$ set aside for rentals= survival

[Matt S]

in general is there a rule of thumb when it comes to how much $ to set aside for each rental property. $ that would be used for repairs, to cover late rents, etc...?

I have a tenant who is now late 2 straight months and i believe we are going to have to evict. But I'm looking at probably covering $2k in mortgage(2mths) and any repairs...I can't see how if you had 5 houses and this happened how any of you are still in this biz? What is the trick?

[Michael Rossi]

Stambam,

When you're first starting and have only a couple of properties, you're at maximum risk. That's because the cash flow from one or two (or five) properties won't cover big expenses that occur early on in your career. However, as your portfolio grows, the risk diminishes because the cash flow from your properties will cover any big expenses that come up (assuming of course that you bought properly and have calculated your cash flow using real world operating expenses).

So, $5,000 might be a big enough reserve for a rental business that owns one rental property and $5,000 certainly should be more than enough for a rental business of 50 or 100 rentals!!!

Mike