When buying first duplex

Do you have to be able to cover the mortage if both sides are empty or are you banking that you will mange it well enough that you will never have to cover the entire mortgage from your own pocket?

If I waited until I got enough raises at my job to cover another mortgage I would never buy my first property. I am planning on have enough cash and credit to fall back on incase I get into trouble.

Any info would be appreciated.

Most banks want you to have 6 months of Principle, Interest Taxes and Insurance (PITI) in some kind of account. They don’t want 6 months of the rent, just the PITI. You really don’t have to have it in a place that is accessible (I use my 401k that I can’t get anyway). You realistically can look at the place being vacant 10% of the time. That is each one 5% or 10% total. You need to have that much cash liquid.

If you are concerned about holding rentals without a fluffy bank account for your reserves, I would suggest completing a few RE transactions using other techniques of investing that could put a few thousand dollars (maybe even $10k over a couple of transactions, depending on your area and your negotiation skills) in your pocket before diving into landlording. Wholesale a few properties, lease-option one or two, and you will have some reserves in your account.

If you don’t have the reserves to tough out the rough times, landlording can be not so rewarding. A few of my pre-foreclosure clients have been investors/landlords. They build a house of cards when they accummulate a lot of properties in a short time frame, and have just enough rental income to cover the mortgages. Eventually, one tenant will abandon the property or not pay or whatever, then they are stuck with a trashed unit and they have no way to pay for the remodeling. Thus, they cannot rent it. Thus, income spirals downward, and then they are robbing Peter to pay Paul.

If you are serious enough about RE investing, don’t bank on your job for anything investment related (except maybe to pay your personal bills to maintain/increase your credit rating). This industry is not real estate investing necessarily, it is CREATIVE real estate investing so get creative. Get creative, complete a few deals to put a few thousand in your account to start.

Just my $.02

i would echo the previous comment that you need to have the ability to come up with a couple thousand dollars fairly quickly (<30days) without extreme measures; whetehr it be a HELOC, some part of your salary ,some liquid investment or perhaps a low interest credit card (or a combination thereof). You WILL end up having part or all of months where you make the mortgage payment being in between tenants, a hot water heater gone bad, etc.