For those of you who own investment real estate and have been dubbed “Landlord”, I share with you the absolute worst scenario Buy & Hold real estate investment if you have purchased properties with good margins. Note: Although I live in Houston Texas and wholesale great investment properties in Houston, most of my real estate is in my hometown of Columbus Ohio. If you want more information on any of these sites, I can help you.
Last year I changed property managers because the previous manager just wasn’t up to it. The new manager arrived, collected late rents and fired a few tenants who had to leave. Of my 18 investment properties that I keep to build long-term wealth, 11 of them were occupied and 2 of them have slow paying tenants. For the first three months after they took over, I had $1,000 more in expenses than income due to all those vacant houses. I had no job (Just Over Broke), and I like to eat something other than instant noodles.
So how did I survive? Well, it’s quite simple; I had a cash reserve built up from previous months and years of investing just in case the “worst-case scenario” of a bunch of vacant units happened at once. My cash reserve is sufficient to cover all expenses for all my units for 3 months, as well as my own personal living expenses. Without it, I would have been exactly where many other less educated investors were; in foreclosure.
Having a good cash reserve is essential for the success of your Buy & Hold real estate investment. Without it, a few bad months can wipe you out…and don’t expect the feds to come up with a $700 billion bailout for you. You’ll just be another bad real estate investment story.
We are all in the same boat!
PS Even though my actual cash flow was negative by about a grand per month for 3 months, I still made a small profit since more than a grand of the principal was paid off on my mortgages. My property manager found tenants for 2 of my homes that moved in on the 1st of the following month and filled a few more of my properties the following month. When all the units were refilled, the cash flow was about $3,000 per month on the plus side after all expenses.
PPS When bought at the right price with the right terms, even the worst market and the worst economy can’t stop you from succeeding as a Buy & Hold real estate investor.