Investing in a single family property can be a rewarding financial move. It allows investors to diversify their portfolio into an appreciable asset that provides monthly cash flow income – and builds equity at the same time. It can also provide a nice and affordable place to live for a family who would otherwise most likely be unable to purchase a property in the same neighborhood. However, purchasing an investment home is a big decision. It is a large investment that requires thought and planning. Whether you purchase your investment property and manage it yourself, or outsource the property management, there are a number of expenses that you will have to budget for.
1. Mortgage Payments
This is perhaps the most obvious cost for most property owners who do not pay in full. Depending on how much you put down (usually 20%-25%), the value of the property, and what your mortgage rate is your mortgage payment will vary. But the bottom-line is that your mortgage payment for your investment property plus any potential property expenses (detailed below) should not be higher than your monthly rental income.
Here is a mortgage calculator you can use to give you an approximation of your monthly loan payments. This calculator should be used only as a guide. Be sure to speak to your bank or financial advisor prior to purchasing the property.
Read on to find out about nine more expenses to prepare for as a single family rental investor.