1. Treat it as a Business

First and foremost being a landlord is different from being a private homeowner — it’s a business and you need to treat it as such. Although some lending requirements for personal mortgages have relaxed a bit recently, the requirements for rental property have basically remained the same. If you’re borrowing money for your first rental house, you’re going to need at least a 20% down payment. If you can swing 25% down, it’s likely to get you a better interest rate and lower fees. If it’s your first rental property, your current income is going to have to be enough to handle the mortgages for both your residence and your new property.

2. Don’t Bite off More Than You Can Chew

What we mean by this is start small. Starting with a single house or smaller multiple-dwelling unit, perhaps with a partner, would be ideal to see if the business really suits you. Save your condo buys when you can afford  a larger down payment and monthly association fees. Starting with a single home will allow you to get a feel for the maintenance, bookkeeping and other work required. Finding a good first tenant is also an important step. Beware of shady tenants!

3. Know Your Farm Area

Location, location, location. We can’t stress researching your intended investment market. A home that seems to be a steal might be priced lower because it’s in a neighborhood most people wouldn’t actually want to live in — one that has higher crime, noisy streets or poor schools. This will also be helpful when figuring out the right rent and rate of return. Make sure you budget for maintenance as well. A common rule of thumb that also assigns 5% of gross rental income to regular maintenance and another 5% to pay for the downtime and repairs that come with vacancies should cover you.

4. Happy Tenants, Happy Life

Be a good landlord, communicate with your tenants. Happy tenants are critically important. Remember that they are the customers of your business that we talked about earlier. By keeping the property in good shape and taking care of issues in a timely manner you can expect the same respect back when it comes to paying rent on time. Then you will both be happy and you’ll be building wealth with an investment you can feel good about.

To learn more about Part-Time REI visit us at http://part-timerei.com/

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