What's the state of the rental market?Irwin recommends consulting with a real estate agent who specializes in rentals to estimate rental rates and how long it will take to find a qualified renter.
Homeowners should know that rent is based on market rates, not the amount homeowners need to cover their mortgage payments.
"Homeowners who choose to rent need to be financially prepared for the possibility of negative cash flow, vacancies and the chance that the renters will stop paying the rent," Rule-Enos says.
What are the costs of owning investment property?Owners who become investors need to continue paying principal and interest on their mortgage, property taxes, homeowners insurance, homeowners association fees, and maintenance and repair costs.
Homeowners who hire a property manager will have an additional expense to weigh. Himali and Irwin estimate property managers charge 8 percent to 12 percent of the gross monthly rent.
"The first calculation to include should be a fee for a property manager, because the last thing anyone wants is to have to be on constant call for maintenance issues, especially if they are not local," Himali says.
Of course, many of these costs are tax-deductible to landlords. Owning a home as an investment property changes an owner's tax liability in ways that may or may not be to the owner's advantage. Talk to a tax professional for more guidance.
Are you ready to be a landlord?Irwin says the emotional cost of being a landlord includes handling tenant complaints, maintenance problems and even the possibility of eviction. The application process should include a background check by the landlord.
"Landlord-tenant laws vary from state to state, so it's very important to either hire a professional who knows the laws or to make sure you have a thorough knowledge yourself," says Himali.
In the final analysis, homeowners need to weigh the emotional and financial costs of being a landlord against the potential for profit. A Realtor can create an estimated net profit or loss statement based on the potential sales price.
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