How to Buy a House to Rent Out

    Some people buy houses
    to sell, while others choose to hold onto

    the house and rent it
    out to tenants. Renting a home comes with its

    share of headaches and
    risks, but if you set up the home and the rental

    arrangement right this
    business idea can help you build wealth.

     

    Instructions

     

    o   
    1

    Get
    pre-approved for a mortgage loan. Ask the lender about special programs for
    investors, such as adjustable rate mortgages that will vary after five years of
    owning the house. If you’re buying the house outright with cash, you can skip
    this step and the process will be much easier. You will just need to go to
    closing with a certified cashier’s check for the sales price plus taxes and
    title fees (the final figure will be given to you by the real estate agent or
    title company).

     

    o   
    2

    Look
    for duplexes (and multi-plexes), townhomes, rowhomes and small single family
    homes to purchase because they are usually easier and more cost-effective to
    rent out.

     

    o   
    3

    Settle
    on a home that is reasonably priced. To get an idea of what is
    “reasonable,” put the house price and estimated loan interest rate in
    a mortgage calculator to determine the mortgage payment (if applicable). Ask
    yourself, “Can I afford this payment if I don’t have a renter?”

     

    o   
    4

    Research
    the average rental prices in the area of the proposed home for the type of unit
    you are looking to buy. You can get an idea of what people are paying to rent
    apartments and homes in that area by looking in the “For Rent”
    section of Craigslist.org or by checking the rental listings in local
    publications. Your real estate agent can also provide you with guidance in this
    area—most agents have special statistical tools at their disposal.

     

    o   
    5

    Compare
    the mortgage payment with the expected rental price to see whether you would
    break even or make a profit by purchasing the house and renting it out. Once
    you evaluate the costs and benefits, you can proceed with the purchase,
    finalize loan paperwork and sign a sales agreement with the seller through your
    real estate agent.

     

    o   
    6

    Go
    to closing for the rental home to transfer the deed into your name and get the
    keys to the house. This is a date that is agreed upon between you and the
    seller of the house.

     

    o   
    7

    Start
    advertising the home for rent in local classified ads. Place an ad on the
    following websites to maximize your audience: Craigslist.org, ForRent.com,
    Rent.com and Rentals.com.

     

     

     

    o   
    8

    Prepare
    the house for your renters. The entire house must be cleaned, rooms must be
    repainted, fixtures have to be repaired and any safety hazards need to be
    corrected before your renters move in.

     

    Tips & Warnings

    ·        
    Consider
    hiring your real estate agent for two jobs—to help you buy the home and then
    to rent it out. There will be an additional fee, but the agent will show the
    home and take the potential renter through credit and rental checks.

     

    By Louise Balle, eHow Contributor/ eHow.com