Lubbock, TX · Member since 2017 · 9 posts · 3 votes
When first starting out and resources/cash flow are limited, what are some good strategies or rules of thumb to ensure that things like vacancies or costly repairs don’t render you unable to pay the loan or mortgage on the property? I’m just starting to learn more about RE investing and I keep thinking, “what if i had 5 empty properties with 5 mortgages all due at once?” Obviously I’m thinking worst case scenario.
Any advice or strategies on how much someone should have in reserves to protect themselves from major repairs or extended vacancies?
@Brandon Callahan always make sure you get last months rent and the security deposit for each unit. Depending on the number of units that may help you out a little. Often lenders will require reserves, and even if they don't never be without a decent amount. I have 5% of the actual PP set aside.
I typically like to have 3 months of every bill, per property. The likelihood of needing 6-12months is highly unlikely, also having 5 mortgages that need to be paid, with no money coming in is unlikely. But like insurance you pay in and may never need it.... but when you need it, you NEED it. So comes down to your comfort level also consider it self insurance!