Buying a rental property in Tennessee may be an effective way of diversifying your investment portfolio. Of course, there are many variables that you must consider before deciding if owning an investment property is right for you. For instance, if you aren’t handy, you may not be able to meet a tenant’s needs in a timely or affordable manner.
How will you pay for a rental property?
You will likely need to make a down payment of at least 20% on an investment property. It’s unlikely that you will be able to get an FHA loan, VA or USDA loan because you generally cannot get mortgage insurance on anything other than a principal residence. It may be possible to use funds in a savings account, sell property or raise cash from other investors to secure the down payment on real estate that you’d like to use for investment purposes.
You’ll need to choose a property carefully
Prior to making an offer on a property, you’ll need to do extensive market research. This will help you determine who your ideal tenant is and how much that person will likely be willing to pay each month. It will also help you choose a piece of real estate that will appreciate in value while you own it. As a home increases in value, it becomes easier to sell for a profit if you no longer want or need it as part of your portfolio.
If you are interested in purchasing a rental home, it may be a good idea to speak with a real estate agent or financial adviser. Doing so may give you more insight into the process of becoming a landlord as well as the rights and responsibilities that you have as a rental property owner.