No offense intended, c-rock, but the cart's before the horse here. These are questions to which you should already have answers before signing an contract to purchase.
Go to this site:
[url]http://www.irs.gov/forms_pubs/pubs.html[/url]
and select:
Publication 527 Residential Rental Income
Publication 550 Investment Income
Publication 946 How to Depreciate Property
for starters. These reference other IRS Publications and Forms, and they can be downloaded from this same site using Adobe Acrobat, which is obtainable free.
Also see your accountant and attorney, preferably before you sign a purchase contract.
Other questions to answer:
*Who pays utilities?
*Who pays refuse pickup?
*Who mows, rakes leaves, shovels snow, etc. (if applicable)
*Will you get references from the prospective tenants?
*Do you realize that if you publicly advertise the rental that you must accept a gov't- subsidized low-income tenant if one applies?
Have you balanced monthly income and expenses?, for example:
*How much is your estimated gross monthly rental income?
*How much is the real estate tax bill on the property, divided by 12 to get monthly amount?
*If you are borrowing, how much is your monthly payment?
*How much does liability and fire/comprehensive insurance cost for the property on a monthly basis?
*How much are you allowing for maintenance?
*How much for groundskeeping?
*Will you be paying any utilities or refuse pickup, and how much on a monthly basis?
Subtract all the expenses from the estimated income to get your net income before depreciation and taxes. Your annual depreciation will be essentially the cost of the unit that you will pay divided by 27 years, the time it takes to depreciate residential rental property. Divide again by 12 to get monthly depreciation, and subtract from the net income. The remainder is what you will pay taxes on, as explained in Publication 527.
There's much more to it, but that's the Reader's Digest version.
Noah