Here is a powerful real estate Investing tip and a reminder to our clients!
Use a separate bank account for each property. It serves 4 very important functions
1. We pay taxes and insurance yearly to maximize cash flow. The money is saved monthly in the account. In addition, saving for large repairs such as a roof or furnace are saved here. We use excel to track it and calculate disbursements to our joint venture partners.
2. The security deposit is stored here and because the balance never falls below that amount we can prove we didn't use the tenant's money for our own benefit.
3. We keep three months of operating expenses in the account (mortgage and Condo fees x3) so we are never pressured to use credit or place a tenant we aren't sure about. In addition, on your annual financial analysis, I include a vacancy allowance and maintenance budget for you to save it up if you don't already have it. When buying a house you take possession and the mortgage is due at the end of the month so if you have it rented at possession the extra month's rent is the start of your "sleep better fund" another little known fact is banks will generally allow you to skip one payment each year. Of course, it gets added to the back so it costs you more interest but it is an emergency tactic that could really save your butt. Especially if you have 10 mortgage payments to make each month.
4. Most banks have a deal that if you maintain a certain balance in the account there are no fees so the bank account is free most months. The account statement is the ledger for your accountant and proof to your joint venture partners that your accounting is accurate.
22% of Canadians supply housing for 50% of the rental housing market. Everyone knows the longterm returns are more predictable with better yield so why doesn't everyone own rental property? There are 3 major barriers to entry.
- Most often you need 20% down. The average house price is $421,000 so that's $84,200 Dollars to save up.
- Managing real estate isn't passive. It takes an assertive and patient demeanor, time and hard work.
- Real Estate investing is a vast industry with many asset classes and strategies. Not every property is a profitable one to own. Knowing what, where and how to buy is a skill that takes training.
The good news is there is always a way and our job is to guide you to overcome the barriers so you can live with financial peace and freedom. Contact Tony to learn how you can do business with Avail Properties Inc.