Tips for Buying Rental Properties

Real estate prices are down and mortgage rates are at a 50 year all-time low. What does that mean for the novice real estate investor? It means the time is right for buying that first piece of rental real estate. However, for the first time investor there are very real rules and tips that need to be followed in order to keep that home in the investor’s hands for the long haul and out of the banks pockets.

Real estate investors need to BUY A HOME THEY CAN AFFORD. The trouble with many first timers is they feel they can buy a home that is higher priced and rent out that unit with no problem. If something happens and it is more difficult to find a renter or the renter bails on the unit, the investor may not be able to afford the mortgage. The idea is to buy a unit that is affordable right now, without any increase in income and that will help to protect you, the investor, from future foreclosure.

Another huge tip is to CHOOSE THE ADDRESS CAREFULLY. There are two differ types of real estate rentals. The first is the year round rental. These homes are purchased with the idea of renting out the home all year. The second type is the seasonal rental. Seasonal rentals may appear near vacation destinations or colleges and will often be rented only during certain times of the year. When choosing the address of the rental property both rental styles need to be taken into consideration. Again, referring back to the first tip; if you cannot afford the mortgage, you cannot afford a lapse in rent checks coming in.

The most important tip of all in this foreclosure ridden real estate market is the mortgage chosen for the rental property. The mortgage needs to be a FIXED RATE MORTGAGE. The other option, the Adjustable Rate Mortgage allows the lender to raise the rate. That will, in effect, raise the mortgage and an increasing mortgage means you will have to raise the rent to cover that mortgage. This can leave the renter unwilling to pay the new rates and moving out of the home.

Renting out homes is a hot choice today in real estate investment. With so many foreclosures, the available homes on the market are there to start up that stream of income that can take the investor into retirement with a smile on their face. But, following these simple tips can help to save the day for the new investor.

 

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