Question by myzznetta: What's a good way to buy a cheap house, to rent out?
I'm thinking of trying to purchase a house or some property that I could possibly rent out. What is the best way to purchase property cheap? And is it better to start off small like purchasing a house to rent out, rather than trying to get an apartment building?

Best answer:

Answer by sortaclarksville
Start with a house or a duplex. I would definitely not start with anything more than a quad-plex. As to buying cheap, you have to pay market price. Nobody is going to just give away a piece of property so it can be rented out by the next person at a huge profit (if there was that much profit in renting it out, then the current owner would keep it and rent if – well, if they were smart they would). Even foreclosures are going at near market value these days. The only reason they are going for a little less is because they usually need repair work, which eats up anything you saved on it by buying it as a foreclosure.

Just remember in the world of real estate rental property, the majority of your profit is not made by renting it out, but by holding onto the property and letting in increase in value. While renting it out, you may make a little bit each month over and above your expenses, but that needs to be set aside for future repairs. A lot of landlords even rent at a small loss because they know that their "cost" of having that property is still a good investment because of the amount it will increase.

For instance, you may buy a house with a monthly mortgage of 0 and rent it for 0. That 0/mo will have to be saved to cover your taxes and to cover future repairs. If you don't save it, then you will be in a bind if something should need to be repaired. If you have a mortgage of 0 and rent it for 0, then you are NOT breaking even, but are losing a little bit of money. BUT, long term, that is okay because the value of the property will increase. You are really just letting someone else buy a property for you. However, in the end, you get the big payoff when you sell it.

Buying a property, renting it to cover your costs, sitting on it for awhile so that it goes up in value, and then selling it is how most landlords make their money. Not from monthly income from rental proceeeds.

What do you think? Answer below!