Thinking about purchasing an investment property? Purchasing rental real estate requires knowledge of leasing, mortgage loans, tenant and landlord relationships, and property management. Buying real estate can be lucrative but, just like any investment, comes with benefits and challenges.

Key Takeaways

  • Rental property investors usually need a 15-25% down payment for a rental property mortgage. 
  • A landlord requires a broad array of skills, from understanding basic tenant law to fixing a leaky faucet. 
  • A passive investor is hands-off and may opt to pay for the services of a property manager or invest in real estate investment trusts (REITs).
  • Full-time investors spend a significant amount of time choosing houses and fixing them up to sell or rent.
  • Investment rental properties may include vacation homes, multi-family homes, or single-family homes.

Click Play to Learn All About Investing in Real Estate Rentals

So You Want To Be a Landlord?

Buying investment property and acting as a landlord can be a good way to earn income, but requires a commitment of time and money. After choosing the right property, prepping the unit, and finding reliable tenants, ongoing maintenance is required.

Maintenance and upkeep costs can decrease your rental income. There’s always the potential for an emergency, such as roof damage. Investors should plan to set aside 1% of their property’s value for repairs.

Rental property owners can manage the property themselves or hire a property manager, who typically charges between 8% and 12% of collected rents. Although costly, a property manager can provide a wide range of services including arranging maintenance and repair work, screening new tenants, and handling late rent payments.

Additionally, rental property owners need to know the landlord-tenant laws in their state and locale. Both tenants and landlords have rights and obligations regarding security deposits, lease requirements, eviction rules, and fair housing laws.

It is important to…

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