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Updated over 5 years ago on . Most recent reply

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7
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Tony Mi
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7
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Preparing for the worst

Tony Mi
Posted

I'm studying up on Buy and Hold real-estate investing. So many of the resources discuss how to get the deals, what steps to take to be successful, but I haven't found many that describe what happens on the worst case scenarios and how good investors overcome those issues. For example, how much in reserves should one have to ensure they never lose the property to foreclosure? What sort of savings should you have on each property in case it goes vacant, has to get evicted on, etc? What are the best steps to take if your property is destroyed either by a natural disaster or one hell of a tenant/accident?

Are there any books that cover these sorts of contingencies fully? I know some folks say things like save 6 months of housing payments in case of, but is there more to it? What would be the least prudent to be safe and what would be considered the most prudent?

Thanks,
Tony

Most Popular Reply

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306
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Michael Lewis Lee
  • Wholesaler
  • Dallas, TX
133
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306
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Michael Lewis Lee
  • Wholesaler
  • Dallas, TX
Replied

Hello Tony!  I hope I can answer all your questions effectively.  This message from a man who is 63 and crippled now but was licensed real estate brier in Texas and a construction manager for about 30 years.  Try to prepared for anything that can happen.

I was and wasn’t properly prepared for that brain aneurism and stroke that stroke that happened when I was 54 just two days before preventing surgery thanks to me taking a MRI and saw that problem but before that happened,I was told by my regular Doctor my condition was perfect.  

Even though I had paid off my house in 1996 and my wife was a computer programmer and making decent money it was not good enough for her not to die from cancer at 59.  I was going to say that you need 6 months of payment reserves on all rental units.

You need full insurance on all of your properties that will pay in case of natural disaster.  Maybe an umbrella policy can save you some money.  Natural disaster is kind of one of those “cross your fingers” things.

Being educated continually and being prepared for anything that could happen is almost impossible but you can try.  Do not try to do everything yourself.  Be able to hire others and delegate.  Remove as many distractions as you can.  

Don’t assume anything will not happen where you should be involved or you have any responsibilities.

Worst cases can happen from A to Z.  You can’t be prepared for anything that has to do towards the future is almost impossible to prevent but be prepared for anything that happens.  The more prepared you are, the better.  The more units you own, usually the better and the less vacancy will hurt you.

For rental properties, it is usually proper to have a separate bank account for deposits.  Strict  screening will usually help you in the long run.  Always think long term when renting and always know that people need to sleep at whenever.

Try to save as much as you can to be prepared for anything that happens.  My wife had been saving for about 35 years but it could not save her life or any insurance either. Stuff happens that you cannot control.

Good luck to you!

.

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