Owning rental property is expensive, and you must make sure you have enough set aside for potential emergencies. While many people are attracted to real estate for the potential of passive income, it still requires a significant investment, so you need to manage your money properly. You never know when an emergency might pop up, so what are a few examples of expenses you need to budget for?
Utility And Maintenance Issues
As a landlord, you will be responsible for keeping the utilities intact. For example, there might be damage to the roof that you need to repair, or there might be a problem with the HVAC unit or hot water heater, and you might need to replace it. You need to have money set aside to cover potential repair and replacement bills for these crucial elements of your home. Even though you might think that home insurance will cover some of these expenses, anything that is considered routine maintenance or natural wear and tear is not going to be covered by your home insurance policy.
Potential Natural Disasters
You should also have money set aside to cover repair bills created by potential natural disasters. Depending on where you live, a hurricane, tornado, severe thunderstorm, or wildfire could damage your property. Even if you have home insurance, your home insurance policy probably will not cover everything, and you will still be responsible for the deductible. You may want to take a look at the weather in the local area to figure out what types of natural disasters you need to think about. You may also want to review your home insurance policy to figure out what is covered and what is not.
How Much Money Should You Set Aside For An Emergency?
You should have money set aside to cover potential emergency expenses, and a strong rule of thumb is to have 6 months of living expenses set aside. This will provide you with an extra layer of financial protection as you try to keep your property occupied.
