What happens if there is negative Cash Flow due to a loss of renter or unplanned expenses?

Reading Time: < 1 minute

We have a cash reserve at the individual property level for every home. It will typically average around 2% of the total home value. We also budget for ongoing operating expenses, both planned and unplanned. These include things like property tax, home insurance, and maintenance. And our anticipated dividends are after these operating expenses.

In the event that expenses or negative cash flow ever exceeded our cash reserve and operating expense budget, we would make a short-term loan from our corporate entity to the individual home and then repay the loan with future rental payments.

We would not do a capital call to investors, but it could lower the anticipated new cash flows from rent until the short term loan was repaid or cash reserve was refilled.

Leave a Comment

Your email address will not be published. Required fields are marked *