Every business has its own risk you need to deal with. As in property investing, there are also risks and weighs you need to consider and anticipate. Besides, there is also the unexpected that you might need to face in the future. You see, anything that could go wrong should be anticipated in some ways so that you wouldn’t be suffered from the consequences. One of the most effective strategies to deal with the unexpected in your property investing is cash buffer. Building up cash buffer is a mart way for property investor to maintain their investment and avoid losing much money.
Cash buffer and property investing
There are possible scenarios which cost you money such as when your tenants are late in paying their rent or when your property is left untenanted for certain period. During those times, you need to remember that you still have to pay your loan. They don’t wait until your tenants pay their rent or until your property is tenanted. In addition, there is a lot of possible cases of emergency that could happen to your property such as broken heater, leaking pipes, and many more. Those situations sound simple but never easy to handle in reality.
Those situations can be a test for those who can survive and can’t. Those who can’t handle the situation might leave and retire with little to no savings. Some investors just give up when they keep dealing with those situations while they don’t even get profit they aim from the beginning. However, property investing is never easy. In facts, it has its ups and downs. However, it doesn’t happen only to property business. Other business face similar situation more or less. The point is, dealing with the unexpected never been pleasant but you need to face it either way. By dealing with them, your property investment can survive in the long run and even grow bigger.
Cash buffer is like a life saver in property investing, it can prevent you from losing so much money from unexpected and expensive emergencies. It is what you can rely on during your lowest and weakest point in your property investing. There are many ways you can do to build up your cash buffer. Of course it is not that simple especially when your cash flow is not yet stable. However, you will find it very helpful to have cash buffer during the hard times. It makes all your effort to build your cash buffer worth it.
There is no ultimate calculation as to how much cash buffer you should build. It usually depends on your rent income, property, and regular expenses. However, it is highly suggested that you at least have $5,000-$10,000 per each property you own. That much is enough to deal with emergencies such as immediate repairs that cannot be delayed. Cash buffer is also very helpful when the interest rates increase. You don’t have to deal with unnecessary drama if you can regularly save up from your rental income and build up cash buffer.