A Relatively Cheaper and Easier Way to Jump Into Rental Properties

As I sit down to take a break from the craziness of packing for the move my husband and I are about to embark upon, I can't help but share some thoughts with those of you who may want to get into into the rental property niche but aren't sure where to start.  At some point in your life you are probably going to own a home and move.  If this has happened or is going to happen in your future, this is a great way to get a jumpstart into buy and hold properties. 

When you decide it is time to move, if you are able to complete your next set of plans without having to sell your current home, keep it as a rental.  Why is this a great way to start building your portfolio?  Well, in most cases when you bought your primary residence your loan terms are, in reality, much better terms than you would get as an investor.  For instance, a lower interest rate and most likely you didn't have to put as much money down. Depending on your loan program you could have purchased the home with either 0%, 3.5%, 5%, etc.  Which is much less than the conventional loan down payment requirement of 20%.  

In addition, depending on how long you have owned your home you have already paid off some of the principal and now can hand that job over to a tenant. While you take checks to the bank and enjoy watching that loan amount decrease without you having to pay out of your pocket.

Before you decide whether you are going to make your primary residence a rental you really need to do you due diligence in researching the rental market and tenant pool in your area.  Find out what other homes like yours are renting for, how long they are listed, what the vacancy rate is in the area, etc.  These indicators can tell you whether or not turning your primary home into a rental is a good idea.

When might this not be a good idea?  While you do your homework, if you learn that you may be having to pay a chunk of cash out of your own pocket PLUS the rent that the tenant is paying you each month, it may be better to try and sell (of course that depends on the market too).  If that is the case, that you have to pay cash out of your pocket each month too, you may need to ask yourself this question- Is this property worth hanging onto for appreciation purposes?  

 I wanted to jot my thoughts down on this topic because my husband and I are in the midst of a move and we decided to turn our home into a rental.  Now, we always had that intention, even when we bought it 5 years ago.  However, we did sit down and assess the current market to decide whether or not it was the right decision now.  

I do recommend for those of you out there who are just starting out to think about this option when moving or perhaps when buying your first home.  Even purchasing a multi-family and living in it is a pretty good idea because your get good loan terms and were able to get a future rental property with little money down and it will hopefully generate great return in your future while potentially paying some or all of your mortgage now!

Happy Investing!