Rental Properties - Rental properties can create problems for prospective borrowers; this is mostly because lenders have a risk-based view of income earning properties and the potential effect they can have on the borrower’s ability to repay as planned.

To offset this potential risk, lender’s guidelines often have restrictions on rental income.

Some examples of these restrictions are an automatic 25% “vacancy/loss factor“, or exclusion of the total gross rent income received, which lenders use to account for the ever-present possibility that you wont be able find suitable renters for an extended period.

Rental property loans require good to excellent credit to qualify for and many require a down payment of at least 5%. There are 100% rental property mortgage programs available to borrowers with excellent credit but many have higher rates that affect positive cash flow on the rental property every month.

Rental properties usually carry a higher interest rate than properties that are a person' primary residence. This is mainly because a rental property is a higher risk than a primary residence. If times get tough or the owner can not fill a vacancy in a rental property, the homeowner is more likely to fall behind and let the rental property go before they would their main residence.

Rental Property - Many people dabble into real estate investing, or at some time or another think about purchasing rental properties. There are many things that need to be considered when looking to buy rental properties. One thing you should know is that qualifying for investment property financing is usually a little tougher than qualifying for the property that you plan to live in.

You will also want to develop a business plan for an investment purchase to make sure that you do not get in trouble financially. You need to budget any profit you make from that property for repairs and routine maintanence. Many a real estate investors fail due to lack of planning.

When qualifying for a rental property mortgage loan you normally will not be able to use 100% of the rent that you collect. For qualification purposes, most lenders only credit 75% of the rent collected. This is to allow for vacancies that will occur in the rental property.

It will be important to consult with your accountant professional to review any tax benefits that come with a rental property. Possible tax advantages can possibly include, improvements, repairs and even vacancy.

If you already have rental proptery a lender may ask to see copies of the rental agreemtents you already have.

Make sure you keep track of all your rental agreements along with the ability to track payments for proper record keeping. Make sure to get checks and not accept cash when collecting monthly rent.

When planning to purchase a rental property, you should prepare to have around a 10% down payment. Though there are a few no money down loan programs for investors, you will get much better terms if you are working with a down payment.

Many people invest in rental property to create an income to supplement other retirement income, or even as a main source of retirement income.

When deciding on investing in a rental the risk is high. A few basic questions need to be answered before making the purchase. How long can you afford for my tenants to stop paying rent? I suggest a minimum of 4 months reserves. Are you familiar with your states eviction laws? Do you have an attorney? Unfortunately these are just a few of the issues you should be familiar with.

Rentals can be a great form of cashflow. It just takes a little bit more work!

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