How to Invest in Rental Property

Join the ranks of thousands of people who have discovered that investing in rental property can be profitable - and even enjoyable!

Difficulty: Moderately challenging

Instructions

Things You'll Need:

• Purchase Agreement
• Real Estate Agents
• Real Estate Attorneys
• Tax Services

1. Determine what type of rental property appeals to you - a single-family residence, multi-family unit, commercial property, or a vacation home.

2. Narrow your search by focusing on available properties in a particular area.

3. Obtain comparable prices for similar properties in the area from a local real estate company.

4. Estimate possible rental income from a particular property, based on current rental prices for similar properties, found in the classified section of your local newspaper.

5. Determine possible cash flow (or loss) for the property by subtracting taxes, insurance, mortgage payment, maintenance, repairs and other expenses from the estimated rental income.

6. Consult a tax advisor about the tax consequences of investing in rental property.

7. Ask an attorney or real estate agent to review all contracts and agreements before submitting an offer.

8. Make an offer based on comparable prices for similar properties in the area, subject to appraisal, loan approval and thorough inspection of the property.

9. Determine who will manage the rental property.

Tips & Warnings

• Establish and maintain an emergency fund to cover unexpected repairs and expenses on your rental property.
• Mortgage loans for rental property usually require larger down payments with higher interest rates, than mortgages for owner-occupied properties.

[mamawriter]

on 7/20/2009 Searching for that particular area is key when investing in this sort of property. You want to find one that will be worthy in the future as well.

[PropertyDan07]

on 3/18/2007 Try out free online tools like (http://www.zillow.com or http://www.flipcalc.com ) that can help analyze your rental property.

[question]

on 1/2/2007 I have recently had a chance of using a Personal Finance Software package by Australian business Parcus Group - Personal Finance Associate.
The product is very good. For the AU$29 it costs, you get budgeting, financial planning templates as well as advanced features that typically cost loads more as separate software packages such as investment real estate calculations (mainly based on rental cash-flow analysis) as well as some value based shares valuations (based on Warren Buffet's stock valuation methodology)
Their website is www.parcusgroup.com
For anyone interested in their own wealth creation (via real estate or else) this product is definitely worth looking at.

on 11/22/2005 An older building that needs work may mean you can't rent it. Many cities have rental laws and fees to pay if you are a landlord. Cities may require you to hire an electrician for wiring repairs, for example, even if you can do the repairs yourself.

on 11/22/2005 Find a property with an "Owner Will Carry" option. The owner carries the loan at terms you both agree to. The result is typically more flexibility with interest rates, term length, and down payment.