How to Invest in Single Family Rentals

Renting single family homes can be profitable.

Owning a single family home as a real estate investment provides a number of ways to profit. The home can produce a stream of income from renting, can grow in value, and can provide significant tax advantages such as yearly depreciation. However, losing money is also a possibility for investors who aren't careful when buying rental real estate. By studying the market, selecting quality homes, and getting the best deal possible, investors can maximize the profit potential of the rental home.

Instructions

1. Order your credit report and check the report for inaccuracies. Have any inaccuracies corrected as quickly as possible. Take steps such as paying bills on time to maintain or improve your credit score. A high credit score is important, as lending guidelines for rental homes are more stringent than guidelines when purchasing a home for a residence.

2. Discuss financing options with a number of banks and credit unions. You need to determine how much money can be borrowed, and the terms. The amount of the downpayment may have a big impact on the interest rate. Discuss this impact with lenders.

3. Target your search for rental properties. Buying an investment property close to home can make choosing the right neighborhood easier. Consider the needs of renters when searching for a target area. Renters will be concerned with things like school districts, access to shopping and entertainment and the local crime rate. Also choose a neighborhood based on the financial growth or stability of the area. Areas with growing or stable employers are more likely to produce large numbers of reliable renters.

4. Gather information on the rental rates and vacancies in the chosen areas. You'll need to estimate the amount of rent the home will bring and the likelihood of the unit sitting empty, as part of the buying process.

5. Contact a realtor and request a list of properties for sale in the chosen area. Drive through the neigborhood to gather information on the specific homes, and to further narrow list of properties to consider. Finding the right home may take some time; you'll need to have patience to find a quality investment property.

6. Visit the homes you're considering with the realtor. Having a contractor, home inspector, or other person familiar with construction work along on this visit can help you identify potential problems and provide you with a rough estimate of repair costs and time.

7. Choose a home or homes to make an offer on. Work with the realtor; make an offer on the home and negotiate the lowest price possible. Contact a lender to arrange financing for the home.

References

• MSN Money: Investing, Real Estate, How to find good investment property
• Pittsburgh Post-Gazette: Some key points to consider when investing in real estate
• SmartMoney: Personal Finance, Real Estate, Are You Buying Into a Good Neighborhood?
• Bank Rate: Finance, Real Estate, Great time to invest in rental property