Here is a hypothetical scenario if the intent is to purchase a rental property w/o any loans.
Available funds: 400K
Purchase price: ~325K
Repairs/Renovation: 20-30K (before renting the place)
Remaining funds: ~40K (after purchase, repairs, escrow…)
Annual rental income: 25K (about 15 years to recover the principal)
Annual property expenses: 20% (5K)
Would you consider 20K net income/year a good return on the rental purchase? Note – this example does not consider any EOY income tax obligations, time for repairs, appreciation, potential rent increases etc.
In case you find the return to be acceptable… then redfin and craigslist are your friends. Play with the various filters to identify prospective locations/properties. Like others have already mentioned, real estate is a personal preference and the type of property depends on how actively one wants to be involved.
From a turn over perspective I would consider a single family residence is easier to manage. Regardless of the property type to minimize hassles I find the following useful:
– pick a location you are extremely familiar with
– pick a property you will consider moving into (if necessary)
– be ready to learn anything and everything about property repairs (this helps to understand whether to panic/or not during those tenant calls)
– with any repairs pick quality over price for essential items, and compromise on the auxiliary items
– identify a core set of principles for the tenant selection process and do not compromise
– finally set the expectations of the tenants, and try not to let them run your life!
