Whether you already own a home or not – the opportunity to own a rental property exists. In the end there are just a few things you need in place to make it happen.
However, what’s important is knowing everything that goes into it after you have acquired a property.
Can Just Anyone Become a Rental Property Investor?
Obviously the first step is going into acquisition mode, which mainly means finding an area to invest and lining up the financing to buy.
Unlike when you buy your primary home, the financing options will be different. Investment properties and second homes are not treated the same. Rates will be different.
You can still get traditional financing though, be sure to look into all the options:
- Conventional loan
- Jumbo loan
- Home equity loan (based on the equity in your primary home)
- Home equity line of credit (based on the equity in your primary home)
- Cash-out refinance
As I mentioned – acquisition is the first step, bankrate has an awesome article covering key items to consider when looking for an investment property titled: How to acquire an establish a rental property
Be sure to remember, after you have honed in on a neighborhood and know your financing options that you are running numbers on potential properties to ensure it cash flows. Always use the property calculator!
How about all the items that go into owning and managing a rental property?
It’s really not that overwhelming as long as you understand what needs to be covered.
Taxes, Insurance and Laws – Oh my!
Rental properties are taxed different than your primary home. Items like depreciation are writes offs against your rental income, for example.
Also, the insurance cost will be a bit different then the policy on your primary home since tenants will be living in the rental property.
Speaking of tenants, we need to be sure we are on the right side of state and federal laws. Be sure you have an up to date lease, best if a lawyer gives it a look or draws it up.
Along with taxes and insurance there are other fees such as maintenance, advertising the rental, etc. You can see a detailed list under the bankrate article section consider the full financial impact.
As they say, knowledge is power…
Be sure to learn these fundamentals so you can make informed decisions and create the wealth that rental properties can build.