Buying a rental property can be very expensive—especially if you do not know where to start. We will outline some easy steps that you can take to ensure that you will be able to afford—or save up—enough money so that you will be able to invest in your own rental property, hopefully with very limited stress and anxiety.
You are going to need money for a down payment
It depends on how much the total investment costs, but you are looking at upwards of 10 000, maybe much more. Rental properties are regarded differently by the banks (where a traditional mortgage you can put less money on a down payment and pay more monthly, a rental property would likely require a down payment of at least 20%). Look at the total costs and see if you are financially capable of making a down payment.
Don’t forget to factor in repair costs
You have the down payment and the overall cost of the property, but what you need to make sure you do not forget is the fact that you might (and likely will) need to do repairs on the unit. In order for you to be able to rent out a specific unit, there are certain rules that a landlord must abide by (so the home must be in good repair in order for you to be able to rent it out). Make sure to factor in any costs that will be associated with repairs before you make the offer. For more information, visit this link.
Money for taxes, repairs, mortgage
Say you can’t find someone to rent your place. Say your renters leave a huge mess or damages that you end up being on the hook for. As this unit is not your primary residence, the taxes will be a lot higher for you—and therefore will be another expense for you to have to factor in. It is a good idea to expect the best, but plan for the worst. Have a savings that plans for these types of situations—ideally, you should save up about 6 months worth of money for mortgage payments, taxes and incidentals.
Prepare and you won’t be caught unaware
Buying a rental property can cost a lot of money upfront, but can offer you a great and rewarding investment in the long run. You are going to need money for the down payment (think at least 10 000 dollars plus), plus taxes, plus repairs, plus incidentals—a smart thing to do would be to plan for at least 30 000 dollars on a 100 000 dollar investment, but if you can manage more, then you definitely will have more wiggle room and less anxiety. Plan ahead, save up more money than you think you need and research the area where you are interested in purchasing a rental property in very well. If you make sure that you prepare, you will have more than enough knowledge and money in your pocket to succeed and have a profitable rental property for yourself.