What to do with rental income?

[Justin Heminger]

My wife and I bought our home a little over a year ago and due to me being in the military, we are moving. We decided to rent out our home as the market doesn’t indicate a profit if we sell. Our plan is to rent it out for 5 years and look to sell then. After our mortgage HOAs, maintenance etc., we are looking at about $240 in cash flow. My question is, do I put that in a high interest savings (currently 2.05%) or re apply it to principle? My experience with all of this is brand new so be gentle! Thank you all in advance.

[Nathan Gesner]

First and foremost, you need to build up a reserve. You could experience a major expense like roof replacement, a tenant that fails to pay rent and trashes the place, or just a long vacancy. Make sure you have a healthy reserve to cover those unexpected issues.

Once that's established, save up for your next investment!