As an investor, once you have many properties and many units your income is diversified.  If you have some vacancies, your payments are covered by the other units that are filled.  If you bought right, you have plenty of cash flow to cover vacancy loss, because this was figured in as part of the overall evaluation criteria.

We must be careful to not take this for granted, however.  It is amazingly easy for investors and property managers to become complacent.  Once we know we have cushion to deal with, somehow urgency slips.  We buy properties and don’t rent them right away.  We know someone is moving out and we don’t advertise in advance of them leaving.  We start the eviction process and don’t time the re-rent properly.  Pretty soon your cash flow is gone and you can be in trouble.  You have to start dipping into personal funds to cover payments.  You sit on pins and needles hoping the unexpected maintenance doesn’t happen.

What causes this complacency?  Lack of discipline?  Lack of systems?  Being unorganized?  Denial?  Not enough time?  Enough money coming in so we get fat and happy and don’t care anymore?

I’m not sure what the reason is, and I’m certain it’s different in every circumstance.  We can guard against this loss of cash flow by remembering that investing is a business.  We need to have systems, processes, people, backup plans, and schedules in place that protect our profitability.  We cannot leave our business up to chance.  We cannot count on “feeling like it” at any point in time.  We cannot allow our tendency to procrastinate to affect our bottom line. 

We need to take many of the human flaws out of the equation as possible, and supplement our role with back to the basics, good ol’ fashioned business operations.  Without it, we are hobbyists realizing hobby-level results.