With buy and hold properties, there are several factors that need consideration, especially if a loan is applied for when purchasing the property. If it doesn’t fit the criteria for rental, will it work as a flip and sell? If it fits neither criterion, don’t buy it. Instead, look at other factors as well. Mortgage and insurance are necessary to consider, if they’re too much, the property might be a bad investment. Property tax, income tax, maintenance, and management—to have someone else do it, or do it yourself? —those are all other problems that are necessary to factor into the loan amount for the property as well. Going through all the steps to evaluate properties and percentage costs for other potential problems will need consideration as well. In the end, always having all the factored amounts ahead of time when evaluating properties for rental or flipping will save time and money when applying for loans.
- Your property taxes can vary widely depending on the state or community in which your rental property is located.
- Factor in the costs of property management, whether you are doing the work yourself or hiring a property management company.
- Capital expenditures such as the roof and HVAC system must be taken into consideration when you evaluate a rental property.
“For those of us that are buy and hold investors, the numbers have to work in order to be able to make a property cash flow.”