5 Ways To Build And Protect Your Emergency Fund
#1. Rent Your House at Market
Emergency fund is totally dependent on profit. No profit, no extra cash to put aside as an emergency fund. Therefore, the first thing you should do is make sure you make profit, and the best way to make profit is to rent your house for a market value. Undervaluing your house would give you little or no profit, and hence no emergency fund.
#2. Save Every Dollar You Can
Do not have your tenants calling you for every little repair just because you will pay for it. Try to get them into the habit of doing some stuff on their own. Things like snaking a drain full of hair should not waste your time and money. This small fixes takes a lot of money, and you might not realize until you start saving.
#3. Get Rid of Washer and Dryers
Fortunately, nowadays we no longer need to buy these easy-to-break appliances for our homes. This saves a huge amount of money which would’ve originally been added to the start-up cost. This money could be laid aside as an emergency fund. Not buying washers and dryers does not only save you a huge amount of start-up cost, it also saves you the money you spent repairing them because they are the two easiest appliances to break.
#4. Label Appliances AS/IS
It is unnecessary to remove washers and dryers from the house when they have already been installed there, but do not make the mistake of not labelling them AS/IS. This means, you have specified in the lease that you won’t fix them. Not only the washers and the dryers should be labelled AS/IS, any appliance or facility in the house that does not add value to your rent or resale is not worth fixing and should be labelled AS/IS. You do not want to be cutting into your emergency fund fixing kids swing sets or an above ground spa, this makes no financial sense.
#5. Decide if it is Cheaper to Fix or Band-aid
Things are bound to break in your rental, that does not mean you should deplete your emergency fund to fix every little thing. Although emergency funds are there to finance repairs, but you should be wise on how you use it. You do not want to use it up on one repair, and there will be nothing left if something else breaks the next day. Sometimes a band-aid is all an appliance needs to keep functioning, you do not have to replace the whole thing. However, failed band-aids can be a waste of money considering you would need to purchase a new one eventually. Analyze the state of the appliance before you decide.
