Considering buying rental property − and wondering how a rental property mortgage works in practice?
We don’t blame you one bit: Learning how to buy a rental property, rehab and fix it up, and manage a mortgage for it are some of the most common questions that real estate investors perennially have.
If you think about it, it only makes sense − because once you’ve learned how to start buying rental properties and mastered the art of property management, you’ll also have learned how to unlock more passive income, boost your earnings, and maximize your investment portfolio as well.
Of course, any discussion about buying rental property wouldn’t be complete without taking a more in-depth peek at the pros and cons of the practice … and thinking more deeply about important steps to consider before you start.
Let’s take a closer look at how to buy rental property, obtain a rental property mortgage, and get started with real estate investing, one of the most common and popular ways to build, grow, and pad out an investment portfolio. How To Start Buying Rental Properties
Buying a rental property is in many ways similar to buying a house , although securing a home loan for your rental property purchase may come with additional requirements and eligibility criteria attached.
Likewise, maintaining your real estate investment will also require similar amounts of repairs, upkeep, and maintenance, although you may elect to seek assistance from a property manager for any tasks or needs that you can’t manage yourself.
Of course, different types of rental properties will require you to handle different responsibilities as well. After all, it’s easier to look after to service a single unit vs. multi-unit dwelling with shared common areas.
On the bright side, getting a mortgage for an investment property will be a familiar process to you if you’ve ever purchased a home. Real estate investors can actually hold up to 10 residential mortgages for single family homes. Each of these properties can include up to four units , offering the possibility for multiple rentals.
Real estate investors looking to boost their cash flow by investing in rental property should follow the below steps as they search for new opportunities. 1. Weigh The Pros And Cons Of Buying Rental Property
Real estate investing is one of the most popular methods today among investors to build passive income, boost annual revenues and pave the way for long-term growth and financial security. It also comes with advantages and disadvantages to be aware of, as with any form of financial investment. Pros Of Investing In Rental Property
For starters, a portfolio of single- or multifamily rental properties can help you build passive income , even as your properties hold the opportunity to increase in value with the passage of time.
In addition, rental income is exempt from Social Security taxes, and property ownership and operation conveys a host of potential added tax savings and benefits. Rental property holdings can further help you build out your credit history, improve your credit score, and secure additional access to capital. Cons Of Investing In Rental Property
Mind you, buying rental property also comes with some potential hiccups attached − like the cost of advertising for and finding responsible tenants or the possibility of having to deal with difficult tenants. No matter if they’re condos, apartments, single-family homes, or multi-family residences, real estate holdings also requite regular maintenance and repair, and come with bills that must be regularly paid attached. Ownership of rental property also requires you to maintain certain insurance policies and pay annual property taxes. What’s more, you won’t find capital invested to be as liquid either − meaning that it can’t instantly be converted back into cash. You may further need to factor in ongoing costs such as hiring a property management company to handle upkeep and maintenance of your property (or properties) as well. 2. Know What Your Annual Expenses Will Be
If you’re going to be a successful rental property owner, it’s also important to know and keep close tabs on what your regular, recurring costs and expenses stand to be. Just a few common expenses that you might encounter as a landlord in addition to mortgage interest, upkeep and (in select cases) homeowners association fees include: Maintenance costs
Landlord insurance costs
Property management premiums
Utilities (gas, water, electric)
Repairs and servicing Of course, it’s always a good idea to plan for unexpected expenses in the event that a water heater breaks down, HVAC system gives out, or you find that […]
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