Inadequate cash flow can put a borrower into debt quickly. It’s not just about making enough in rent to cover monthly mortgage payments–it’s about having the cash flow necessary to comfortably cover all expenses of owning a property, including property taxes, routine maintenance, emergency repairs, insurance, and more. Additionally, tenants come and go.
The borrower must have enough cash flow to cover mortgage payments even if their property is uninhabited for a period of time. Not to mention that borrowers who are building their property portfolio will need adequate cash flow to cover things like down payments, closing costs, renovations, and more for every new property they invest in.