Information on Buying a Rental Property

Price

The price that you pay for a rental property is critical to your success as a landlord. Unlike the home that you live in, a rental property shouldn't be purchased based on your personal feelings toward it. It's a much more practical purchase based on its ability to make you money. Experience in real estate is helpful for knowing what a building is actually worth. The trick is not to buy a really cheap property (they're cheap for a reason), but to get more house than you pay for. Paying $300,000 for a property that's worth more is a better deal than paying $200,000 for a property that's worth less.

You will pay more for a rental property in a nice neighborhood, but you will make more from it too. Nice neighborhoods tend to attract tenants who have more money and are often easier to deal with, so you can charge higher rents and have fewer hassles. You may also have fewer concerns about the security of your property if it isn't in a high-crime neighborhood. If you have renovation skills, you can do well by buying a rundown property in a nice neighborhood and fixing it up to the standards of its neighbors.

The majority of buyers who are looking for a home don't want to deal with renovations. This means that houses in move-in condition sell for more than houses that need work, even if the required work is relatively minor. Finding a house that needs some cosmetic work but is still structurally sound can save you money on the purchase price. If you are interested in being a landlord and not a renovator, avoid houses that have foundation or roof problems. If you get involved with these, you may find yourself spending thousands on major construction, while at the same time losing money on the rent you're not taking in while the house is under construction.

The ease of a landlord's life can be measured by the character of his tenants. Talk to some landlords before you dive into the renting game, and you may change your mind. Every landlord has a "tenant from hell" story. To avoid renting your property to people who will put more effort into trashing it than paying the rent, conduct interviews with prospective tenants and do your best to get to know them. Insist on good references and follow them up.