Buying a home to rent out to tenants can be a good investment for your future and retirement, as long as you buy the right home to rent. Here are some tips to help you choose the right home for this process.
Shop for a Rent-Able Home
As you look at various homes to choose the one you will buy and rent out, you need to consider some factors about the property. Make sure you buy a home that is attractive to the largest amount of renters, so you have a larger pool of potential tenants. For example, if you buy a home with one bedroom and one bathroom, you may not be able to rent it to a family with more than two members. Families with children will usually prefer a home with two, three, or more bedrooms and at least two bathrooms.
It is also helpful to look at homes in specific areas that will have a larger group of potential tenants for you to market the property to, such as neighbors near a local college or university, or in a suburb of a large city that has a large number of jobs.
Factor in Rental Rates
Another important tip to remember when you are shopping for an investment rental property is the amount of rent you can charge for a home. Depending on the area of your rental, you may be able to charge much less or much more each month in rent. If you decide to buy a home in an area with a lower housing cost, you will not be able to charge as much in rent, and you may not be able to cover all your expenses on the property. You don't want to have to pay for expenses out of your own pocket.
It is important the rent you can charge on a property will cover expenses, such as the mortgage, water and sewer utilities, repairs and upkeep on the property, as well as the cost to hire a property manager. Take some time to research each area to find out the amount of rent similar properties are charging. Look online for local rental websites and call property management companies to inquire about some of their rental rates.
Look for the Right Financing
Along with ensuring your property's rent will cover its expenses, you will need to check into your financing options to buy a rental property. This helps you determine how much you can expect to be paying on the mortgage, and if the mortgage payment works with the property's cash flow so you can at least break even on the property's cash flow.
Talk to a mortgage broker about mortgage programs available for an investment property. They may have adjustable rate mortgages where you can qualify for a much lower payment over the first few years of the mortgage, and zero interest mortgages to help improve the property's cash flow.
Contact a company like Mike Clendenning | RE/MAX Synergy for more information and assistance.