Your step-by-step guide to investing in residential real estate

Investing in residential real estate can be lucrative. From single-family homes to multifamily units, each property type presents a unique mix of benefits.

Depending on your strategy, an investment property can offer the potential for steady income, long-term appreciation, tax benefits and portfolio diversification. For many investors, it can also be helpful in achieving personal and financial goals, whether that means building more wealth, generating passive income, funding retirement or leaving a legacy for future generations. In fact, Americans view real estate as the best investment, a sentiment that’s remained consistent for several years, according to a 2025 Gallup poll.

However, investing in real estate is not an easy endeavor. It involves high upfront costs, illiquidity, risk of depreciation and management headaches. Success hinges on selecting the right location, marked by strong job growth, a growing population and balanced supply-and-demand dynamics.

“Treat real estate as a business,” said Dave Rowan, president and founder of Rowan Financial, who specializes in assisting real estate investors. You’ll need to manage your money, from tracking your income and expenses to understanding your profits and losses. It’s important to build a reliable team to help you stay on track.

Let Homes.com walk you through three options: house flipping, a strategy known as "house hacking" and buying a rental property. But first, there are three key things you should do before investing:

Before diving into your next venture, it's critical to establish your investment goals. They will guide your decisions and allow you to stay on track.

Here’s what to consider:

Financial objective: Determine the purpose of this investment. Know what this property will be used for. Perhaps you need it for passive income or to fund your retirement. Define your asset type: residential, commercial or mixed-use properties.

Time horizon: Identify your timeframe. This investment could be for short-term or long-term gains. It could be for sending your kids to college, supplementing your retirement income, paying for your aging parents’ care or funding a home build. Your exit strategy — whether selling, refinancing or holding — also should be defined when setting your investment goals.

Risk tolerance: You might be willing to take on higher risks for higher returns or prefer more stable ones. It’s also important to decide your level of commitment to the investment property. Determine how much effort or time you are willing to put into your investment. This will come down to whether you want to be a more passive investor or an active landlord or want to hire a property manager. Most property management companies charge a monthly fee of about 10% of the monthly gross rent collected. If the rent on your home is $1,000 per month, the property management fee would be around $100 based on a fee of 10%.

Once you set your investment goal, take a closer look at your current financial picture. Ideally, investors should have 20% to 30% saved for their initial down payment, a contingency fund set aside for unexpected repairs related to their investment project, such as repairs or project delays; a strong credit score; preapproval for financing, and a fully funded emergency fund to fall back on if you lose your job. Real estate investing involves more than just the purchase price; it includes closing costs, property taxes, insurance and ongoing maintenance expenses. Investors can also consider hiring a financial adviser. Some advisers charge hourly or a flat fee that could range from $2,000 to $7,500 a year.

Your financial readiness should reflect the type of investment you want to take a stake in, whether it’s a residential rental requiring ongoing management, a fix-and-flip project or a shared living situation, also known as “house hacking,” which refers to the practice of renting out a portion of your home for additional income.

Investors exploring a property should begin with thorough market research. The age-old mantra “location, location, location” still rings true, but that’s just the beginning. Other factors like crime rates, property values and overall community appeal are important, too.

Consult with at least three real estate agents to uncover hidden opportunities, advised Kevin Lee, CEO of Insightful Real Estate Investment Group in Sacramento, California.

Pro tip: Working with local agents who are also investors can offer valuable insight into how to approach an investment property, Lee said. You may choose to hire one to help you navigate the transaction and research the market.

It’s also wise to research markets with strong supply-and-demand dynamics. You may want to avoid rural or remote areas, where growth potential could be limited.

This strategy centers on the classic business principle “buy low, sell high.” The idea of house flipping is to purchase a home, make repairs and upgrades and then sell it for a profit. When done skillfully, it can be highly profitable. But the costs go well beyond the repairs. You'll need to pay for permits, real estate commissions or marketing costs, utilities and taxes as you wait for the property to sell.

For potential investors, finding off-market deals can indeed be a strategic approach to investing in a house to flip. One way to do this is by connecting with a local agent who also flips houses. Certain agents are receptive to partnerships, particularly from those who specialize in sourcing off-market deals.

Pro tip: Be transparent about your goals and ask whether they’re willing to work with you or refer you to trusted colleagues. They get what you’re looking for and might have websites where you could buy homes with cash, said Ryan David, founder of We Buy Houses in Pennsylvania, a company that purchases properties as is.

Another valuable way to find a deal is through local real estate investor associations, which host events that provide opportunities to network, ask questions and learn from experienced investors. David also suggested targeting areas with a population of 10,000 to 15,000 people because “while incredible deals can be found in very remote areas, the lack of buyers makes these deals less practical.”

Finally, consider bringing a contractor with you to assess the property to see how much work needs to be done before you buy. Building a strong relationship with a trustworthy contractor is a must. While prices can vary, expect to pay at least $100 for an hour-long site visit.

Questions to consider:

• Is the area growing? If so, why?  
• Are there more industrial parks being developed? This is key because it's a sign of job creation, infrastructure investment and economic growth, which can drive housing demand and property appreciation.
• Are other big businesses setting up shop nearby?
• How long has the property been on the market?  

More on this topic:

• Buying a home in 10 steps
• How to save for a down payment
• What to offer on a house

Financing a flip is similar to buying a regular home: You’ll either pay cash or take out a mortgage. Ideally, you’ll want to save at least 20% for a down payment, with another $10,000 to $15,000 in reserves to cover unexpected costs. You can also acquire a "hard money loan," which is a short-term option secured by real estate. These loans are based on the value of the collateral property rather than the borrower’s creditworthiness. “A lot of people think that funding is hard, but it’s actually quite straightforward for an investor or a flipper,” David said. Hard money loans have a faster approval process, but they come with higher interest rates due to the increased risk private lenders are taking. This could be a viable option for those who need fast financing despite higher costs.

Questions to consider

• Are you interested in crowdfunding? Crowdfunding can be a viable option, but it’s essential to understand the legal and regulatory implications. Consult a real estate attorney or financial adviser before proceeding.
• Would you be open to doing a joint venture with another investor?  

More on this topic:

• How big should your down payment be? Hint: It doesn't have to be 20%.
• Fixed-rate vs. adjustable-rate mortgages

Your offer should be based on your assessment of the property’s value — not the list price. It’s essential to crunch the numbers carefully and plan for the worst-case scenario since no two deals are the same.

Many investors use a formula called the maximum allowable offer, or MAO, to guide their decisions. This is the highest offer an investor can make while also turning a profit on the investment property. Calculating MAO is straightforward but requires understanding a few key figures: renovation and repair costs; after-repair value, or ARV; fixed costs, and the 70% rule. The 70% rule suggests not paying more than that percentage of the ARV, minus the cost of repairs. This helps build a buffer to cover the other expenses like closing costs or any surprises that might pop up along the way.

To start, calculate how much you would have to allot to repair the property. Get estimates from local contractors after the property has been inspected. The ARV is the estimated value after finishing the repairs and upgrades. This is usually found after surveying comparable sales in the area and evaluating the home’s location and condition. Once you’ve looked at similar properties in the area, take the average or median sales price to find the estimate of ARV.

Fixed expenses include closing costs, real estate commissions, insurance and property taxes. Calculate the sum of those costs and plug it into the MAO formula: MAO = (ARV* 0.7) - estimated repairs minus fixed costs.

For example, if the property’s ARV is $500,000 and repairs and fixed costs are estimated to be $50,000, you shouldn’t be paying more than $300,000 for the property (70% of $500,000 minus $50,000).

Questions to consider:

• What’s my expected return on investment (ROI) based on the MAO and ARV calculations?  
• How does the property’s condition compare to similar properties that have recently been sold? 

More on this topic:

• How to find a home for sale before anyone else does
• How to make your offer for a home stand out from everyone else's
• Buying a home in 10 steps

You don't want to rush to flip the property, but you also don’t want the house to be sitting around for a long time. It’s recommended that investors get a team of contractors, David said, so “send out at least three of them to get bids for any necessary work." Getting multiple estimates helps identify whether the repairs will be cosmetic, foundational or structural. Cracks in your walls and sagging floors are common structural problems that put your home's integrity at risk. Meanwhile, cracks in your foundation may appear minor, but if left unaddressed, they can lead to serious problems, allowing moisture to seep in, encouraging mold growth and ultimately compromising the structural integrity of your home. Obtaining these estimates can prevent headaches later on.

Questions to consider:

• Can your contractors provide references or examples of similar work they have completed? 
• What’s the estimated timeline for the repairs?  
• Are there any potential hidden costs or issues that could arise during the repairs?  
• What is the payment schedule for the contractors?  
• What materials will be used? What’s the quality?  

More on this topic:

• These 3 home renovation projects pay off the most at resale

The scope of the renovations on the home — which could include working on the foundation, installing a new furnace or repairing the roof — should be laid out. Getting detailed estimates from contractors is crucial.

Timing is another key component to this equation. Ideally, the best time for repairs is the springtime when weather conditions are more favorable, according to David, but some buyers are looking to purchase a home before the school year starts.

The total time spent on renovations should be 60 to 90 days, otherwise you’ll be incurring additional holding costs, he said. Holding costs are expenses a real estate investor pays during the time they own the property, including mortgage payments, taxes, insurance, utilities and HOA fees.

Lastly, ensure that all of the permits are pulled before breaking ground on your renovations. Many municipalities require building permits, and if you don't get them, officials could force you to remove the improvements, fine you, issue a stop-work order or take legal action.

Questions to consider:

• Do you have all the necessary permits for the renovation work?  
• How will the timing of the renovations align with the best market conditions for selling the property?  
• What are the contingency plans in place if renovations take longer than anticipated?  

Once the home is ready to sell, it’s time to stage and hire professional photographers to capture high-quality photos of the property, David said. These photos are part of the marketing strategy to get the home sold and attract more potential buyers.

Pro tip: Whether you decide to sell the house yourself or hire a local agent, having professional photos taken will only enhance your chances of the property being sold.

Ensure the home is well-staged. To determine your asking price, be sure to analyze comparable sales (comps), consider your renovation costs and factor in your desired profit margin. A real estate agent or appraiser can verify your pricing strategy.

Questions to consider:

• What is your target selling price, and how does it compare to the listing price?  
• What marketing strategies will be deployed?  
• Will you sell the property yourself or hire a local agent to handle the sale?  

More on this topic:

• How you can handle multiple offers
• Staging: Tips to make your home look its best
• Selling a home in 11 steps
• How to make the best use of drones to sell your home
  

This strategy allows investors to generate income from their home. Traditionally, it involves buying a multifamily property, living in one unit and renting out the other or others to pay for the mortgage.

Location is an important factor to consider as it will determine your purchase price, the rent you charge and the home's desirability. Other elements like rising population, job growth and new local developments are aspects that indicate stability and potential rental income.

“You want to ensure that it's a neighborhood that you are comfortable living in: Visit the neighborhood during the day, night and on the weekend just to see the activity in the area,” said Waunita Scott, moderator of the Mid-Atlantic Real Estate Investors Association’s shared housing focus group. Evaluate school districts and crime rates. Homes.com provides information about working with a real estate agent who specializes in multiunit properties, offering valuable insights into local deals and rental rates. Be sure to assess the property taxes, comparable sales in the area and the condition of homes in the neighborhood.

Questions to ask:

• Will there be required renovations?  
• How much of the mortgage will I need to cover personally?  
• Will the tenant’s rent sufficiently offset my monthly costs?  
• Are utilities (electricity, gas, water) fully separated between units?  
• How much interaction is required with tenants in shared spaces if I live on the property?  

More on this topic:

• Buying a home in 10 steps

Once you have identified your property, the next step is to run the numbers using the maximum allowable offer, or MAO, formula to identify whether the property is worth the investment. Calculating the MAO allows real estate investors to figure out how much they should offer to purchase a property. The formula includes subtracting estimated repair costs and the desired profit margin from the after-repair value, or ARV, of the property.

Investors can leverage MAO and the 70% rule to keep a solid portfolio. The 70% rule suggests not paying more than 70% of the ARV, minus the cost of repairs. To put it another way, the 70% rule is a dependable way to find your MAO.

For example, if you are looking at a property with an ARV of $100,000, the 70% rule means your repair costs should not be greater than $70,000. This figure accounts for buying and holding costs, utilities, agent fees, closings costs and any lending fees, ensuring there is a buffer for profit. This would mean that your profit would be at least 30% of the home’s value, or $30,000, in other words.

Next, estimate your repair costs. Let’s say the contractor estimates that the upgrades will cost $20,000. Subtract this amount from $70,000, which leaves you with $50,000. This is the maximum allowable offer you can make for your investment to be profitable.

It's highly recommended to consult another investor to review your plan and the numbers. Ask for feedback to see whether you may have overlooked a step.

Lastly, some investors use websites such as Rentometer.com to calculate what the rent would be in the area.

Questions to consider:

• How long do you plan to live at the property? (For example, the Federal Housing Administration loan requires borrowers to occupy the property as their primary residence for at least one year.)  
• How does the property’s condition compare to similar homes that recently sold?  
• What’s your return on investment based on the MAO and ARV calculations?  

More on this topic:

• How big should your down payment be? Hint: It doesn't have to be 20%.
• Fixed-rate vs. adjustable-rate mortgages

After using the MAO formula to calculate the highest price you are willing to pay, it’s time to submit a realistic offer. Avoid lowballing. Be prepared to negotiate because the seller could either accept, counter or reject your offer. Know your financial limits and be willing to walk away if the deal doesn’t meet your budget. “The key is not getting emotionally attached to a property,” Scott said. Consider ways to sweeten an offer, such as paying all cash, being flexible on closing dates, etc.

Questions to consider:

• Have you reviewed the seller’s terms and timeline for closing?  
• What are the property taxes and how would they affect your monthly cash flow?  
• Will you break even, or will you be making a minimum monthly profit? This is contingent on finding a renter, and you have to take into account that finding one could take a while.

More on this topic:

• How to find a home for sale before anyone else does
• How to make your offer for a home stand out from everyone else's
• How to find out who owns a property

There are several financing options that can make this process more doable. Depending on your credit score, income and the type of property you are purchasing, you could consider different avenues for financing. Many investors favor Federal Housing Administration (FHA) loans due to their low down-payment requirement of just 3.5%. Conventional loans could be another option if you have a stellar credit score and a bit more saved up. An investor may be able to purchase a duplex or triplex with a down payment as low as 5%. Another option is to house hack with an investor partner. You could team up with friends, family or another investor to buy a property together. Be sure to clarify equity shares and responsibilities.

Questions to consider:

• Will the property qualify for FHA or conventional financing?  
• Would an FHA loan fit your goals, knowing you must live on the property for a year?  
• Are there local or state programs that offer down payment assistance with favorable terms?  

More on this topic:

• How to save for a down payment

Conduct a final walk-through to ensure the property meets your expectations.

Be sure to secure the final loan approval and review and sign key paperwork, such as the deed, purchase agreement, closing disclosure, title documents and mortgage. Buyers need to be prepared to cover fees such as the loan origination, title insurance and property taxes. Real estate taxes should be prorated by days of ownership, credited and debited at closing.

Questions to consider:

• Is the title clear of liens and other legal complications?  
• Are there occupancy rules for your property?  
• If you buy with a partner, are your roles, responsibilities and exit strategies defined?  

Once the deal is signed, you should already have a clear idea about what needs to be renovated. Don’t wait until after closing to start planning the rehabilitation process on the property.

Pro tip: Have your contractor start working on the home as soon as possible after closing, Scott said. Change the locks immediately. Aim for a three-month rehab period to minimize your holding costs.

Questions to consider:

• How quickly can the renovations be finished?  
• Do you have the contractors and permits ready to go before closing?  
• Is the timeline you've set realistic?

More on this topic:

• These 3 home renovation projects pay off the most at resale
• 12 questions sellers can ask prospective agents

Managing tenants can be a real chore. It’s critical to find the right ones, which means you’ll need to gather a lot of information. Before handing over the keys, you need to understand to whom you'd be renting — their rental record, credit score and history of financial responsibility — to determine whether they are likely to pay the rent on time. Verify their employment, call their references and conduct a court record search.

There are several tenant screening services that offer a variety of reports, package pricing that can match your needs and Fair Credit Reporting Act (FCRA) compliance. A background check could range from $25 to $55, which includes a comprehensive review of a prospective tenant's credit and eviction and criminal histories.

Pro tip: Scott advised treating this process as if you're "the FBI because tenant screening services don’t pick up everything.”

Questions to consider:

• Where have they lived in the past five years?  
• Do they have any outstanding debts?  
• How long have they been employed at their job?  

Even though you live on site, you’re now a landlord. A formal lease should define the requirements, security deposit rules and eviction procedures. Consider researching state and community landlord-tenant laws to learn about notice periods and the required disclosures. Scott advised landlords to “set your expectations with your tenant and have quarterly inspections.” Ideally, you want to have tradespeople on speed dial in case of an emergency and set up a payment schedule.

Questions to consider:

• What's the renewal process and notice period?
• How often will you inspect the property?
• What lease length is optimal for your goals?

It's critical to monitor performance to ensure profitability and sustainability. One way to do this is by tracking your cash flow and planning for unexpected expenses, such as broken appliances, early lease terminations and tenant issues. Property management doesn’t have to be a full-time job for most. Some investors estimate 10 to 20 hours per year per property and encourage landlords to weigh their time commitment against the financial return.

Questions to consider:

• Are you seeing the cash flow as projected?  
• Is the money you set aside for overhead and repairs sufficient?  
• Is the property appreciating in value? Check yearly.

Rental properties refer to a home purchased by an investor and occupied by tenants on a lease or another type of agreement. These properties can be standalone single-family dwellings or multifamily units.

As a new investor, it’s crucial to consider these key factors when evaluating real estate locations:

• Job growth in the area
• Population changes
• The percentage of renter-occupied households in the area
• Rental rate and vacancy trends, as well as projections for future demand
• Home price data to see how properties have performed historically and to gauge where they might be headed.

“The sweet spot is finding a rental property that’s a starter home in an established neighborhood. Those are properties that you can still find at good prices," said Aria Khosravi, owner of Revive Real Estate, a residential real estate company that specializes in locating, rehabbing and selling residential properties in Colorado.
Pro tip: Look for metro areas that have a population of more than 100,000 people, Khosravi advised.

Questions to consider:

• Are there any risks of natural disasters like wildfires, hurricanes or tornadoes that may drive up insurance costs? Homes.com listings assign scores to these environmental factors.
• What’s the property tax rate compared to other neighborhoods/markets?  
• Would you consider investing in out-of-state neighborhoods based on your budget and goals?  
• Would you consider a high-appreciation area, which may yield less monthly cash flow but more future value?  

More on this topic:

• How to find a home for sale before anyone else does
• How to make your offer for a home stand out from everyone else's
• Buying a home in 10 steps

Your investment property could be a single-family home, condo, townhouse or duplex. Take into account the pros and cons for each asset type. Condos and townhouses may offer lower entry costs and shared amenities, but rising HOA fees and rental restrictions can influence cash flow and flexibility. Always review the association's financials and bylaws before investing. Some veteran investors like Khosravi recommended purchasing a single-family home with three to four bedrooms, two bathrooms and 1,200- to 2000 square feet of living space. “I wouldn't get anything big. A bigger house means bigger problems,” he said. Smaller homes can have lower turnover and maintenance costs.

Questions to consider:

• If you decide on a condo, how much will HOA fees affect your cash flow? What are the rules regarding renting out the property?
• Is it hard to get a loan due to a lot of rentals in the neighborhood?
• Will the property appreciate in the next five years?  

More on this topic:

• The other costs that come with buying a condo

One of the biggest mistakes an investor can make is not running the numbers. Underwrite the property by analyzing its financial viability. Khosravi said to start by identifying your strategy. One option is "the BRRRR method": buy, rehab, rent, refinance, repeat. You buy a property that needs work, fix it up, rent it out, then get a new loan based on the property's higher value. Ideally, the money from that new loan helps you buy the next property and so on.

Investors should also estimate the rental income; account for vacancy rates, maintenance costs, utilities and homeowners' association fees, and check for potential special assessments the development may need.

Pro tip: Khosravi stressed the importance of setting aside at least 20% of gross rent for overhead and aiming for a minimum of $500 monthly cash flow after expenses. He also warned against buying blindly, underscoring the importance of treating each property like a business by evaluating its full financial picture.

Lastly, some investors use websites like Rentometer.com to calculate what the rent would be in the area.

Questions to answer:

• What's your expected rental income?  
• What’s your projected cash flow?  
• Do you have a plan in place in case the property sits vacant for an extended period?

Decide what type of investor you want to be. Your financing strategy should align with how hands-on or hands-off of an investor you want to be. Here are some financing options:

Owner-occupied loans: This includes FHA and conventional mortgages. They're designed for primary residences but can be used by investors who plan to live on the property temporarily.

• FHA loan: This allows for down payments as low as 3.5% for select borrowers whose credit score is 580 or higher.
• Conventional loans: This refers to a loan not backed by the government, which requires a minimum credit score of 620 and a debt-to-income ratio of 50% or less.

Finding a hard money lender: Hard money lending focuses on the value of the deal rather than the investor’s credit history, providing fast, flexible financing for properties with strong investment potential. These loans are short-term ones that require the borrower to use collateral like a home to secure the loan. The downside? Interest rates are high because lenders take on more risk, which means a more expensive loan for the borrower. Friends and family can also be a private lender, offering personalized financing arrangements based on trust and relationships rather than formal underwriting.

Questions to consider:

• Do you have access to private capital, or do you need institutional support?  

More on this topic:

• How big should your down payment be? Hint: It doesn't have to be 20%.
• Fixed-rate vs. adjustable-rate mortgages
• Can you buy a house if you have a lot of personal debt?

Hiring a real estate can be a vital step for investors. Some recommended hiring an agent who specializes in investment properties. One way to find such a professional is through the Homes.com agent search tool, which allows you to filter by experience level. Another way to find investor-friendly agents is by connecting with local real estate investment groups. These groups can have great referrals and insight.

Some of the terminology to look out for when hiring an agent could be "cap rates," which refers to capitalization rate, the estimate of potential rate of return on an investment property, or net operating income (NOI), which reveals the profitability of income-generating real estate investments. NOI includes all revenue derived from the property minus necessary operating expenses.

Questions to consider:

• Does the agent understand the real estate lingo like "After Repair Value," "net operating income" and "cap rates"?
• Does the agent have experience with BRRRR (buy, rehab, rent, refinance, repeat) or other strategies?

More on this topic:

12 questions buyers can ask prospective agents

A purchase offer can include important terms like the price you’re willing to pay, your choice of financing and your schedule to close. Part of the offer can even include contingencies, such as requiring a property inspection, or state in the contract that the seller will clear the title, which could come out of their proceeds.

The next step depends on whether you are purchasing a property that needs work.

Khosravi cautioned how important it is to be financially prepared for unexpected costs at closing. Sometimes the appraisal comes in lower than expected or rehab expenses exceed estimates. Ideally, investors should have about $20,000 to $40,000 in cash reserves to help cover the unexpected costs when doing the BRRRR method.

Pro tip: Check whether your state requires attorneys to be involved in the transaction. They can play a big role in reviewing contracts, negotiating terms and ensuring legal compliance.

Questions to consider:

• Do I have a timeline for tenant placement or refinancing?

The rehab phase is crucial to unlocking your investment's full potential. This step is important to investors who are using the BRRRR strategy. The goal behind this strategy is to buy a distressed property at a deep discount (ideally 50 to 60 cents on the dollar) and invest in the upgrades that will make it more marketable and more appealing to renters without over-rehabbing.

Questions to consider:

• Will the repairs increase the appraisal value of the investment property?  
• Do I have a backup plan if delays materialize during the rehab phase?
• Do I have the tenant screening process ready to go before repairs wrap up?
  

More on this topic:

• These 3 home renovation projects pay off the most at resale

Taking the responsibility of being a good landlord involves navigating unfamiliar tasks like vetting tenants, creating lease agreements and making home repairs. It's important to find the ideal tenant, which means you’ll need to gather the right information. As a landlord, understand to whom you'd be renting, their rental history and their history of financial responsibility and credit score to determine whether they are likely to pay the rent on time. Double-check their credit background and eviction history, verify their employment, call their references and conduct a court record search. Consider charging an application fee.

This “turns into more of a relationship business, especially if you only have one or two rentals,” Khosravi said.

Many veteran investors recommend reaching out to the applicant’s previous landlords to understand their relationship with the tenant. Teaming up with a real estate attorney who can help create lease agreements can protect your interests and limit your liability.

Questions to consider:

• Does your home insurance policy cover damage or theft for rental properties?  
• What can and can't you ask a prospective tenant? Do you know what you can legally ask or require in your community/state?  

Determine whether you want to be your own handyman, otherwise it’s recommended to have a team of reliable tradespeople that you call to your address for any home issues, such as a leaky faucet or a clogged toilet. The list of professionals should include a general handyman, an electrician, a plumber and an HVAC technician. Most of the tradespeople you hire should be bonded, insured and licensed by the state. Some states require handymen to be licensed, while others have no set standards for the people who perform this kind of work.

If you don’t have time to manage your rental property, you may want to hire a property manager. It’ll cost you 10% of your gross monthly rent.

Consider vetting different property management companies.

Pro tip: One way to seek guidance is going through your local real estate investing groups for referrals or even reaching out to your local chamber of commerce, according to Khosravi.

A property management firm will deal with hassles of maintenance requests, collecting rent and executing lease renewals and terminations.

Questions to consider:

• Do you have the time and bandwidth to self-manage?  
• Do you intend to build your portfolio, and are you willing to manage multiple properties?
• Ask your property manager: How many homes do you have under management?
• How long has the property management company been in business?

It's critical to monitor performance to ensure profitability and sustainability. One way to do this is by tracking your cash flow and planning for unexpected expenses, such as broken appliances, early lease terminations and tenant issues. Property management doesn’t have to be a full-time job. Khosravi estimated 10 to 20 hours per year per property and encouraged landlords to weigh their time commitment against the financial return.

Questions to consider:

• Are you seeing the cash flow as projected?  
• Is the money you set aside for overhead and repairs sufficient?  
• Is the property appreciating in value? Check yearly.