Investment is a variable which changes according to market conditions. It is difficult to determine the amount of money you need to keep in reserve for rental market. Any real estate investor who wants to invest in rental market should consider the following factors.
Stability of Your Local Market
If rental market rates in your area are low, you can afford to maintain fewer reserves. It is a good idea for the property owner to keep one month’s rent in reserve. There are instances where you have to press charges against tenants who are not paying rent which might cost you more. Evicting your tenant is a very lengthy procedure. In cities like New York, it will take years for the court to convict the tenant. Additionally, collecting back rent after conviction is next to impossible. To avoid this problem, you should be extra cautious while selecting your tenant.
Maturity of Your Property
The landlord’s expenditure on the house mainly depends on the age of that particular property. If your property is relatively new, you will not have to spend extra cash on maintenance. On the other hand, if your house is old, you might need to keep aside a large amount of cash for repairs. It is highly recommended to hire a property inspector before buying a house for rental market.
A few people know that real estate in low income areas gives you more turnover as compared to high income areas. Multi unit buildings in low income areas attract a lot of potential tenants.
Secret to Success
For most regions, it is a good idea to keep reserves equal to three moths rent of your property. Doing this will help you run your business smoothly.