1. Recognize that  investing is a business.

Being a landlord and an REI is different from being a private homeowner — it’s a business and you need to treat it like that. Have a good business plan. This type of investment is not hands-off. It can be passive but it requires involvement. It requires your time. It requires certain knowledge and skills.

2. Start small.

Don’t get in over your head right away. Starting with a single house or smaller multiple-dwelling unit, perhaps with a partner, is a good staring move to see if the business really suits you. Starting with a single home will allow you to get a feel for the maintenance, bookkeeping and other work required.

3. Know your Farm Area

As with any business, location can be critical. And we all know real estate is all about location, location, location. 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. For that reason, investing in out-of-state property is a gamble. Do your research and get comps from your Realtor and only  buy in neighborhoods you know well or have carefully researched.

4. Figure out the right rent and rentors

Rents differ widely around the United States. Zillow, Craigslist or a real estate agent can give you an idea what they are where you’re buying. Then you need to determine if that rent will be enough to cover your costs.

Too often, people take a look at their loan and think if they cover that, they’re doing fine. But you’ll need to pay property taxes and insurance. Don’t forget though about regular maintenance. Things break, and you will need some money in the bank to deal with unexpected expenses.

You’ll also want to know the rate of return you’re getting on your investment. There are formulas, such as the “capitalization rate,” to help with this, but you might want to turn to a professional. A good accountant can make sure the purchase makes sense.

Finding a good first tenant is also an important step. Run background checks if you can. Finding and keeping good tenants is the heart of successfully investing long-term in real estate.Happy tenants are critically important. They’re your customers and the way you keep them happy is by keeping the property in good shape and treating them with respect

 5. Leave it to the professionals

If you decide to manage your property, you’ll probably need to consult a real estate lawyer to get a solid lease and learn the rights of tenants. You may want an accountant, and you’ll need a list of good plumbers, electricians and tradesmen. Building your investment team is very important; so is leveraging other people’s talents. Your goal is to have a second income, not a second job.Turning to a property management company can be a smart move. It’s usually worth it to pay 7% to 10% of our rental income to a manager.

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