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