If you desire to generate additional monthly cash flow, buying a house and rent it out is an excellent means of accomplishing this. This form of investment can be done either by choice to enhance cash flow or by default if a house that was to be flipped doesn’t sell fast.
Buying a house for rental is of course, a profitable and lucrative business. It is quite possible for you and your spouse to be living in a rented apartment. While your first purchased home is an investment property rather than a primary residence. Many people purchase rentals prior to buying their private homes due to the fact that such investment is located in a more affordable area. Which is not easily located near their jobs and other activities.
You can make money in real estate via diverse ways; however, the most lucrative among them is investment in rental properties. This is because it offers two fold investment returns to investors which include a steady residual income from the monthly rental as well as equity from the property itself.
You should seriously consider building wealth from rental property investment and do not take it for granted.
Buying a home for renting involves serious research and important considerations which will be considered below.
🏘What is the Value of my Home?
The rental’s location is very important in determining the extent of profit you can make. Put into consideration a wide range of interests while deciding where to purchase.
Although, an important factor is price, other factors like distance to schools, colleges and universities, freeways, neighborhood amenities, bus stops and supermarkets should be given due consideration. Assuming you are buying a house for yourself, you can be more flexible in your choice of location. However, when considering it for mortgage and possibly selling on the long run. You should place serious consideration on some important issues.
🏦Income on rent
As you look forward to making a profit on an investment property. It is essential to know what you can charge on rent. You can determine this by looking at comparable rentals within the vicinity. Listings can found in local newspapers or online. You may even inquire from other landlords in the area. Ask from them about deposits, utilities paid, pet fees, etc. Besides, you can carry out your own personal inquiries by finding houses that are similar to yours in terms of number of bedrooms, bathrooms and amenities. Examine recent vacancy rates for nearby areas on the United States Census Bureau’s site, to approximate the number of months in a year that rent might not be collected from you.
When purchasing a home for profit, it is essential you calculate your estimated net income from the investment prior to buying. There are some expenses associated with owning a rental property like repairs and cleaning, hazard insurance premiums, property taxes, utilities and management fees.
You can sum up all anticipated expenses for the month and deduct the aggregate from the rental fee you will charge. The amount you can afford for the purchase price and mortgage gives you the difference between these two figures. This calculation will serve as a guide, so that you don’t purchase a rental that consistently loses money.
🎊 Qualification for a mortgage loan
A good credit history and score like 740 and above will help you qualify for a mortgage with the lowest interest rate. Alternatively, placing a down payment of 20% and above on the whole will enable you find a favorable loan terms and avoid Private Mortgage Insurance. If your credit score is bad, you may still qualify for a loan, but with a higher interest. As an estate investor, your lender considers your overall debt –to- income ratio, other assets and experience as part of requirements for obtaining a mortgage loan.
Your rented home is a business which is reported on Internal Revenue Form 1040, Schedule E. Although, you must report every rental income, you may deduct loan origination cost, loan interest, advertising, property taxes, upgrades and repairs as well as insurance.
Property investment will eventually enable you to earn a steady income flow and equity. Due to the fact that it is your tenants that will be responsible for your mortgage payment. The property can be liquidated for cash or you may continue to enjoy the rental income.
Offering homes for rent is highly profitable; however, you need to weigh the risks involved. If you are unfamiliar with the rental market, you may join real estate clubs and networking with other investors to enable you learn the ropes.
It is however important to consider all factors highlighted in this write up before embarking on home purchase for rent.
Want to purchase a home for renting? Contact RL Real Estate Group for help. Please visit our website at RLRealEstateGroup.com or give us a call at 605-212-8431. We are here to help you with all your real estate needs. Check out our affordable homes for sale now! Pick from our many beautiful and strategic locations with flexible payment terms. Click here to see open houses in the Sioux Falls and surrounding areas. A trial will convince you.