Many investors offer homes for rent as a way to generate positive cash flow. The need for rental properties has been amplified due to the number of foreclosures. Once real estate is repossessed by banks, homeowners normally cannot obtain another mortgage loan for 2 or more years. Foreclosed homeowners need a place to live and often turn to affordable rental properties.

Providing homes for rent in popular tourist destinations offers another option to produce cash flow from investment properties. People are willing to pay higher prices for vacation rentals than houses they rent long-term. However, investors should be financially prepared to maintain utilities, provide household furnishings, and cover cost of cleanings after each rental.

Some investors seek out investment houses for use as Section 8 rentals. Section 8 landlords receive housing vouchers through the Public Housing Authority which cover a percentage of monthly rent. Section 8 landlords must become certified to receive guaranteed rent vouchers.

Although investors undergo annual property inspections and are required to comply with state housing laws, Section 8 can be a good strategy for attracting long-term tenants and consistent cash flow.

Many investors now offer rental homes with the option to buy. Owner will carry financing is particularly attractive to foreclosed homeowners, buyers with bad credit, and buyers incapable of providing large down payments. Providing seller-financing can create a win-win scenario for all parties involved.

Lease purchase option agreements are a popular choice because they provide buyers with the opportunity to buy a house while restoring credit. Investors obtain a down payment to secure the property and contribute a percentage of rent payments toward the purchase price.

Lease options typically extend for 1 to 2 years while buyers engage in credit repair strategies. Once lease purchase agreements expire, buyers are required to obtain bank financing. Otherwise, they could lose all vested funds through breach of contract.

Banks require borrowers to possess a minimum credit score of 640 to qualify for home mortgage loans. However, borrowers should strive to have FICO scores of 720 or higher to obtain a lower rate of interest. An additional 1/4-percent interest could add thousands to the cost of the home.

Another popular owner-financing strategy is using seller carry back mortgages. Investors can elect to carry all or partial financing for the purchase amount. Most offer upwards of 20-percent financing and require buyers to obtain a bank loan for the balance.

Investors can assess interest against seller carry back mortgages, but must abide by state usury laws. These contracts typically extend for 2 to 3 years. It is always best to consult with a real estate lawyer before engaging in owner will carry financing strategies to ensure contracts are legally-binding and transactions comply with state laws.

Regardless of how rental homes are offered, the key to success is becoming informed of tenant needs. Nearly all renters want affordable housing in safe communities. Those with school-aged children often seek out homes for rent in areas with quality schools. Business professionals typically prefer rental homes situated near interstate systems or with easy access to major airports.

The second key to success is selecting affordable properties that can be easily rented. One source many investors are using to purchase discounted properties is the Fannie Mae Homepath program.

This government-sponsored program offers nationwide residential foreclosure homes. Qualified buyers can finance Fannie Mae homes using Home Path Mortgage; a financing program offering special incentives and low down payment requirements.

One reason Fannie Mae Homepath properties are attractive is they oftentimes qualify for housing grants offered through HUDs Neighborhood Stabilization Program. NSP grants are offered to real estate investors and individuals who purchase properties within communities hit hard by foreclosure.

Combining NSP grants with Home Path mortgages can help investors reduce costs and maximize potential profits. Applying for grants can be a timely process, but if funds are awarded it is well worth the effort.

Offering homes for rent has advantages and disadvantages. Taking time to weigh the pros and cons of each can minimize risks. Those unfamiliar with requirements of rental properties may find it helpful to participate in online networking groups or local real estate clubs.

Author Bio: Learn more ways to maximize profits with homes for rent from California real estate investor, Simon Volkov. He shares insider-secrets and valuable resources via his exclusive real estate investing library at www.SimonVolkov.com.

Category: Real Estate
Keywords: homes for rent, owner will carry,lease purchase option agreement, fannie mae homepath,rental homes