Ensure you include all of the expense calculations when number crunching (property management, vacancies, maintenance, capital expenditures, property taxes, and insurance).

If they can afford the utilities and food, Take out an insurance policy on both of them.

You are basically describing turn key providers.They buy distressed properties, rehab them, get them stable with tenants and then sell to investors.

In the case of prepaids, that's your money so it will either go toward your legitimate expenses (taxes and insurance) or you will get it back.In your example the lender fees are the origination fee and maybe the closing costs.

@Abraham AndersonHi Abraham,I would contact Kelly Thomas, our insurance agent and pose the question to him.

If you can rent it for $800 a month, that gives you plenty of room for expenses (taxes, insurance, maintenance, cap ex, prop management, vacancy) and will probably give you a positive cash flow of a couple hundred bucks a month.

@Chris RandInvestors who have rental properties report their rental activities on schedule E.You report rental income less expenses(insurance, utilities, repairs, mortgage interest, real estate taxes, depreciation etc).The great thing about real estate is that you may have a cash-flow positive business but report a taxable loss thanks to depreciation.The difference between cash-flow and taxable rental income is that depreciation is factored into taxable rental income and principal payments are not a tax deduction.generally speaking cash flow - depreciation + principal payments = taxable rental income

Business insurance, management agreement between myself and the LLC, etc?

All real estate activities you engage in need to be approved by your broker as their insurance can have a clsim filed against for any of your activities.

That means, if your current debt ratio is 50% or lower without buying the home, then it should still be about 50% or lower after buying the home as a rental.Fannie Mae will allow you do a 1 unit at 15% down payment, although you might consider a 20% down to avoid mortgage insurance and help lower your debt ratio.