Find the right property. Locate a property that fits your criteria. To factor in whether or not this property will be a lucrative rental you must first examine the market. Take into account the neighborhood the property is in, schools available, job markets in proximity and rental markets nearby. Try to stay ahead of the curve and find neighborhoods that are up and coming- being gentrified. This will determine the quality of the rental market you are in and how attractive it will be to potential renters. In turn, your rental prices will determine your cash flow on the property.
Financing the property. There are multiple ways to finance a property. Buying with cash, bank financing, hard money and private money are just a few. Anyone that tells you that you can buy real estate with zero money down is actually trying to sell you something. Banks and lenders are a great tool but you will still need to put some skin in the game, and in most cases this equals about 20-25% of the purchase price. To learn more about the different types of financing and their benefits click here
In order to make any real estate transactions profitable an investor must calculate all the expenses vs. income generated. A great tool to use for reference is a rental calculator. There are two types of expenses investors must take into account: fixed and variable. Fixed expenses are planned and expected expenses that are generally recurring, such as your principal mortgage payments, interest, taxes, insurance, property management fees etc. Variable expenses are those that are more difficult to determine on a regular basis- they can come from a variety of sources such as vacancy, repairs, water, sewer etc.