashflow on your rental?

Originally posted by @Cindy H. :

So we bought a rental, 30 yr amortization, monthly payments. Is it worth increasing payments to 2 per month, bi-weekly, making extra principal payments to reduce the mortgage? We've allocated expenses to everything we could think of so in reality our cashflow will likely be higher than our "estimate". Assuming we won't need to be doing repairs immediately and vacancy is 0% at the moment, should we just put that "extra" cashflow into a separate fund (earning no interest) or should invest any extra, then pull out (if liquid) or use our existing HELOC to cover any major expenses? How do you manage the cashflow on your rental?

 This is not for the faint of heart but I put my access cash into a stock trading account. People might think I am crazy but its pretty liquid and I have confidence that it will grow better then your average savings account.. 

Also when you portfolio grows have a HELOC on a property that is free and clear. So you have a safety net if hell freezes over. This is much better then having a property(ies) with a mortgage and excess equity on a HELOC. Its always nice to have a property free and clear and not worried about any liens..

Hi @Cindy H.

Great questions!

Personally, I believe that it is wise to that a separate account for every rental so that it is easy to see and account for all of the debits and credits for that property.

Simplii Financial and PC have good FREE accounts for this type of thing.

It is also a very good idea to keep ~$5,000-10,000 in additional cash in those accounts "in case" something happens.

It is a horrible feeling when you have late rent, with ZERO $$ in that property's account when the mortgage payment is due.

It is only a matter of time until we as landlords run into issues and need cash to solve those issues.

Its a great feeling to be able to sleep at night knowing that you are covered for a few months (6 months) if needed if/ when someone decides to not pay etc.