2. Do you want to be a landlord but are short of
the 20% or more down payment you’ll need?
Not to worry. There are other ways you can have
the landlord experience without breaking the
bank.
3. Traditional home financing will
get you a one-to four-unit
property. (Note that anything
larger is considered commercial.)
The Federal Housing Administration
(FHA) in particular provides programs for potential
landlords who, if they agree to live in one unit, can
rent out the others. Unlike sources of conventional
financing, the FHA requires lower down payments
and has easier credit requirements.
4. Keep in mind, especially if you are new to
purchasing a rental property, that it is your
income only, not the rental income that you may
receive, that will be used to qualify you. It is only
when you have two years of documentable
income derived from your rental property that
you will be able to use that income to qualify for
a mortgage.
5. If you plan to document your
rental income and use it to qualify
for a mortgage sometime down
the road, ensure that you have a
signed lease, even if you want to rent to a family
member.
6. Also get copies of all the rent checks that are
deposited into your bank account. Otherwise,
when it comes time to qualify for a mortgage as
a landlord, you may have difficulty proving to
lenders that you have had legitimate rental
income for the required period of time.
7. Acquiring a property with an in-law suite, whether
attached or detached, is another way to receive
rental income. There are properties that have in-
law units, and as with multiunit properties, the
additional unit must have its own utilities so that
you are able to separate your rental property
from your residence.
You’ll need good advice
to navigate the rental
market. Your mortgage
professional and your
real estate agent can
smooth the waters for
you.
