Rental income must be added to your overall income, which increases your tax liability. However, you can also deduct any necessary expenses like home repairs needed during the rental period.

Renters invariably do some wear and tear on your investment, so making sure you plan accordingly for that as part of the rent or any deposits. Short-term rentals like vacation rentals may have less wear and tear with shorter stays, but you still need to make sure to account for other expenses like house cleaning and yard care.

An agent who is close to the market with data can guide you along the process and ensure you identify a property that has enough upside potential for a good return on your investment.

Again, an experienced agent can help you navigate the pitfalls of renovating by connecting you with trusted contractors and vendors that can deliver you the quality you need within your budget.

Make sure to work with lenders that have a lot of experience with fix and flip investments. They will be more equipped to provide you options that foresee the possible challenges that come with this type of investment. 

Land is a big-ticket item, so having financing in place is critical. It’s also important to understand that loan interest expense for land is not tax-deductible like it is for a primary residence.

Land is not very liquid, so it may not be a good choice if you require immediate cash flow from your investment like those received from purchasing a rental property.

If you are purchasing land for development, consider what potential uses for which the land is zoned. Can you build residential or does it need to be used for commercial properties? If you do decide to build, make sure to understand what access your land has to water, sewer, and other utilities and services.

If you are considering investing in multi-family units, know that it typically requires more up-front financing if they are larger properties. 

Despite a larger investment, lenders are more open to approving loans depending on the renter income profile. Having multiple renters reduces the risk of having to depend on one renter for generating cash flow.

If you are investing in a larger unit, it requires an extra level of care and maintenance. Property management companies are a great solution if you don’t plan on doing it yourself. Furthermore, if your property is large enough, your rental income would most likely offset the extra management costs.

Doing your homework about all the important facts of a community will help you have more confidence in investing in the area. Safety, education, traffic, and many other factors are important to know.