subject: When Real Estate Investing Goes Wrong! [print this page] When Real Estate Investing Goes Wrong! When Real Estate Investing Goes Wrong!
For those of you who own real estate and have been dubbed Landlord, I share with you the absolute worst case scenario of Buy& Hold real estate investing if you've bought properties with good margins.
A few months ago I changed property managers because the previous manager just wasn't cutting it. The new manager came in, collected some late rents, and kicked out a couple of tenants that needed to go. Out of my 18 investment properties, 11 of them are currently occupied, and 2 of those have slow paying tenants. This month and last monthI have $1,000 more in expenses than I do income due to all those vacant houses. I don't have a j.o.b., and I do like to eat something other than ramen noodles.
So, how am I to survive? Well, it's quite simple actually; I have a cash reserve built up from the previous months and years of investing just in case the "worst case scenario" of a bunch of units being vacant at once happens. My cash reserve is enough to cover all expenses on all of my units for 3 months, and my own personal living expenses. Without this, I would be exactly where a lot of other less educated investors are; in foreclosure.
Having a good cash reserve is paramount to your Buy & Hold real estate investing success. Without it, a couple of bad months can wipe you out...and don't expect the federal government to come in with a $700billion bailout for you. You will be just another bad real estate investing story.
We're all in this together!
-Matt
P.S. Even though my actual cash flow is negative by a grand last month and this month, I am still making a small profit since more than a grand of principal is being paid down on my mortgages. My property manager has found tenants for 2 of my houses that will be moving in on the 1st of next month, and is showing 2 of the other houses this week to other prospective tenants. Once all the units are filled again, I will be cash flowing around $3,000 on the positive side after all expenses.
P.P.S. When bought at the right price with the right terms, even the worst market and economy can't stop you from succeeding as a Buy & Hold real estate investor.
