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Colton Wright
Colton Wright

Getting Started Buying Rental Property


Notwithstanding the associated responsibilities, a good investment property can provide the perfect trifecta of recurring rental income, long-term appreciation in property value, and tax benefits related to mortgage interest, operating expenses, and depreciation.




getting started buying rental property


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Financing a single-family rental property works a little differently than applying for a mortgage on a primary residence. Down payments can be bigger, lender fees and interest rates are usually slightly higher, and there are different requirements to qualify:


Although there may be more hoops to jump through when arranging financing on a rental property, the good news is that there are a lot of options available. Conventional lenders, such as banks and credit unions, offer loans backed by Fannie Mae or Freddie Mac, while other investors obtain rental property financing through private lenders or by forming a joint venture.


A good place to begin looking for a rental property loan or refinance is the Stessa Mortgage Center. Simply answer a few questions online, and the platform will generate competitive mortgage quotes specifically designed for investment property purchases and refinances.


For example, assume you purchase a rental property for $250,000 and it produces an annual rental income of $24,000. Let's say operating expenses are 40% of projected income and the annual mortgage interest expense is $11,000.


You can use the free rental property analyzer in this post to forecast the potential return of a property. Simply enter some information to view projected key metrics, including cash flow, cash-on-cash return, net operating income, and cap rate.


Once you've closed on your rental property acquisition, it's time to focus on tenant relations and other important operational aspects. Two key areas that require immediate attention include tracking income and expenses and sorting out property management.


Even for experienced real estate investors, keeping track of rental property income and expenses can quickly become overwhelming. Common income and costs that affect the return on a rental home include:


After signing up for an account, simply enter the rental property address, connect business banking and mortgage accounts quickly and securely, and run reports such as the income statement, net cash flow, and capital expenses.


With Stessa, investors can easily maximize rental property profits through smart money management, automated income and expense tracking, and personalized recommendations for maximizing revenue based on unique portfolio and investment strategies.


Being a landlord can be more time-consuming than it might appear. Finding and screening tenants, collecting the rent, and taking care of repairs are only some of the duties required for successfully managing a rental property.


Owners also need to comply with local and state landlord-tenant laws, the Fair Housing Act, conduct periodic property inspections, run regular rent comparables, and obtain the best prices from qualified vendors to help with keeping operating expenses under control and growing rental property returns.


As housing prices continue to rise, finding funds to make a big down payment to buy a rental property is becoming more difficult in some real estate markets. Fortunately, there are several alternative strategies for buying a rental property that require less money:


A real estate partnership helps finance the deal in exchange for a share of the profits.Instead, you can ask your network of family and friends, find a local real estate investment club, consider real estate crowdfunding, or search for social media groups that target real estate investors."}},"@type": "Question","name": "How Much Down Payment Do You Need to Buy Investment Property?","acceptedAnswer": "@type": "Answer","text": "Lenders typically have stricter guidelines when it comes to rental properties. Though you can buy a primary home with as little as 3% down, most borrowers need to put down 15% to 20% to buy a rental property.","@type": "Question","name": "Should I Invest in a Condo?","acceptedAnswer": "@type": "Answer","text": "Condos are often less expensive than single-family homes, and they have fewer maintenance requirements. However, ongoing association dues and the potential for expensive special assessments are a risk. It is important to investigate the financial health of the homeowners association and the current condition of the overall building and the individual unit.Condos can be a good option for rental property buyers and they are often located in desirable locations."]}]}] Investing Stocks Bonds Fixed Income Mutual Funds ETFs Options 401(k) Roth IRA Fundamental Analysis Technical Analysis Markets View All Simulator Login / Portfolio Trade Research My Games Leaderboard Economy Government Policy Monetary Policy Fiscal Policy View All Personal Finance Financial Literacy Retirement Budgeting Saving Taxes Home Ownership View All News Markets Companies Earnings Economy Crypto Personal Finance Government View All Reviews Best Online Brokers Best Life Insurance Companies Best CD Rates Best Savings Accounts Best Personal Loans Best Credit Repair Companies Best Mortgage Rates Best Auto Loan Rates Best Credit Cards View All Academy Investing for Beginners Trading for Beginners Become a Day Trader Technical Analysis All Investing Courses All Trading Courses View All TradeSearchSearchPlease fill out this field.SearchSearchPlease fill out this field.InvestingInvesting Stocks Bonds Fixed Income Mutual Funds ETFs Options 401(k) Roth IRA Fundamental Analysis Technical Analysis Markets View All SimulatorSimulator Login / Portfolio Trade Research My Games Leaderboard EconomyEconomy Government Policy Monetary Policy Fiscal Policy View All Personal FinancePersonal Finance Financial Literacy Retirement Budgeting Saving Taxes Home Ownership View All NewsNews Markets Companies Earnings Economy Crypto Personal Finance Government View All ReviewsReviews Best Online Brokers Best Life Insurance Companies Best CD Rates Best Savings Accounts Best Personal Loans Best Credit Repair Companies Best Mortgage Rates Best Auto Loan Rates Best Credit Cards View All AcademyAcademy Investing for Beginners Trading for Beginners Become a Day Trader Technical Analysis All Investing Courses All Trading Courses View All Financial Terms Newsletter About Us Follow Us Facebook Instagram LinkedIn TikTok Twitter YouTube Table of ContentsExpandTable of ContentsSo You Want to Be a Landlord?Buying a Rental PropertyMaking Money in RentalsRisks and RewardsRental Property FAQsThe Bottom LineAlternative InvestmentsReal Estate InvestingHow to Invest in Rental PropertyTips for buying your first rental property


Lenders typically have stricter guidelines when it comes to rental properties. Though you can buy a primary home with as little as 3% down, most borrowers need to put down 15% to 20% to buy a rental property.


Rental properties can be an amazing investment. While it may seem really tough to get started as a real estate investor, it may not be as tough as you think. There are also many misconceptions about how people make money with rentals and how risky they are. This guide is going to help you learn all about rentals: why they are an awesome investment, how much money it takes to buy them, how to finance them, how management works, and many other tips and techniques. Owning rentals is not just about fixing toilets at 2 a.m. as many would make you think, and the returns can greatly outperform the stock market. There are some risks with rentals as well and we will go over those too.


I have been a real estate investor for almost 20 years. Real estate has been an amazing tool that let me start as an agent and work myself into flipping and buying rentals. My rentals have allowed me to feel secure with buying exotic cars, a nice house, and going on nice vacations. I know the money will always be coming in from my rentals, whether I work or not, and that is one reason I think they are the best investment out there.


While I have done well in real estate, one of the great things about rentals is you do not have to make a ton of money to invest in them. The more money you have, the easier it is to get started, but there are ways for the average income earner to become wealthy by investing in income-producing properties. I wish I would have used these strategies more when I was younger, but no matter how old you are, you can still see great returns with real estate.


My residential rentals have actually given me money back after refinancing some and selling a couple of others. I have negative money invested in them, and they still make me $6,500 a month after all expenses, including property managers. I have built millions of dollars of equity in them, and those are just my residential rentals. I have 17 commercial rentals that do even better.


Many people will say the stock market is a better investment than rentals because the historical price of stocks has gone up more than the historical price of real estate. However, the price of a home is only a very small fraction of the investment when buying rentals. I love to see my rentals go up in value, but I think of appreciation as a bonus. Here is how a good rental property will make you money. 041b061a72


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