Real Estate Investing

The idea of owning rental real estate can be appealing. By hiring a property manager — most common in the case of apartments or condos — you can create a line of passive income, though not necessarily a stable one. There are many considerations before delving into the landlord business.

Financial analysis: Ideally, you would be able to pay cash up front for the entire purchase. This could give you more price negotiating power and certainly more peace of mind. However, many people find this is not a possibility without completely depleting the savings that will be so crucial to successful landlording. A substantial downpayment will be required, however, to obtain a loan for investment property. You will want to have a nice cushion of savings for things that may break and for months when you may have a vacant property.

Bargain hunting: This will be important in maximizing your profit potential and can even make it possible for you to purchase the property in cash. Brokers in the know can help you hunt bargains.

Property inspection: It can be tempting to go with a fixer-upper because they are generally cheaper. However, unless you are an expert remodeler, this can turn into a money pit situation. Get the property inspected for possible disaster spots — even if it looks nice at a glance, a little paint can hide a lot of problems. Inspectors will be able to determine any serious problems the property may have.

Research the neighborhood: Investopedia’s Top 10 Features of a Profitable Rental Property details specific characteristics investors should pay attention to when choosing a neighborhood. These include crime levels, schools, property taxes, amenities, amount of listings and vacancies, etc. You should also analyze what comparable properties in the surrounding area are selling and renting for.