Buying a first rental property most often results in future real estate investment buys. Either buying investment property with others or flying solo on a unit, rental property owners soon see the advantages from the income generated, income tax benefits and wealth building. Yet with the first unit, it’shandling vacancy rates important to know not just that the unit will cash flow but the cash will continue to each month.

That means having the property rented full time with no vacancies. That’s sometimes a tall order as there will ultimately be gaps in rent. That means being prepared financially for those months when the property is being repaired, prepared or looking for tenants.

If you’re about to embark on a rental property adventure, are you able to comfortably afford the mortgage payments, property taxes and insurance on the unit without the benefit of rental income and if so, for how long? That’s one of the evaluation principles to be crystal clear on. You might find a property in excellent shape for a price well under market but if the property stays vacant for six months, will you be able to keep up the payments?

Lenders like  to see an amount of liquid assets in the bank equal to six months worth of housing payments. If the mortgage on the rental is $1,500 per month and taxes and insurance $300, that’s an $1,800 monthly payment. Six times that amount in the bank is $10,800. This cash reserve amount is sometimes flexible but you can bet the lender will at least require some money in the bank after the dust settles. If you don’t feel completely confident the property will have a very low or nil vacancy rate then step back and reconsider. The last thing you want starting out is to fall behind on your mortgage payments. Be confident going in, but only after all the numbers make sense.