As the old saying goes, it’s a good idea to expect the best and plan for the worst. That’s why if you’re purchasing an investment property, you’ll want to set aside resources to pay for unexpected emergencies ranging from a roof that needs to be replaced to a full-fledged climactic crisis after a heating and cooling system gives out. Here are two ways to make sure you’re prepared for the unexpected:
Build an emergency fund. Evaluate the total value of the house and identify what percentage of that value you should keep on hand in cash. In general, it’s recommended that you keep between 1% and 3% of the value of the home for repairs. Landlords also face the possibility that a tenant simply won’t pay the rent. You’ll want to have money set aside to cover your mortgage on a property in the event a tenant unexpectedly leaves or is evicted.
Fix things sooner, not later. The more upkeep you do today, the less you’ll have to invest in major upgrades tomorrow. Keep those tree limbs trimmed, clean out the gutters periodically and check the plumbing inside your rental property for leaks. Preventive care is important for investment property, just as it is for our personal health.
