I want to buy a house and rent it to make money. Is that a good idea?
Jan 21, 2010
in
Commercial Mortgage FAQ
I was also thinking apartment complex, but do you have to get financed by a bank, and will they let you rent out the house? And how d you get financing for apartments?
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16 comments
Jerrold J on January 21, 2010 at 12:36 pm
Buying rental properties that have a POSITIVE cash flow is ALWAYS a good investment. Real estate is THE easiest, fastest way to wealth and is the most popular investment vehicle. BUT it is NOT foolproof.
First you need to understand WHAT makes a GOOD rental property. It MUST be in an area with population AND job growth going up (demand) It MUST be in an area where rental rates ( $) are high enough to pay for mortgage payment, insurance, tax’s, repairs, vacancy, management, AND profit. It MUST be the right size ( # of bedrooms), the right location, (schools), and the right condition.
YOU need to KNOW how to evaluate the rental potential, evaluate the condition of the title, the building, estimate cost of repairs, tax structuring, purchase options and the cost of each option. have a property management company to handle the rental applications, qualifications, and record keeping. You need to know how you will finance it, the cost of the financing, the carrying costs, the holding costs, evaluate rental demand, project rental growth, job growth, progression/regression, population growth, projected tax increase, and more. You need to understand the time value of money, interest rates and closing costs, entity structuring, how to hold title, how to structure for sale, and your exit strategy.
Once you know these things, IT’S EASY!!
sabaku on January 21, 2010 at 12:36 pm
Buying and then renting is an AWESOME idea, but really, all it does is pay for the mortgage on the rental. You wont make much of a profit.
golferwhoworks on January 21, 2010 at 12:36 pm
either a bank or commercial mortgage is required. Sure once you own them you are supposed to rent them out to satisfy the note
We are all screwed on January 21, 2010 at 12:36 pm
You won’t make much money
The Yeti on January 21, 2010 at 12:36 pm
Not until the recession is over. Housing and real estate are not good investments right now.
Mandi on January 21, 2010 at 12:36 pm
That’s a tough question in today’s economy. Technically it is a great time to buy a house, and I know a lot of people are selling their houses and renting (I’m looking to rent a house). It would be a gamble, but as I said so many more people are renting now than buying so it might work out.
I don’t know the answer to the rest of your questions.
Victoria on January 21, 2010 at 12:36 pm
I would suggest against it. You really can’t trust anyone anymore on who is going to pay and who isn’t, even if they have great rental/credit history. If they lose their job and are unable to pay, then you’ll have to start paying.
Just some food for thought.
Have a nice day.
D D on January 21, 2010 at 12:36 pm
if you have to ask that here than no.
cfisher4234 on January 21, 2010 at 12:36 pm
The biggest problem is that you are responsible for the upkeep which is a huge hassel. Also – you have to plan on having it vacant for at least 3 months out of the year – which means no income for those months so you’re stuck paying it. Also, renters are known for destroying places on their way out – so you’ll have to all the repairs before a new tenant comes along. My bro-in-law has a rental and says it’s the biggest mistake and headache he’s ever made.
tbrminsanity on January 21, 2010 at 12:36 pm
You would qualify for a business loan as this would be a business opportunity. There is a lot of work with renting (dealing with tenants, maintenance costs, and the bills of the building as well). That being said you can make a fair amount of money in it as well. Word of advise though, don’t be a "slum lord" as all it takes is one tenant who is willing to challenge you on any illegal practices to put you out of business.
Lily J on January 21, 2010 at 12:36 pm
Its a great idea if the price is right! My boyfriend and I currently own a double, we live upstairs and rent out the downstairs. With the price we paid for the house (which determines your mortgage) and the price we charge for rent we basically live rent free. Our downstairs rent pays our mortgage as well as a few of our bills each month!
When searching for an apartment or housing complex you will have to be financed (unless you can pay for it in cash) and you will have to put a certain percentage down (where we live its 25%) because it is considered income property. So basically you have to consider the condition of the house and the price of the house to determine how much your mortgage will be and how much you can charge for rent. If you end up paying more for your mortgage, taxes, etc a year than you collect in rent, then it is not a good idea to buy that piece of property.
Real Estate can be a very profitable business if you do it right. So consider all your options and find one that makes sense financially.
lishamarie3 on January 21, 2010 at 12:36 pm
not in this market, my husband wanted to i told him if he decided to i wouldn’t stick around. I think its a terrible idea
joscasta on January 21, 2010 at 12:36 pm
Its a great idea… since if you look at the economy, people are going into foreclosure, and where do they move? Rental properties!
Honestly, its a good time to buy a rental property since you probably can get one cheaper, and if you maintain it properly, you can keep residents in there for years, especially if you get it section 8 (rent assistance) certified!
Contact your local bank to find out about rental properties in foreclosure, and see what you can possibly do to fix them up and make some money!
AnomalousD on January 21, 2010 at 12:36 pm
It depends on a lot of things but above all, who would be your target renters?
It is more of a headache than it’s worth to rent housing to unreliable or irresponsible renters. Think about how you are going to ensure payment and how you are going to set up lease terms. Make sure you understand all the legislation surrounding landlord/tenant relations.
As mentioned in a previous answer, you won’t really make money, you just won’t have to pay much or any of the mortgage. You do have to consider how much effort you’ll have to put into maintenance and upkeep as well.
MoRmEx.co.cc on January 21, 2010 at 12:36 pm
In the US right now, i don’t think it’s a good idea with all the mess bush is leaving and all, but it’ll be great if you take that same idea and apply it in another country, yeah why not..if you can buy a house in america, you may buy three elsewhere with the same amount, have you thought of that?
Good luck
src50 on January 21, 2010 at 12:36 pm
You obviously haven’t thought this through and run the numbers.