Don't forget to have a cash reserve!

[Cal C.]

One of the most important things you will need when investing in real estate is access to readily available funds to make emergency repairs. Emergencies will happen and often at the most inopportune times. These funds can be in savings, or they can be cash available on your credit card (definitely not recommended).

Pipes freezing and bursting, HVAC going out during a hot summer or a cold winter or an unexpected vacant house that needs lots of repairs are all examples of times when you are going to suddenly need to access cash FAST!

As you go along you'll get a feel for how much cash you need access to. But to begin I'd say at least $2,500 for the first house. Also just because in the first year or two you don't have any issues it doesn't mean you are not about to have two or three emergencies in quick succession. So please don't get complacent.

[Patrick L.]

You could spend that entire $2,500 in a week if the right repair came up. A new roof would cost me double that. A new AC system would use that entire budget and maybe more. What if the rent is unpaid for a month and it takes you another month and a half to complete an eviction? And then the place is a mess and you have $3,000 in repairs and another vacant month while you get it rent ready and find a new tenant? And then you have a mortgage that you still have to pay every month? It happens to people all the time and in that situation on an $800/month house you could be out $7,000 in lost rent, legal fees and repairs before it's all over.

It's hard to budget for just one house, it gets much easier when you have more....If I only had one house I'd probably want 6 months of rent as my reserve to be safe.