Interested in learning to rent property
Question: I understand the basics of renting property. Curious how to start my own “landlord business”.
For example:
Cost of rent should be based on what?
Take monthly mortgage payment and add 10% Take value of house and charge 10% find amount to pay off property in 15 years and charge that find amount to rent with only 7 of 12 months at full capacity?
I’m not an accountant, should I hire one to keep track of finances? I’m not a lwayer, should I contact one to draw up a lease?
How many properties is enough to get started?
I have a 2 BR townhouse I live in now. I own about 13% of it, rest is in 1st and 2nd mortgages. My plan is to save about 5-6 months mortgage payments, rent out this property, then move into a larger house.
Then at some point use equity in TH to buy another property. At what point will a bank usually approve the second rental property purchase? 20 % equity, 30%… What criteria do they look at?
What are typical legal and accounting costs associated with this?
Answer: What the market will bear. Oddly, or appropriately, desperate people with bad credit will pay top dollar. Good people with good credit will wait for a bargain. You want the rent high, but not so high that you don’t have a good selection of renters. Local conditions will determine the typical renter. I have an accountant. Luckily mine is also a landlord. So he is keenly interested in the in’s and out’s of the paperwork. If you want to do this yourself (in the US) take a look at Schedule E. I’m sure the IRS will correct your obvious mistakes 
A checkbook record is quite good. Who, What, When and Amount are basic information for yourself or your accountant. You didn’t pass the bra exam? Sorry, couldn’t resist. Standard leases from the office supply stores are pretty good. I’ve found that adding a list of penalties for each offense is helpful. Nobody gets too excited about breaking the subletting clause. A $25 a day penalty for breaking the subletting clause gets much more attention. Same with pets or loud music or whatever. With more experience you’ll know what to put in your next lease. Definitely consider a lawyer for evictions. Renting out your current home when it becomes economically viable is a great idea. The longer you wait the better your financial position (usually).
You have to have equity AND the positive cash flow to pay back the loan. Banks want to easily get their money back if they have to foreclose. I’ve heard anything from 10% to 33% for down payment. Time to talk to an actual banker. I pay my accountant about $500 a year to track 3 properties (plus my simple personal taxes). YMMV. I keep a detailed “check record” including rent deposits. Some expenses are repairs deductible in the current year. Some are spread out over 5 or 7 years. Some are improvements and increase your basis, but are not deductible at all (until you sell).
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