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Rental Property Investing 101 – A reprint from


This is from Fox Business (the Power to Prosper) – Personal Finance.  How many of us think of buying property to live in and then to ultimately rent, then move on to another property to do the same and so on.  With the drop in home values, this is a real possibility and another way to prepare for income in retirement. 

The media and real  estate professionals continually report that 2012 is the year to buy real estate. Since home values have dropped considerably, the U.S. median  list price has dropped considerably, too. Couple that with interest rates that are the lowest they’ve ever been and  it’s a perfect storm of real estate buying opportunity, especially for starting  out your career as a landlord.

Note: If you are one of those folks that believes you can predict the future  and hopes prices will go down, they may. But interest rates might go up which  would nullify any gain you would hope to obtain from any price decrease. But  more importantly, all investments fluctuate in value over time. You should not  be concerned about short-term fluctuations in a long-term investment, like real  estate. If you buy sooner over later, ten years down the road not only will you  own more properties overall than someone who waits, but you’ll most likely have  earned significant equity in all of them. And you won’t care about any price  fluctuations that might have occurred in 2012, 2013, or 2014.

Here are tips to get started. And, if you start a few years out of college,  and amass several properties, you will probably be retiring early.

Go for the long haul — Rarely do people increase their  wealth by owning property for short periods of time. Long-term investing in cash  flow-producing assets like real estate is the way to go.

Don’t’ give up your day job! – You need a solid job to be  able to save money for a down payment and be able to obtain financing to buy  properties.

Buy cash flow-positive properties – If you don’t understand  why to do this, you might want to skip real estate ownership. See “What  is a Good Real Estate Investment” article.

Buy a property that you love! – The more you love the  property for all the right investment reasons, the better chances you’ll own it  long term.

Skip the prize properties – Prize properties have negative  cash flows and are NO prize, it’s the moderately priced properties that are the  real prizes.

Buy as a personal residence to change to rental – Buy  properties in life that make good rental  property investment sense and first live in them as a personal residence.  When you buy as owner occupant, you get the best financing and can put down a  smaller down payment if you so desire. Plus you learn the property  characteristics, issues, and can fix issues so they won’t be issues once you  make it a rental. Then, move out after one to three years and into your next  personal residence that will become a rental property a few years later. This  also ensures you will only buy properties in areas where you are willing to  live, and that’s very important to do as a real estate investor.

If it sounds too good to be true, it is! – Real estate is  high risk as there are many things that can go very wrong. If it sounds too good  to be true, be very careful. Once you take ownership of the property, you have  to correct the problems and issues,or live with them.

Fully educate yourself for 3-6 months – Talk to other people  who own properties, read books, go to the local real estate investment clubs,  etc. The better you educate yourself, the higher the chances you will take the  proper steps to reduce your risks and make smart and safe decisions.

Buy properties in good shape – Fixer-uppers are money pits  and rarely sell at a large enough discount to compensate for all the work  needed. Buy properties that are as close to rental ready as possible. A great  move, if possible, is to buy a property with a good tenant already renting the  property!

Be conservative on your expectations – Always overestimate  the amount it will cost to renovate a property, underestimate the rental income  you will earn, and overestimate the expenses you will have to pay. Then, when  you blow it out of the water, you’ll have a big smile on your face and be able  to gloat to all your friends!

Stay away from high vacancy areas or declining cities – Buy  properties in nice, moderate, working class areas where there are not too many  foreclosures, empty properties, or in a city or area that is in decline.

Start young, but not before you are settled in a particular  city – You want to start early, but make sure you’re somewhat settled  before you take on this big responsibility. Have fun when you are young, there  is still plenty of time to get rich on real estate. Just start saving your  pennies for that first down payment.

Death, taxes, and…. – Those two items are guaranteed in  life. But, there is one more item if you are a real estate investor, and it’s  100% guaranteed: If you own real estate, you will feel pain along they way.  Things will go wrong, but you will recover and will likely look back on the  journey with fondness when you retire early.

And let’s end where we started, once again with the most important item in  real estate investing:

Go long! – Long-term ownership will give you the highest  chances of entering retirement with a nice rental property cash flow stream. And  long-term ownership equity gains will compensate for the hassles and issues you  have along the way.

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