1. It's all about location

The first thing you'll need to consider when investing in a rental property is the location. You'll want to choose a location that is desirable to potential renters. This means choosing a safe neighborhood with good schools, close to public transportation, and easy access to shopping and dining options.

It is best to avoid locations that have a high crime rate with lots of vacancies, as this will make it difficult to find tenants. You should also avoid areas that are prone to natural disasters, such as floods or earthquakes. 

Take your time and explore your options to find the perfect location for your rental property.

2. Type of rental home

The next thing you'll need to consider is the type of rental home you're interested in. There are many different types of rentals: condominiums, single-family houses, and multifamily homes are all included. Each type of rental has its own set of pros and cons.

·  Condominiums: These often offer amenities like swimming pools and exercise facilities. They can be easier to maintain than a single-family home. They may have restrictions on renters, such as no pets allowed, use of amenities, and more.  There will be a greater HOA costs, but this will result in less upkeep.

·  Single-family houses: These are often one-unit properties that provide more privacy for tenants. They may require more maintenance than a condominium. These typically cost more to purchase than a condominium. However, the single-family house will likely appreciate at a higher rate, therefore providing extra profit at the end of the sale. The maintenance of the home will also be higher with a single-family house and dependent on the owner.

·  Multifamily homes: These include two- to four-unit dwellings. They often provide more rental income than a single-family home. They may require less maintenance as there are multiple tenants to share the cost. These typically appreciate at a lower rate than a single-family home, but still provide extra rental income. It may be more difficult to find financing for these units.

There is no right or wrong answer when it comes to choosing the type of rental home. It all depends on your personal preferences and needs.

3. Investment property vs. second home

An investment property is a rental property that you purchase with the intention of making a profit. This can be done through renting out the property, selling it at a later date, or both. 

A second home is a property that you purchase for personal use. This could be as a vacation home or a place to retire. You may also rent out your second home when you're not using it, but this isn't always the case.

Legal aspects

It's important to know the difference between an investment property and a second home because it will affect your financing options and your tax liability. In certain states, there are laws that protect tenants in rental properties. These laws may not apply to second homes, so it's important to do your research before making a purchase.

Management

You'll also need to decide how you're going to manage the property. You can either hire a professional property management company or self-manage the property. There are pros and cons to both options.

·  Hiring a professional management company: You'll have someone else to handle the day-to-day tasks associated with running a rental property. This can be helpful if you live far away from the property or if you don't have the time to dedicate to managing it. 

·  Self-management:  You'll have more control over the property and how it's run. This option is often less expensive, but it can be a lot of work. No matter what you decide, make sure you're prepared to handle the responsibilities that come with being a landlord

4. Income and Expenses

The real reason you're investing in a rental property is to make money. Rental income can come from the rent, laundry fees, parking fees, and other sources. It can be from short-term rentals or long-term rentals. It's important to have a clear understanding of your income and expenses before you purchase a rental property. These include mortgage payments, insurance, taxes, repairs, and more.

This will help you determine if the property is a good investment for you.

• Income: The most common income type is rental income. This can be from short-term rentals, long-term rentals, or a combination of both.

·  Short-term rentals: These are usually advertised on Airbnb or VRBO, and they tend to be for a weekend or a week at a time. You would see more of these in a vacation home. 

·  Long-term rentals: These are usually rented out for months or years at a time. The tenant usually signs a lease agreement. You would see more of these in an investment property.

Expenses: Mortgage payments are typically the biggest expense for rental property owners. Expenses include but are not limited to the mortgage payment, property taxes, utilities, maintenance, HOA fees, property management, and more. It is important to put together a budget to determine your return on investment to ensure you are making a sound investment.

5. Financing your rental property

The final thing to consider before investing in a rental property is how you will finance it. There are many different options available, such as traditional mortgages, home equity loans, and private loans (even owner financing). To discover the best alternative for you, calculate your rates of interest, loan durations, and monthly installments.

The mortgage interest rate is typically higher than the rate for a traditional loan, so it's important to shop around and compare rates. You'll also need to decide how much you're willing to put down. The more you put down, the lower your monthly payments will be.