Renting out a property and receiving income from it can be a very rewarding thing. 

A lot of people shy away from the idea of a rental property because they have to deal with humans, also known as tenants. But in my experience, get a good property manager in place and you're more likely to get good tenants and you'll also be shielded from most of the tough stuff in dealing with tenants. They are worth their weight in gold.

 

The one big issue with getting into the property market is that a sizeable deposit is likely going to be required to get a loan. And then it depends on if and how much a bank might loan you. Your ability to service the loan is going to be important.

Banks will take into account the income generated from the property, but your finances are also going to be extremely important. That's why managing your finances intelligently is super important. I'd encourage you to do some research based on where you live to better educate yourself on what banks will look for when offering mortgages. The internet or even a mortgage broker can be a good resource.

 

Property is a great way to use leverage through debt to purchase assets. But if you’re going to buy a rental property, you want it to pay for itself. That means the rent being paid covers all of the expenses and also puts money back in your pocket. 

Think about it this way. I can buy a $250,000 house if I have $50,000 and the bank loans me $200,000. If the rental income covers all expenditures, over the term of the loan, your tenants are paying for 80% of the house for you. Eventually, you'll own a $250,000 house (which should be worth much more when it's paid off) that cost you $50,000. You turned $50,000 into $250,000.

Losing money each month on a rental property is likely, not wise for your situation. Yes, the capital gain can be enticing over the long run, but if it’s taking money out of your pocket each month, you’re going backwards. Remember, this is about increasing cashflow, not reducing it.

-Ben