TIP OF THE MONTH - November 2013
Creating a Budget and Managing Your Cash Flow
Source: Property Management for Dummies
By Robert Griswold
Many Owners rely on cash
flow from their rental properties not only to cover their expenses but
also to supplement their personal income. But particularly if you
are a small rental property owner, you need to have a built-in reserve
fund set aside before you start taking out any rental income funds for
personal reasons. Maintain a reserve balance large enough to pay your
mortgage and all basic property expenses for @ least one month without
relying on any rental income.
Set up a bank account where you set aside money for anticipated major
capital improvements. For example, you may own a rental property
that will need a new roof in the next five years. Rather than see
your cash flow wiped out for several months when it comes time to pay
for that new roof, you can begin setting aside small amounts of money
into a capital reserve account over several years.
Do not forget to allocate funds to cover semi-annual expenses
such as your property taxes and potential income tax due on your
rental property net income.
This web page was updated on 10/31/2013.