How do you know if you have enough money to invest in real estate? In our opinion, you must be able to answer YES to all of the following questions:
- If a tenant moves out unexpectedly, do you have enough money to pay the mortgage, property taxes, insurance each month for 3 – 4 months?
- If a major repair is necessary, such as water damage to floors and ceilings, do you have enough money to pay a $3,000 – $5,000 repair bill?
- If a tenant stops paying the rent, do you have enough money to pay the monthly expenses on the property, and pay an attorney to begin the eviction process?
- In a worst case scenario, if a tenant stops paying the rent, and remains in the property while damaging the property, do you have the temperament and money to manage the eviction process to a successful outcome?
Think long and hard about these questions because no matter how much you screen prospective tenants, sometimes you get a bad apple. As a beginner real estate investor, successfully managing tenants and scenarios is critical to your physical and financial health.
If you answered YES to all of the questions, then you have a level of confidence (and finances) necessary to make the next move. For additional ways to know if you can afford to purchase rental property, click here. To learn more about screening prospective tenants, click here.
The opinions expressed herein are solely those of the Author/WebMaster. Before taking any action, please consult your real estate, financial, and legal advisors.