Any savvy investor knows that buying rental property is a great way to create additional monthly income.  As with any purchase, there are some risks that go along with buying a home for rental purposes.  Take your time and do your due diligence before taking the plunge and buying any property.  Below is a list of seven things to consider before purchasing any property…

• Have an Inspection:  The most important step in any rental process is having a professional inspection and an evaluation of the property.  If you don’t want to be spending all of your rental income on repairs, an inspection will help you discover exactly what kind of improvements this property will need.
• Meet the Tenants:  It is often a good idea to buy rental properties with a lease already in place.  This guarantees that you will already have tenants and in some cases you can purchase a property with reliable tenants who have resided there for years.  If the property is occupied, you’ll want to take the time to meet the tenants and get a feel for their personality.  Also, you should consider how well they maintain the property; this will often be reflected in the condition of their living space.
• Meet the Neighbors:  Take a moment to knock on the neighbor’s door an introduce yourself.  This is a great way to get a candid opinion of the property, since the seller is typically only going to tell you what you want to hear.  Neighbors can give you input on the current tenants, neighborhood problems and the condition of the home.
• Check Other Local Rent Prices:  Go through the neighborhood or local newspaper and get an idea how much other comparable properties are renting for.  Make sure that there is not a large discrepancy between those rental prices and the rents being paid at the home you are interested in.
• Consider the Structure of the Building:  If you are buying an older home or one that may need some work, you’ll want to consider the structure of the home.  Often cedar shake roofs and wood sided buildings can equate to major headaches.  If you can find a property with brick or concrete walls, you will greatly reduce your chances of having to pay for major structural work.
• Check the Location:  Find out if the location of the property you are interested in is conducive to finding qualified renters.  In many cases, certain neighborhoods will be full of tenants who are renting from various investors.  You might want to consider avoiding neighborhoods that are strictly college rentals as this can result in parties, crime and possible damage to your property.
• Buy at the Right Price:  If you are mortgaging this rental property, in most cases you’ll need at least 20% down on the loan.  Calculate what your total monthly mortgage will be and evaluate whether or not you will be actually making a profit after the mortgage and any property upkeep costs are spent.  The total rental earnings minus the sum of all of your expenses will give you your expected monthly profit.  Obviously, unforeseen circumstances can cause your various property expenses to fluctuate.

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