Here is what I set down as my guidelines, after reading reams of paper, devouring gazillion bytes on the internet and talking to people in the business.
The Numbers
It is not ‘my’ house, I have look at it as an investment. It is obvious the cashflow and appreciation would determine my income.
The formula I used to evaluate my options was:
Cashflow: Annual profit = Rental income – (Mortgage payments + Property Taxes + Insurance + Property Management Exps.)
Appreciation: Capital Gains = Sell price – (Buy Price + Selling Costs + Buying costs)
The Market
The economics of demand and supply are at play like any other market. A vacancy costs money and generates no income in return. So evaluating the market is of prime importance.
Talk to local property managers, realtors. Searching for rental offerings and requests on the internet is another great resource. I have personally found academic towns are perpetual demanding locations.
Level of Commitment
What are the commitments the property would demand of me? It is important to list out financial, time and effort commitments that the business would need, because rental properties are a business not just a mere investment. I am on the verge of making the leap, But before you follow you might want to do your due diligence too.
Comments
- mmoore, Jun 22, 2008 at 01:00 PM PDT said:
Are there any rules about the investent you can make and the losses you can write off that apply to your income level?
