Investing | Making Sure You Can Afford Rental Property Investing

One reason why it is recommended that you have at least the total of six months worth of mortgage payments saved up before investing in rental property is this- tenants can be unpredictable. You may have a unit that ends up unoccupied, and if you need to repair or renovate it before it can be rented again, you are looking at not only the cost of renovation, but the cost of an unoccupied rental unit. While major damage from tenants is rare, it is certainly a possibility it is prudent to keep in mind.

Another common problem is that when a tenant fails to pay rent, it can take months to go through the eviction process to get them out of the property so that you can rent it to someone else. While you can keep them on the hook for the money owed as the remainder of the lease, this is not a guarantee that they can or will pay it in an efficient manner. While this risk can be easily offset by careful tenant screening, it has happened to even the best landlords at some point in their careers.

You also need to have money saved up in the event of an unforeseen emergency. Septic tanks can back up, heating and cooling systems can fail, and appliances can stop working. Frozen pipes can cost thousands in cleanup and repair, and even acts of nature can end up costing you big money. You need to have enough savings to cover repairs immediately so that your tenants have a safe place to live and you can keep your property in safe, working order.

Keeping money aside in the amount of at least half a year's mortgage payments is about more than ensuring you can pay your mortgage, it is about being able to handle any problem that comes your way. Rental property management certainly involves risks that standard property ownership does not, and you need to be financially capable of taking care of anything that arises in a prompt and efficient manner.