Plan It Out

Plan It Out

Mortgage Is Not A Dirty Work With Rental Property

For a property you are considering, calculate the monthly rental income and subtract the expenses. This reveals the cash flow you can reasonably expect. Your
Carte Financial Advisor can help with this.

In the expense column: along with the monthly mortgage payment, add in 1/12 of the annual taxes and insurance. Estimate 10% of your rent income if you are
planning to have a property manager.

Include a vacancy allowance of 3% of the income, to develop a prudent reserve. You want to build up 3-6 months of rent revenue. Estimate repairs and maintenance in the same way, as a reserve toward future repairs. If you are paying the utilities, calculate this from historical records.

The data will reveal your potential cash flow. If it’s projected to be negative, this property is not worth your investment. Without positive cash flow, you risk creating a liability instead of wealth.