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.

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This web page was updated on 10/31/2013.