Wednesday, November 11, 2009

Hot Tip for Landlords

Hot Tip for Real Estate Investors, particularly those in Rental Property, is Always Have a Reserve.This tip is especially critical if you plan on fixing up the property before renting. That of course seems obvious but it is equally essential to have a reserve for those in-between tenant times, when repairs and upgrades will always be needed. If a tenant is willing to settle for shabby quarters in disrepair, they are not the kind of tenants to whom you want to rent.You do not want to face the prospect of having to qualify for a new loan if you have run out of cash, the property goes vacant, and not only are you losing income, but the carpet and paint need replacing.If you own your own home, you should be sure to have an equity line of credit open and available for use. Oftentimes when you most need credit is when you are least able to secure it, so it makes sense to plan ahead with this simple step. Not only can you then finance and borrow with your own money, but you protect yourself in the unfortunate case of lawsuits. Even if your house is paid off, the attorney sees a mortgage amount of your HELOC, and your assets are protected.It is also important to realize that a lender will only count 75% of rental profit as income. They know that 25% of that cash flow will be needed for repairs and vacancies. In securing future loans, it is critical that you consider that.Remember, be prepared with a ready reserve. If by some miracle you don't need it, you have lost nothing, and if you do need it, it may make the difference between disaster and success.

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