How to Buy an Income Property

Income properties are real estate businesses that earn their revenue from tenants' rent payments. Getting started in the world of real estate investing begins with the purchase of your first income property. Return on investment in the real estate world can be substantial, but owning income properties poses significant risk. If tenants aren't paying rent or you can't fill the space you will still be on the hook for the mortgage payment.

Difficulty: Moderately Easy

Instructions

1. Find existing income properties owners in your area that are looking to sell. Check Craiglist and your local classified section for landlords that want to sell their property.

2. Contact the seller to set up a meeting. Tour the property and learn about its physical condition. Be sure to get a full property inspection done, but before paying for a professional one, take a quick hands-on look at the roof, water heater and HVAC.

3. Negotiate a sale price. You can negotiate the purchase yourself or work with a seller's agent. If you have a lot of experience in real estate dealings you may be able to go it alone, but if it's your first income property deal you may want to consult an expert.

4. Get a mortgage. Banks will make loans for income properties but will generally require a larger down payment, higher interest rate and better credit score than they require for primary home mortgages.

5. Keep it rented. Having paying tenants is the only way to have a successful income property business. Run background or credit checks on all your tenants and have a well-written lease agreement signed by each one.

Tips & Warnings

• Real estate investing can be risky; have some money on the sidelines ready to spend if necessary.