A lot of people are starting to consider an investment home as an alternate investment vehicle. I like to think of it as a supplement rather than an alternate. An investment home can be a good addition to an IRA or 401k plan. This is especially good for a truly passive household investment mix. But how many properties should you purchase? Therein lies the question.
Having too many investment homes can be an issue too. I’ve seen numerous people overpurchase and eventually being taken down by too much vacancy, maintenance, and other tenant issues. A good rule of thumb is to ensure you have 6 months of reserves of payment for each property you have. This should be in addition to your 401k, although lenders will consider the 401k, and in addition to your household emergency fund.
So the answer is, “it depends”. Your individual situation is going to dictate how many properties you should own, but you should always ensure you don’t bite off more than you can chew.
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