Effective real estate entrepreneurs are always prepared for the next investment opportunity.
That’s one of the reasons they’e so effective – makes sense right?
Being prepared for those unexpected expenses that inevitably come can separate your real estate business from the rest of the competition.
Maintenance and repairs are just normal costs of doing business – they can become problematic when you don’t have the needed cash to cover them.
Property investors who struggle with this issue do so because of a lack of planning and budgeting for these items. Regardless of how well maintained an investment property may be, roofs leak, pipes can burst and doors can accidentally get ripped off the hinges at midnight. It happens.
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So the best course of action is to plan ahead and budget for these normal operating expenses well i n advance of anything ever breaking. Ideally, the best time to begin thinking about your repair and maintenance budget is before you actually purchase the investment property.
In order for a property investor to make an accurate assessment of a potential real estate investing deal, he must plan for maintenance and repairs in the operating budget.
Unfortunately, many struggling real estate investors fail to allocate the necessary funds for both maintenance and repairs. My recommendation is to allocate 10% of the gross rental income to these expenses.
The majority of investors only take the mortgage, property taxes and insurance into consideration when evaluating potential investment opportunities. As you can see, this is a big mistake and one of the main reasons so many real estate investors struggle to make it in this business.
Major Investment Property Repairs
Planning for the larger repairs on your investment properties is a prudent move. Seasoned property investors know that there will come a day when both the roof and central air conditioning system will need to be replaced.
Buying investment property requires that the investor observe the current condition of the roof as he is evaluating the investment. Does the roof have ten years of useful life left? Or is it more like two years? Or does the roof need to be replaced right away?
This same approach can be taken when evaluating the property’s the air conditioning system. By taking into consideration the natural lifespan of these more expensive items, you can more accurately plan for the replacement.
Before you even think about evaluating any new investment properties for sale, make sure you have adequate cash reserves to cover these larger repairs. There are times in this business when a real estate investor needs to be able to write a lot of checks. This is one of them.
