How to Buy Rental Properties?

How to Buy Rental Properties?

One of the finest investments you can make are the rental properties. You must be aware what exactly what you are doing. Norita Investors provides you a step-by-step guide that will take your through the entire process.

We have come up with our own formula for purchasing rental properties that generate real cash flow. Here is the formula:

For example, a person named Peter is not able to secure a tenant for no more than 6 months.

He had to change two windows that were broken due to some anti-social elements while units were vacant.

Peter got 3 phone calls in the middle of the night.

There is a damaged house in the street.

Thinking of the above things and the hassles associated with it, Peter would leave the real estate investing completely.

However, that is not the case.

Peter is highly passionate regarding getting rental properties.

rental properties

The question arises – Why?

Peter learned some pivotal lessons from above. He set out a stringent set of criteria that will make sure that several of the issues do not get repeated.

The result

A highly proven effective formula for buying rental properties that facilitate cash flow. The real perfect formula is highly systematic and streamlined with renowned companies like Norita Investors who assist people like Peter to buy rental properties that are rented out for the purpose of investment.

We want to lay immense stress on this strategy as it is due to hours of analysing, reading, several conversations with other investors, property managers and real estate agents. It is an in-depth analysis of our own investments.

This strategy is the result of our own individual experience and can differ depending on yours.

The first and foremost step is to make sure that you do not end up with a bad real estate experience.

rental properties


Before we dive into some specific methods, we would like to tell you that if you are not aware of what you are doing, you will get burned out and lose a great deal of money. You must research thoroughly and invest in educating yourself. 

Following are some aspects to get yourself educated:

Speak to other Investors

Ensure that you get proper advice from people who have achieved what you are striving to do. To your surprise, there would be many people keen to provide you free tips on something you are not aware of.

Read thoroughly

It is always advised that you go through a wide range of authors who have various approaches. Your tasks are to go through ample material to start viewing patterns and to form your own viewpoints and tactics.

Buy useful courses

There is a huge quality content available. You must do a detailed Google search that will assist you in choosing the right and useful courses.

Be Aware of your Market

I highly suggest that you purchase an area that you know well at least for your first few properties. Try to spend some weekends in your target market for some months. You can drive around in two or three zip codes and speak to the neighbors, local shop owners, property managers etc. In this way, you can get a feel of the entire area and the clients you wish to deal with.

Always buy below market 10 to 20 percent

We suggest you that this is not a way to enhance your net worth. This is a great means to make sure your financial security is strong. In case you sell because of an emergency, 10 to 20 percent will enable you to reduce your offering price to move it faster.

In case you do not have to sell in an emergency, you made a quick return on your investment.

Rental property must produce 15 percent ROI, cash on cash

That means rent minus the debt in case it is mortgaged. Costs must equal 15 percent or more. For instance, a $20,000 down payment would have to produce a yearly cash flow of $3000. This is very low.

Now we have covered the significance of educating yourself regarding real estate investing. That involves studying courses and getting familiar with the real estate investors and going through the books on the subject.

Another vital aspect is the knowledge of the market. The market is what you are investing in, and you must be aware of it well prior to planning an investment in it. Ensure you check the boxes on all the steps prior to making an offer on your first property.

Cash to close

In case awareness is pivotal to success in investing in rental properties, having ample cash is important.

You must anticipate making a down payment that is equal to 20 percent of the purchase price for majority of the investment properties. This is the main requirement of the conventional mortgage lenders.

If you buy a home for $250,000, you need to be prepared to make a down payment of at least $50,000.

Cash reserves, escrows, repairs, closing expenses

There will be closing costs and escrows for real estate taxes and homeowner’s insurance. Those will add 4 to 4 percent of the purchase price to your down payment. The best option is to get the seller to pay the closing expenses for you and this they can do in exchange for a higher sale price.

To have cash reserves equal to 6 months of house payments on the property and is a prerequisite of conventional mortgage lenders. You must factor in extra cash to cover any anticipated repairs which will be the case in case you are buying the property for less than its genuine market value.

Get home inspect from a qualified home Inspector

The mention of repair expenses is the best time to discuss the absolute requirement of a home inspection. If you have nice knowledge regarding investment in real estate, knowledge of the integrity of the physical structure of the property is its own specialization.

It is best to get a professional help such as of Norita Investors into the property to view what is going on in places several buyers do not look.

Let us take an example where you may look at a wall and view what appears to be a small crack. A home inspector can see that as a source of huge issues such as water damage or termites. Similar thing can take place with a bad ceiling. There are certified home inspectors who are trained to see issues that are not certain. You need to have any property you wish to buy that is properly inspected from every angle.

Always pay utmost attention to the report of the inspector. It can show concealed issue and provide you bargaining chips to negotiate the price again to a level that is sufficient to accommodate the required repairs.

As you are purchasing the house for rental purposes, you may use the report to have the present owner find the cause of the issue before closing. That will make the house simpler to rent.

Managing your financing in Advance

If you can pay the full price of a rental property in cash, you need to procure financing to make the purchase. You must buy a rental property for less than its actual market value and you need to be a qualified buyer. You need to close in the shortest time span. You must get your down payment and your finances ready.

You will not be able to get a mortgage prior to choosing a property. You can surely get a pre-approval. That includes filling out an application for mortgage financing and securing approval based on your credit and income.

When you get the pre-approval, you can make an offer and close faster. Your pre-approval would be confirmed by a written letter from the lender. It won’t show that you will get completely approved but the amount the lender will give.

A pre-approval letter is a strong negotiating tool in a real estate transaction. It provides reassurance to a seller that you are qualified to close on the deal.

It is highly possible to get a fast pre-approval and closing via online mortgage providers. One such classic example is of Norita Investors. We provide online application process and do not charge any origination fees.

It will save you between 0.5 percent and 1 percent on closing expenses. You may close your loan within thirty days.

To apply for a mortgage on an investment property is simple. You need to visit the website, fill out an application and get your pre-approval letter.

You may then start shopping for your first rental property.

How do you deal with renters?

Once you buy your first rental property, the first order of business will be to get appropriate tenants. You will have to get comfortable with this process as it will be ongoing.

One must have a proper system in place to get new ones where tenants arrive and go if you plan to be a rental property investor for a long duration.

Advertisement of your home or apartment

A conventional means to find renters is to advertise your home for rent or apartment. You may do this on website such as Craigslist, Facebook etc.

You may have the rental listed by a real estate agent who can place the property on their multiple listing service.

You must wait for a tenant, and this will rely on how strong the rental market is in your area. In case the market is tight, rentals are in short supply. You will get many calls and rent the property in few days.

In case the local market is flooded, it may take weeks or even much longer. You are buying a property in a strong rental market as a basic goal.

Make background checks on Prospective Tenants

When you are contacted by prospective tenants, you must screen them for suitability. You must collect the following details:

Each tenant’s credit report: Individual credit reports need to be pulled for each tenant.

References: A rental reference from the prospective tenant’s past landlord is pivotal. You may request copies of rent checks for 12 months, proving the rent was paid each month and on time.

Verify income: You must always request copies of both a latest pay stub and the latest year’s W-2 to prove income.

You would wish to request proof of savings in the form of bank statement copies.


The finest time to buy income generating rentals in our lifetime. You can get property below the expenses to build and interest rates very low.