Saving for expenses vs for the next property

3 Replies

@William Dubinsky Perosnaly I prefer to continue allocating for capital expenditures throughout the entire time I hold a property. I do this because an issue like a blown heating unit, major roof leak or broken pipe can easily run you a few thousand in some cases. A note conservative route would be to take your cash flow (profit) and pump that into your next deal. There’s no point in scaling up if you have to sacrifice your process to the extent you create significant risks for yourself. Have you thought about BRRRing the current property and leveraging it for the next??

Depending on your returns and how recent any major work has been done, it is possible to adapt to the needs of the specific property (i.e. if the plumbing, HVAC, roof, etc. was all done in the last year or two you can focus more heavily on cashflowing into the next property and setting aside a smaller portion as an insurance policy for the next big problems). But then again if there is a big tree leaning over that brand new roof, or if you often get significant hailstorms and the like then the equation may change and you would want to be setting aside more for expectable damages/treatments. 

When you have enough cash saved up for your next move, open up a HELOC on your equity and let that be your reserve account while you use your cash for the next deal. Hopefully you are addressing issue preventatively so you wont really have to use the HELOC while you're low on cash, but it is there for security if you do.

Free eBook from BiggerPockets!

Ultimate Beginner's Guide Book Cover

Join BiggerPockets and get The Ultimate Beginner's Guide to Real Estate Investing for FREE - read by more than 100,000 people - AND get exclusive real estate investing tips, tricks and techniques delivered straight to your inbox twice weekly!

  • Actionable advice for getting started,
  • Discover the 10 Most Lucrative Real Estate Niches,
  • Learn how to get started with or without money,
  • Explore Real-Life Strategies for Building Wealth,
  • And a LOT more.

We hate spam just as much as you