Many investors are offering homes for rent as a way to generate cash flow for investment properties. As more people face foreclosure, the need for rental properties is increasing. Since homeowners cannot qualify for a home mortgage loan for at least two years after foreclosure, some investors are offering lease purchase options which allow debtors to repair credit damage while working toward a home purchase.
Other investors offer homes for rent in popular vacation destinations. Offering short-term rentals can be a good choice if investors are able to frequently rent the property. Investors should be prepared to fully furnish vacation rentals and provide required supplies such as linens, TVs, cable, and cooking supplies. They should also be prepared to thoroughly clean the property after each rental.
Some investors find becoming a certified Section 8 landlord and offering low-cost rental properties a good way to attract long-term tenants. Section 8 is managed by the Public Housing Authority and provides landlords with guaranteed rent payments for qualified tenants.
To be successful in the rental market requires investors to be aware of tenant needs. Most tenants prefer affordable homes in safe neighborhoods. Tenants with school-aged children prefer to live in areas with quality schools. Most people prefer easy access to interstate systems and shopping.
Real estate investors should take time to become familiar with the different rental home strategies to determine which niche is best suited for their needs.
One area that is becoming quite popular is offering homes for rent with the option to buy. Obtaining a home mortgage loan today has become challenging. Many people who want to buy real estate can’t qualify for bank financing or afford down payment requirements. Investors who offer seller-financed properties can create a win-win solution for all parties involved.
Lease purchase option agreements can be used when buyers do not qualify for a home loan, but are working toward credit repair. When a lease option is in place, buyers provide a down payment and seller’s contribute a portion of rent payments toward the purchase price. Lease option agreements typically extend for 2 to 3 years to allow buyers time to restore good credit. When the agreement expires, buyers obtain a mortgage loan for the balance owed.
Seller carry back mortgages can be a good option when buyers can obtain bank financing for part of the purchase price. When investors offer this type of financing, they agree to carry back a portion of the purchase price. This helps buyers qualify for a bank loan because they do not need to finance the full amount.
In order to fully capitalize on investment properties, investors need to make smart decisions regarding the properties they purchase. Today, many real estate investors are purchasing bank owned foreclosures sold at discounted rates.
One popular choice for buying homes priced below market value is Fannie Mae’s Homepath program. Properties offered through Homepath consist of foreclosure houses. Many of these homes qualify for public grants offered through HUDs Neighborhood Stabilization Program.
Investors can apply for up to five NSP grants when purchasing Fannie Mae Homepath properties. By combining owner will carry financing with discount foreclosure properties and NSP grants, investors can fully capitalize on potential profits.
Prior to entering into lease options or seller carry back trust deeds, investors should carefully evaluate market conditions. Investors can choose to lock-in the purchase price when real estate contracts are drafted or require buyers to pay fair market value at the end of their contract.
Offering homes for rent can be a profitable niche as long as investors carefully weigh the risks involved. Investors who are unfamiliar with the rental market may benefit from joining real estate clubs and networking with other investors to learn the ropes.