How to Prepare for the Costs of Owning a Rental Property in Marietta, GA

When we talk about the costs of owning a rental property, we need to tell you that owning rental investment properties is not for everyone. Many investors want to make the investment and walk away, like you would with cash savings or a CD. That’s not possible with property. But, most people do like to have a higher return but without the risk of the stock market. A rental investment property is one of the best ways to achieve that.

 

Now that I own an investment property, how should I manage my finances?

You need to have a savings account or a reserve fund that’s dedicated explicitly for that rental property. It cannot be your retirement account or a general savings account; it needs to be for your property only. If you choose to depend upon that month’s rental payment to cover the same month’s mortgage payment, you’re setting yourself up for failure. You don’t want to go down that path. Be prepared for unexpected big ticket maintenance items, as well as vacancies. They do happen. The best thing to do is create an account specifically for the property.

 

How much money should I have in that account?

This is sticker shock, but I recommend six to nine months of rental income in that account. That’s a lot of cash, and it’s a challenge to accomplish that. Take it slow. You must create a path to do this over time. One of the best ways to start is to dedicate a small amount out of the rental payment every month. Build on it slowly month by month. Folks can also bridge the gap by having a credit card that they don’t put anything on. Keep a zero balance and don’t use the card for anything other than expenses associated with the property. That will bridge the gap until you have a savings.

 

What if my mortgage takes all my rental income?

How you finance the property has nothing to do with the rental values and investment value of the property. It’s how you acquire it. if you can only put a small amount down, you’ll almost always be in that position. The mortgage will be overwhelming and then you’ll have to feed it every month. Most professional investors put 20 to 30 percent down. When they do that, there’s an equity cushion that’s created. So, you would have to dedicate $100 or $200 a month to your reserve fund, and it will add up quickly.

If you plan for this up front, it’s much easier to manage. We can help you solve any problems your property may be causing. If you’re preparing for this kind of investment, and you want to know how much to save for home maintenance and other expenses, please contact us at McCreary Realty Management. We’d be happy to tell you more about our experience with property management in Marietta, GA.