How Much Should I Save for My Rental Property?

Multifamily properties, such as apartment complexes, duplexes, or condo buildings, can boost cash flow and improve net operating income. If you're thinking about apartment investing and purchasing rental properties, we're here to help. Apartment Addicts can help you find, fund, and run different types of multifamily property in the areas you like. Here's an overview of how much you should save to secure your rental property and start earning passive income: 

The Down Payment

Purchasing a rental property requires a down payment which buys you equity into the asset. Banks and sellers need different down payments, but the average percentage is 10-25%. If an apartment costs $80,000 and the down payment is 20%, you must pay $16,000. The down payment is your initial purchase price and affects other costs, such as interest and monthly payments. It reduces your loan amount, which makes paying monthly installments less strenuous. 

If you have enough savings, you can pay more than the minimum down payment required by the bank or mortgage lender. Putting down funds for the down payment is the first thing you should be concerned about when considering apartment investing. Apartment Addicts can also help you explore other people's money, OPM, and programs. OPM programs involve putting together the deal and inviting other investors to fund the purchase. Here are some tips for saving enough money for the down payment:

• Deposit a predetermined amount to a designated savings account automatically every month.
• Set up a separate savings account with limited access and huge penalties for early withdrawals.
• Focus on paying off your debts to reduce the monthly expenses and interest you'll need to pay.
• Shop around for the best prices for your items and get rewarded for purchases through points & vouchers.
• Save any unexpected money you earn and sell unnecessary things you don't need, then save the cash.
• Match your monthly nonessential purchases with your monthly savings and look for accounts with higher interests.  

Additional Expenses

When funding an apartment, you'll pay additional expenses like closing costs and repairs. Closing costs are expenses, besides the down payment, needed to bring the closing table. Examples include loan origination fees, surveys, taxes, property appraisal fees, escrow funds, and attorney expenses. These added expenses are often expressed as a percentage of the loan balance. Repairs are other costs you must consider when saving for a rental property. Find out how much repair is needed before you can rent the property and save up for that too.

Saving enough funds for the down payment, closing costs, and repairs allows you to start taking in tenants and earning passive income. Seasoned investors also save up for post-purchase expenses, such as vacancies and maintenance. When people move out of the apartment, it can take months before others rent it. This creates an income deficit. You must also complete maintenance before another person comes in. Consider saving enough for maintenance and vacancies to help you cover such costs once you buy the property.

Start Planning Your Apartment Investing Today

Following a sound plan is the best way to go about apartment investing. At Apartment Addicts, we provide accelerated, intermediate, and mastermind programs for aspiring rental owners. Our multifamily investing programs coach you on how to find, fund, and run your apartment and expand your investment portfolio. Contact us to learn how to start, scale, and perfect your multifamily business.