Buying A Rental Property? What To Consider

Rental properties are a great way to bring in passive income. Whether it's a residential rental or a vacation rental, this type of property can be great for those who are interested in investing in residential real estate. Rental properties come in many forms but condominiums and houses are two of the most popular options. If you are considering investing in a rental property, there are a few things to keep in mind. Here are three things that you need to consider before you buy.

Property Management

If you are planning on purchasing a rental property, the first question that you should ask yourself is whether or not you are capable of maintaining the property yourself. Things like making repairs, collecting rent, and maintenance tasks can take up a lot of time. As a landlord, you need to decide whether or not you plan on doing these tasks yourself or if you want to hire a property management company. Property management services can save you a lot of time and hassle. On average you can expect to pay between 8 and 12 percent of the monthly rental value of the property on property management services.


If you are considering purchasing a property to rent out, the process of getting financing may be a little different than it would be if you were purchasing a residence for your own needs. Rental properties are investment properties and lender requirements are typically stricter. You'll need a down payment of at least 20 percent since private mortgage insurance is not available for investment properties. Having a higher credit score can also be helpful. In order to get a favorable interest rate or to get approved for financing, you'll likely need a credit score of at least 740.

Profit Potential

If you are considering investing in a rental property, it's very important to consider the property's profit potential. Can you make money on your purchase? You'll need to take a close look at comparable rental properties in the area in order to determine what the market rate for rent is that area. Then you'll need to account for your expenses including your mortgage payments as well as the cost of property management and upkeep. Having a healthy profit margin is a must when it comes to rental properties.

If you are considering buying a rental property, there are a few things to consider. First, hiring a property management company can take away a lot of the day to day responsibilities of being a landlord. Obtaining financing for this type of investment property can be a challenge. Having a higher credit score and a down payment of 20 percent is a must. You'll also want to carefully consider profit potential before buying a property.