Organizing for my first investment

[Mark Rosenberg]

Hi All,

I’m currently in the process of purchasing my first investment property and was curious how you organized your finances to prepare:

1) do you have a separate bank account for your investment properties?

2) what % do you save for capex or repairs? (My first property will be a brand new build)

Any other valuable information is much appreciated. Thanks!

[Jody Sperling]

1) No need to have a separate bank account for your first investment property, but it doesn't hurt either. Because we only have one investment property at this point, it's all under one bank account. We don't even have an LLC because if someone wants to sue us, the lawyer fees alone will push the zero button for us. (That said, we have a six-figure emergency fund. SO we take resources very seriously and invest cautiously.)

2) This depends how you structure your loans/lines of credit. If you have a line of credit at a low interest rate, why keep YOUR cash available for CapEx? Liquidity matters. We ride our lines of credit down with aggressive repayment between investment purchases. (Especially in your case with a new-build, your CapEx will be cheap over a 5 to 10 year period.)

3) Don't go with a captive agent: Farmers, State Farm, All State, etc... I'm a licensed P&C agent who works for an insurance carrier, and I can tell you from experience that independent brokers are the best option. They'll quote your properties through numerous carriers and find the best blend of coverage for the cost. High value. I like Global Green agencies, but any independent will be excellent.

Best of luck! Investment properties are fun, and lucrative if you treat them like a business.