With the incredible discounts on foreclosures and REO properties, more buyers are jumping into the market to earn passive income through rental properties.  While this is a great way to generate income, buying and renting isn’t just a matter of making the rent higher than the mortgage and upkeep.  There are ins and outs of being a landlord and being responsible for a property even when you aren’t living in it.

For various reasons, the median price of rent is currently on the rise.  It could be because of the number of homeowners that lost their homes to foreclosure and therefore did not have the credit to purchase another property and were forced to rent.  This increases the number of renters and the overall cap on the cost of renting.  Additionally, more people are realizing that it is only better to buy than rent when you are locked into an area for at least seven years or longer.  Buying for the short term is no longer an option. 

One great way to learn a whole lot about the rental market in your area of interest is to talk to other landlords.  Ask them questions about how long it takes them to rent a property, what caliber of tenants they usually get in the neighborhood and if they have any trades people they can recommend for property maintenance.  Some landlords will be forthcoming and other won’t.  It is simply in some people’s nature to hold trade secrets, but don’t worry, if you look around you’ll find a landlord who is willing to share information.

The biggest landlord killer in the land is poor financial planning.  Don’t count on your fingers and toes; map out your investment and rental plans on paper and with the help of a qualified bookkeeper or accountant.  Don’t forget simple things like including your interest and principal when calculating the renters monthly lease amount.  Homeowners insurance on rental properties is different and usually a bit higher and in many localities you will need to register your rental property as a business and pay taxes on the income that you receive from them.  Don’t forget to plan for repairs, seasonal maintenance and any home owner association fees that may apply. 

The best way to be successful in the buying and renting game is to take the time to thoroughly study the market in the area you plan to buy, make sure your calculations for upkeep, bills and expenses are accurate, keep a stash of cash on hand for the unexpected and never settle for making your profits on the re-sell.