It is like having “Plan B”, except it is not.
When it comes to property investing, it is very much like running your own business – always have a “rainy day”/ “spare” – aka contingency budget in place. The last thing you want to see is a 0 balance or even worse, a negative one (if you have an overdraft) in your bank account. That is code red for “get your act together”.
If you leave this, you are bound to start having resentments;- questioning your objectives, your strategies and even lashing out on your partner/ loved ones or worse, yourself. You have to face that sometimes with any investments, no matter how profitable, comes with some risks.
Any business entrepreneurs will tell you, you need to know that there are days that you might experience a loss. The higher the return, the higher the risk. Yes, that’s right, even though you have accounted for these calculated risks, there are bound to be certain events that you don’t expect to occur or you don’t know existed in the first place.
So, budgeting is paramount – it is the solution. If you have not already done this, please do. I have to admit, most of our success come from organised life, organised money and organised planning. Guys, the best way to do this budgeting is to set aside three (3) month expenses aside for this contingency account.
Always pre-empt this because you cannot expect yourself to be 100% in control. Here’s some common/ not so common setbacks that property investors face;- sudden unexpected high vacancy rates, crazy tenants or even flash flood.. Even thought the property is highly positive geared (i.e. property is generating more profit than your expenses), sometimes it is best to be safe than sorry, right?
So even though you have insurance for all these scenarios – it doesn’t hurt to keep a contingency of a three-month grace. If you are as organised as some (*cough US cough*) then your insurance companies should cover all losses – but having this plan just gives you the extra assurance for the mind and of course, any extras left over will become bonus savings at the end of the year!
Article Source: EzineArticles.com
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