Finding the right house is extremely important. Your ability to rent the apartment in your house will depend on several factors. Is the house convenient to the downtown or perhaps to a suburban office park? To a college or university? Where will the tenants — and you for that matter — park cars? Does the house need so much work that paying for repairs through a home-improvement loan will cancel out a few years of incoming rent? (That is all right if you can do without profits for that length of time.)

It is best if the house you buy has a separate entrance for tenants so they do not have to walk through any part of your apartment to reach their own. The only way you can discard that generally applicable standard is if you are buying in a college town (where houses are apt to be too expensive for the first-timer buyer) or in a downtown, hot, back-to-the-city market, where many people, especially the young single ones, are interested in living.

Are apartments in houses a rarity where you are because there are dozens of new rental complexes around town? If so, you will be competing with features like waste disposals, bathroom exhaust fans, built-in microwaves, and the latest refrigerator models, features not found in most older homes. That's not to mention the pool, tennis courts, and clubhouse you almost certainly do not have! You will have a hard time finding tenants unless you are offering rents substantially lower than those of the glossier complexes or you have something special to offer. That could be a house in a historic district, with architectural features not found in new construction, a home within walking distance of downtown, or some other special attraction that will make your place a particularly appealing place to live.

Ask yourself who your tenants are likely to be. Nose around a little during this stage. Read real-estate articles in your local papers, not just the advertisements. What is the rental situation like?

Worksheet 19.1 Should You Be a Landlord?