LogFAQs > #904202886

I own some. This relates to the US rental market.

You don't just acquire them for no money down. You need to have cash to either pay the full purchase price or fund the down payment.

If using financing (i.e., leverage), the down payment for a rental/income producing properties will typically be higher than a standard owner occupied residence (which is 20%).

If applicable, you'll also need more cash or financing for renovations and repairs before it can be shown to tenants, and a cash reserve for unexpected costs.

Then you'll have to consider rental rates to determine if the property can cash flow (i.e., rents cover debt service, maintenance, insurance, property taxes) or you'll initially be cash flow negative (so you'll be bearing out of pocket costs. The usual metric for valuation is the cap rate.

Another thing you'll have to think about is whether you want to self-manage or hire a property management company for a fee (I do the latter).

After that, you'll have to deal with rental income tax and depreciation, tenant and rental law issues, among other things.

So it's not like you can just wake up one day and go out and buy a bunch of rental properties with no money or financing. Also, in my experience, the cheaper the house the less desirable the area which leads to lower rents and lower quality tenants. Yet another thing to think about.