Investing In Rental Homes

In today's economic market, many individuals are thinking about investing in rental homes. There are lots of houses, condos, and townhouses on the real estate market today that are smoking deals. In many regions of the United States, there are properties that are available for less than half of what they sold for a few years ago. While this is devastating for many homeowners who owe more on mortgages than their residences are worth, it is an opportunity for investors who would like to buy properties to rent to tenants. Becoming an investor in this manner will be a grand adventure and wise business move for some people, while others aren't cut out to be landlords. Here are some questions to ponder if you're thinking of buying rentals as investments:

- Can you generate a positive cash flow? After collecting the going rate for a specific property from a tenant, will you be in the black or the red after paying the mortgage payment? If you purchase a condo for $30,000 and your payment is $300/month, you will need to be able to rent it for enough to cover the payment and to put away for potential repairs. If you can rent it for five or six hundred dollars each month, it could be a great investment.

- Have you checked into what rental homes are drawing in your area? Check the listings in the area you're considering to see what your expected rental income would be. If properties are renting for $700 to $800, it's important to stay in that ballpark. If a landlord puts too high of a price tag on his or her property, it's likely to stay vacant for longer periods of time. Every month without a tenant subtracts from the end of year bottom line.

- Can you afford to pay the payment without the tenant's rent? It's important to have enough emergency funds in the bank to cover the mortgage "just in case." You never know what might happen, and you always want to be prepared for the worst case scenario.

- Is the house, townhouse, or condominium located in a good area? The rule of buying real estate is "location, location, location." Not only should it be in a desirable area, it should be close to highway entrances and employers. These are selling points in the eyes of potential tenants.

- Will you allow pets? This is an important question to ponder. Many people have pets, and allowing one or two dogs or cats will allow for a larger pool of prospective tenants to fish from. Typically, there will be an additional security deposit to cover any potential damage known as a "pet deposit."

- Are you handy enough to do repairs, or do you know someone who is? When a landlord owns rentals, things will break down and need to be repaired. It's helpful to be able to fix some things without calling in the pros. Otherwise, it's a must to have a good handyman's number on speed dial.

Buying rental homes may be a smart answer to investing. After pondering these questions, a person should know whether this is a fit for him or her.