Items you will need
- Credit report
- Investment capital
Rental property is one of the best ways to have both a solid investment and a constant stream of income if managed correctly. If you do not already have the disposable income to purchase the property outright, you will need to obtain a loan. According to Fannie Mae, "investor and second home borrowers can own 5 to 10 financed properties if they meet certain eligibility and underwriting and delivery requirements." Therefore, it is possible to obtain multiple properties for rental as long as you take the steps to qualify for financing.
Hire a Realtor to find rental properties. A Realtor will have access to the Multiple Listing Service (MLS). MLS is a combination of services that facilitates the process of finding the best properties based on buyer needs. A Realtor will save you a lot of time and energy finding property on your behalf.
Save 6 months of reserved mortgage payments and housing expenses for each potential rental property. Lending institutions look at rental property as investment property and therefore require this money as protection against possible loan default.
Qualify for financing. There must be no late mortgage payments over 30 days in the past year, no foreclosures or bankruptcies in the past 7 years, a 25 to 30 percent down payment and a high credit score.
Organize relevant documentation that shows past, positive rental history if you already own rental property. A demonstrated competency to successfully manage existing rental property profitably will positively affect your ability to gain further financing.
Apply for financing. Fill out the loan applications and submit all of the relevant supporting documentation that verifies your eligibility for financing.
Complete and submit a Request for Copy of Tax Return (form 4506) or a Request for Transcript of Tax Return (4506-T) to the lender. This will grant the lender permission to access your tax returns, which is necessary to complete the loan process.
Purchase the rental property after receiving financing. Have your real estate agent negotiate with the owners of the properties for the best selling price.
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