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When home prices stabilize, many people consider investing in real estate. Historically, owning real estate is a great way to create wealth. As property values increase over time, you build equity while someone else pays the mortgage for you. The numbers seem to work, but buying a rental property comes with another consideration. When you buy property and rent it to someone else, you’re officially a landlord. What do you need to know?
Check your home buying eligibility. Start here (Nov 8th, 2026)
1: Qualifying for a rental property loan
The first consideration determines not “if” you want to be a landlord but “can” you? For a one-unit rental, Fannie Mae and Freddie Mac allow 15 percent down (85 percent LTV). A two- to four-unit rental needs 25 percent down (75 percent LTV). However, lenders may ask for more, plus cash reserves and a higher rate. Conventional mortgages will be your only choice, since FHA, VA and USDA loans are only for homes you live in.
Second, and just as important, consider the rent itself. Under Fannie Mae rules, a lender can count rent from the property only if you document your current housing payment. On your first investment property, its rental income can then offset only the new mortgage payment. Do you have at least 12 months of experience managing rental property? Then a lender may count the subject property’s cash flow as income, which can help you qualify.
2: Screening your potential tenants
An advantage of owning rental properties is that someone else pays you rent which then goes toward paying your mortgage. Yet the important part of that sequence is first getting the rent paid on time. As a landlord, it’s your responsibility to both market the property and screen prospective tenants. If your mortgage payment is due on the 1st you want to get your rent on the 1st as well.
A rental application must contain information about the tenant’s employer, current landlord and address. It must also include a release to review a copy of the applicant’s credit report. A recent paycheck stub shows how much income is there each month to pay the rent. A good rule of thumb is that the monthly rent not exceed one-third of the applicant’s gross monthly income.
Contact the current and previous landlord for a reference. Did they pay on time? Why did they leave? Contact the employer and find out how long they’ve worked there and what is their position? Good, stable tenants have good credit and have a history of paying their rent on time.
3: Make the house habitable
Renters have rights too. One of them requires you, the landlord, to keep the property in a habitable condition. If you’re buying a fixer-upper, you need to do the fixing before you start renting.
Depending upon the area, these minimal conditions provide a safe, livable environment for your tenants. You will need to fix pest infestation, missing smoke alarms, a lack of hot water and doors with no locks. Just remember that tenants have a right to live in a decent, safe and sanitary property.
If the rental property you’re buying is in bad shape, you may have a hard time getting financing. Talk to a reputable lender before making an offer.
4: You will be the fixer
Not only are you the landlord but you’re also the “fixer.” Think back to your first apartment, when the garbage disposal quit working or the toilet backed up. What did you do? That’s right, you called the landlord.
Say you’re out on a leisurely Sunday afternoon, playing a round of golf with your friends. Then your phone rings, and your tenant frantically yells, “The toilets’ backing up and the garage is flooded with sewage!”
Not exactly a pleasant thought, but when emergency repairs come up, you’re the one your tenants call. One other consideration when being a fixer is having the ability to pay for needed repairs as they arise. Hot water heaters, refrigerators and any appliance will ultimately need repair or replacement. Before buying a rental property, make sure your finances are in order to accommodate emergency repairs.
5: Is a property manager the way to go?
One of the best things about being a landlord is that you don’t have to be if you don’t want to. You can hire a property manager. Property managers take care of as much or as little as you require. For a monthly fee, the property manager can collect the rent and answer phone calls from tenants. A manager can also work with local contractors to make needed repairs as they arise.
Property managers are often real estate agents and can help market your property when your tenants ultimately decide to move. They can show the property and complete the rental agreement on your behalf. Overall, they can take on as much or as little of your landlord duties as needed.
Property managers will affect your cash flow. So if the rent is barely covering your mortgage payment, a property manager may not be your best choice. But if you do have room for a manager, it does take some of the stress away from being a landlord.
Are you ready to buy a rental property?
Think you’re ready, willing, and able to be a landlord? Contact us to see if you qualify for an investment property loan.
Check your home buying eligibility. Start here (Nov 8th, 2026)
