Investing in a home that you can rent out, whether it’s a single-family or a multi-family property, is a great way to make some extra money each month. You can use this to pay off the mortgage on your primary residence or to pay off other bills that you incur, so an investment property is a great way to give yourself an added level of assurance that you’ll always have the money you need to take care of your family.
But how can you budget for a house that you’re planning on renting out? Continue reading for a few tips.
Things to Consider Before Shopping
Before you even begin searching for your investment property, consider the following:
- How much are you willing to pay, based upon how much you can actually afford?
- What type of rental property are you in search of?
- Do you have any particular neighborhoods or cities in mind?
- What’s the average rental rate for properties in the area(s) that you’re interested in investing in? In other words, how much can you expect to make?
- What’s the return that you’re anticipating from your investment?
Set Up Financing Options
A common mistake that many homebuyers make is that they start looking for properties before they’ve actually arranged their financing options. This can lead to issues in the long run when you realize, for example, that you can’t afford as much house as you originally anticipated, or when a house you want goes to another buyer who’s already been pre-approved for a loan.
So before you head out and shop for an investment property, speak with a bank or lender to find out how much they’re willing to give you. Setting up your financing options ahead of time will make you a more prepared buyer, and you’ll be a step ahead of other buyers.
Start Saving and Set Up Your Budget
Once you answer the above questions, you should have a clearer idea of just how much house you can afford, and you should also have a better idea of how much you can generate in income from the rent that you’ll charge.
When you have your budget in place, you can begin saving on a consistent basis, even if it’s just a small amount of money that you put aside from each of your paychecks. This will help you put together a down payment for your rental property.
Consider Repair Costs
Investing in apartments isn’t always a smooth endeavor, especially when you’re dealing with properties that have been previously rented out and may be in desperate need of repair. So in addition to budgeting for the actual home price, you should also have enough money set aside to make repairs to encourage renters to settle in and pay your rental rate.
Now that you know what it takes to budget for a house that you’ll rent out, you can find the property that suits your needs and increase your monthly income easily.