When asked what was the number one piece of advice you would give a potential landlord, one of our current owners had this great advice.
Recognize that being a landlord is a business. Being a landlord is different than being a private homeowner. It's a business, and you need to treat it like one."Where I see a lot of people make mistakes is, they don't have a good business plan," Smith says. "This type of investment is not hands-off. It's not just a passive revenue stream. It requires
Any property you buy has to make sense from a business perspective, not because it's a house you'd like to live in. That means it should be a reasonably priced home likely to appeal to the kind of tenants you're looking for.
You'll also need to be able to qualify for a loan. Lending requirements for personal mortgages have relaxed in recent years, but Jim Merrill of Axel Mortgage Inc. in Phoenix says the requirements for rental property largely have remained the same. If you're borrowing money for your first rental house, you're going to need at least a 20% down payment. And if it's your first rental property, your current income is going to have to be enough to handle the mortgages for both your residence and your new property. However, Merrill says, "Once we can show that someone has two years of successfully managing rental property, we can use that to offset the (income) requirement."