Christian OsgoodCEO, Multifamily Strategy · CEO at Multifamily Strategy

Don’t jump out of the plane without a parachute!

24 Sept 2024 · 1 min

Watch on YouTube

1:00

In this solo advisory segment, Christian Osgood emphasizes the critical need for real‑estate investors to budget a healthy cash reserve beyond the down‑payment and initial cash‑flow projections. He explains that the first year of property ownership is when unexpected expenses—such as burst pipes, roof repairs, and problematic tenants—most often arise. Osgood shares anecdotes about hidden building defects and tenants with very low credit scores who eventually stop paying rent, highlighting how these surprise costs can strain an inexperienced investor’s finances. The overall message is a cautionary reminder to plan for contingencies and avoid “jumping out of the plane without a parachute.”

Chapters

Not that it's easy to do, but you need to have a reserve. You budget and your initial numbers have to include not just cash flow day one, not just enough to do the down payment, has to be enough to buy the property and keep a healthy reserve. I found, especially in the first year of operations of a property, that's where you get the most surprises. That's where it's like, oh my gosh, we just found this busted pipe. Did the owners know about it prior? Maybe, maybe not. Doesn't matter now because it's my building. I've seen pipes fail. I've seen problems with roof. You see problems with tenants. That happens all the time. You didn't get to do your own screening on every single one of these tenants. You might get some tenants that are rougher than you wanted. I've had buildings where when they go to reapply, these tenants have credit scores of like 480. Like they've never made a bill payment on anything ever. And then it's amazing. Guess what happens? They stop paying their rent. These expenses are especially heavy on the front end. And if you are an inexperienced investor,