This creates two loan payments ($100,000 of equity and $300,000 on the new mortgage).Key NumbersHome Equity Loan Interest Rate: 6%Mortgage Interest Rate: 7%Rental Income: $3,000 per monthExpenses (management, taxes, insurance, maintenance): $800 per monthIncome and ExpensesMonthly Rental Income: $3,000Monthly Expenses: $800Monthly Mortgage Payment: $2,000ExplanationThe investor earns $3,000 in rent each month.They pay $2,000 on the investment property mortgage and $800 on other expenses.This leaves $200 profit each month or $2,400 per year.However, you have to pay $6,000 interest on the equity borrowed.This leaves you with an annual loss of $3,600.While the rental property generates positive monthly income, the interest cost of borrowing the initial $100,000 results in an overall loss.

Options - collect full payment for the 3 months up front and lower the deposit to secure against damages only, require insurance.

I made the mistake of letting someone get in one of my first units that was a bit off the 3 times, they were great tenants very kind and enjoyed their stay and experience with me, but could not afford it when I increased the rent on them, which is something you will have to do because of rising insurance/tax costs.5.)

Outside systems like plumbing, sewage, and the water heater should be in good condition, and make sure there are no signs of pests.Additionally, look into property taxes, insurance costs, and zoning laws that could affect future development.

I just can’t imagine how everyday people spend this much money on pipe.I don’t think insurance covers any of the foundation repair, also wonder if insurance will cover any of the sewer line repair work?

Did your borrowers mention securing your investment with a recorded mortgage or deed of trust, personal guarantees, lender’s title insurance, or anything else?

While we don’t have state income tax here we do have the hurricane tax that comes with high insurance premiums and little real insurance benefits/help when it’s needed.

Conventional loans with 5% still require mortgage insurance. 

That said, I can totally be off in any of those assumptions - that's what they ultimately are.. guesses.. but they are guesses based on reading a lot, researching, talking to people, and adding a padding that I thought would be "fair" for the items that are not actually factual (ie. insurance/loan/etc). 

The insurance side of it is tricky too because you have to also lie on your insurance paperwork.