By rental properties I mean apartment buildings, houses, condo’s, multifamily unit dwellings, ect. Please feel free to make any suggestions or any I didn’t include. Thank You
Get ahold of a mortgage broker or lender to find out what you qualify for to purchase a rental property. Keep in mind that you probably won’t find a non-owner-occupied loan that requires less than a 25% down payment (maybe 20%, but I haven’t seen them for awhile). You’ll also pay significantly higher rates on non-owner-occupied loans. And, realize that you can’t include future rents as income for the purpose of determining your debt to income ratio when purchasing this property. It doesn’t exist yet and must usually have been coming in for about a year (to where it shows up on Schedule E of your tax returns) for it to count as such.
Then check rental properties for sale in your price range and in the desired area, as well as similar properties for rent . You’ll want to verify that you can actually rent the property for more than you pay for it (positive cash flow). For condos and townhouses, consider that this will include howmeowner’s association dues, as well as the mortgage, insurance, taxes, and possibly things like water and sewer that you may not pass on to the tenant.
You should also have a certain amount of cash on hand for repairs, maintenance, and renovation. You may also have to buy new appliances. You can usually pass these expenses on to the tennant in the form of higher rent payments. But, remember that you will have a certain market value that people will not pay more than.
You should also have extra cash on hand to pay the mortgage when the property is vacant. And, realize that the IRS lets you deduct mortgage interest, taxes, and incidental costs of upkeep and repair of the unit. But, if you make a certain amount of money, this starts to phase out and you can only deduct a certain percentage of the cost of a rental, and eventually none of the costs. And, the amount of rent you make is considered taxable income.
You might also want to look into hiring a property manager, at least for the shortest term they will allow you to after they do the tenant screening. They usually charge some up-front fee to find the tenant, and then have some minimum term where they charge like 8% of the rent to do the management. I hired one for a rental to find the tenant. They charged nothing up front. But, they have a minimum term of 1 year (the lease term) at 8% of the rent as their fee. After that, I can choose not to retain their services. But, it was worth the peace of mind that they are professionals and got me a good tenant.
Also, study rental laws in your state. You can usually find good information from the state department of consumer affairs that isn’t as confusing as the actual state civil codes.
Get ahold of a mortgage broker or lender to find out what you qualify for to purchase a rental property. Keep in mind that you probably won’t find a non-owner-occupied loan that requires less than a 25% down payment (maybe 20%, but I haven’t seen them for awhile). You’ll also pay significantly higher rates on non-owner-occupied loans. And, realize that you can’t include future rents as income for the purpose of determining your debt to income ratio when purchasing this property. It doesn’t exist yet and must usually have been coming in for about a year (to where it shows up on Schedule E of your tax returns) for it to count as such.
Then check rental properties for sale in your price range and in the desired area, as well as similar properties for rent . You’ll want to verify that you can actually rent the property for more than you pay for it (positive cash flow). For condos and townhouses, consider that this will include howmeowner’s association dues, as well as the mortgage, insurance, taxes, and possibly things like water and sewer that you may not pass on to the tenant.
You should also have a certain amount of cash on hand for repairs, maintenance, and renovation. You may also have to buy new appliances. You can usually pass these expenses on to the tennant in the form of higher rent payments. But, remember that you will have a certain market value that people will not pay more than.
You should also have extra cash on hand to pay the mortgage when the property is vacant. And, realize that the IRS lets you deduct mortgage interest, taxes, and incidental costs of upkeep and repair of the unit. But, if you make a certain amount of money, this starts to phase out and you can only deduct a certain percentage of the cost of a rental, and eventually none of the costs. And, the amount of rent you make is considered taxable income.
You might also want to look into hiring a property manager, at least for the shortest term they will allow you to after they do the tenant screening. They usually charge some up-front fee to find the tenant, and then have some minimum term where they charge like 8% of the rent to do the management. I hired one for a rental to find the tenant. They charged nothing up front. But, they have a minimum term of 1 year (the lease term) at 8% of the rent as their fee. After that, I can choose not to retain their services. But, it was worth the peace of mind that they are professionals and got me a good tenant.
Also, study rental laws in your state. You can usually find good information from the state department of consumer affairs that isn’t as confusing as the actual state civil codes.