Information for aspiring landlords

You may consider buying rental property if you are lucky enough to own one home and have money to spare. Rent collection can be a fun way to pad your pocketbook and immerse a toe in the real estate investment world. But as the saying goes, great risk comes with great reward. Here's all you need to know about the process before your search starts.

Study the for rent by owner rental property market Before purchasing a rental property, do a deep research dive into the market where you would like to purchase. First-timers probably should start with their own residential area.

You should be aware of the big employers, what pushes people to move there, and the economic outlook for the near future at least.

You will always keep an eye on your own financial future. You may be able to justify extending your budget for your primary home, but every cent counts when you look at investment real estate. Don't dip into your savings just because you like the backyard — now isn't the time to let fancy flights catch up. Note, it's a money-making enterprise, not a place you're going to survive by yourself, and your own personal interests should take a back seat to what makes dollars and cents.

Figure your cash flow and costs Working out a rental property's cash flow isn't just a simple rent > mortgage equation. Many operating costs, such as HOA fees, taxes, maintenance and property management fees, are also to be considered. Can you pay for the services, or will it be the responsibility of the tenant? Bear in mind that your new rental property may not be used 100% of the time — and it must also be included in your business plan.

Find financing about how to rent out your house. For an investment property, most banks require at least 20 percent down, particularly if you own several rentals. Even if you can buy with a lower down payment, think long and hard before you buy a rental property without having much down money. For so many factors in play, you need a solid financial foundation before spending, from potentially poor tenants to a faulty dishwasher requiring urgent repair.

Nevertheless, when buying a home, there is a mortgage bonus: your bank can consider this property's potential income stream when deciding how much you may borrow. This will encourage you to buy a bigger or better house, as the chances are good that your rental income will help you pay the bill.

Rental property management Once you've bought your rental house, you're ready for the tenants! You would then like to be a landlord or hire someone to handle your investment? Newbie investment owners will find a property manager, who can handle all the nitty-gritty irritating specifics of owning a rental house. A third party can draw up contracts, collect rent, fix maintenance issues, and take over the nasty parts — like evictions — for a fee.

Please make sure to do your homework before selecting a property management business. Get References (and Contact). An excellent manager makes owning rental property a pleasure, but it may be a nightmare with a bad egg, turning your rental property into a terrible investment.