First, conduct a rental property investment evaluation to determine a price range that is within your budget. Far too often will someone find a great rental property and realize they cannot afford it. Furthermore, you should get a good grasp about how you’d eventually finance your rental-property purchase.
Speak with lenders regarding your intention to buy an investment property so that you can compare financing options. Lenders will also perform their due diligence to see if your plans with the rental property will enable you to repay them. Also, there may be less scrutiny over your personal income and ability to pay, though you should be prepared that such information will be reviewed too.
By finding your price range, in addition to narrowing down your choice of properties, you also get a better idea of how much rental income would be required for you to at least break even on the investment.
Finding a property within your budget does not mean you’ll generate enough rental income to cover the costs of owning that property.
In the same way that you’d think about buying a home for yourself, you also have to think about property taxes, rent prices, neighborhoods, schools, crime rates, employment rates and other factors that matter to a potential tenant. Being able to find a decent rental property that cover these aspects will mean the ability to charge higher rent.
As you find potential rental properties, compare rent prices and vacancies in the market to obtain a better idea of what you’ll be able to charge realistically.
With each property that you consider, make the effort to calculate how much you’ll earn in profit after every month, after deducting taxes, utilities, insurance and other expenses. Estimating this number will help you find out which properties are worth buying.
Then, head over to well-known online real estate databases — including Zillow, Trulia, Redfin and Realtor — which allow you to search the home listings that fall under your price range. You may also enlist the help of a real estate agent to find an appropriate rental property (there are brokers who specialize in finding such properties).