Properties taking a loss--how do you deal?

[Andrew R.]

Hi, I have several rentals that I've acquired over 2-3 years (many thanks to advice from BP). The past 2 months have been a maintenance nightmare, with most of my properties having repair issues, some major, and tanking my income and cashflow. Every email I get seems to be another service or repair issue. I'm reeling financially a bit and not sure how to proceed and work through all this---how do you do it when the hits just keep coming? Thanks. 

[Joe Hines]

@Andrew R.

This sounds so familiar...

Hopefully, you've found over your tenure in the rental property business that these things sort of even out over time.  I think we've all had those few months where it just seems to never stop.  Here's how I've managed to ease that pain somewhat:

• Fund your capital expense accounts:  There is a lot written on BP about this, but I put aside 3% of the purchase price and 5% of rent into an account to deal with the capital expenses.  This helps buffer the hit to cash flow a bit.  I'm not sure that all of your expenses are capital, but if you've got more older homes, you might want to consider this for maintenance expenses as well (I do calculate 5% of rent for repairs).  
• Raise rents: As property tax, insurance and repairs have all creeped up a bit, I've found that I could raise rents. It one meeting with my property manager over the summer, I was able to raise rents across the entire portfolio. This gave me the equivalent of another SFH rental income without buying a new home.
• Ditch the low performers: I've been investing in SFHs for about 7 years now and I've always been reluctant to sell. Now that SFH prices are up, I have started to prune the low performers. I'll hang onto that cash until I find a better performer, especially now that I've learned from my earlier mistakes.

Probably nothing here that you haven't thought of already, but if nothing else, realize that you aren't alone.