Avoid Over-Investing in Rental Property

by Corey Klines
(Seattle, WA)

Investing in rental property can be highly profitable but be careful not to bite off more than you can chew. While it is hugely tempting to invest with borrowed money from bank, things can turn ugly and bite you in back if you are not careful.

While you invest with borrowed money, you are investing with leverage. This leverage is a double edged sword that will multiply any gains or losses stemming from your rental property investments. If you can't afford to keep up with the mortgage payments, you may end up facing the dreaded foreclosure.

That's why it's so crucial that you have a reserve of cash stashed away just in case.

This sum of money should be enough to cover at least 3 months of mortgage payments to handle your tenant-less periods. The money will come in handy for any routine or emergency repairs that is required to maintain your rental property in a habitable condition.