Investing in rental properties and REO-to-rental homes has exploded in the past year, with many investment groups and individual scooping up deeply discounted properties. These homes are being maintained as rental properties until the market improves and the homes can be sold for a profit. This can be a very sound investment, but needs to be approached with caution and with sound rental property valuations.

Finding a property that will provide enough rental income to cover the carrying costs while also being easy to sell once the market has recovered is no small feat. Performing solid due diligence of the rent-to-value ratioand using a defensible rental market value is essential before investing in property intended for rental.

Below are some of the most important considerations when purchasing REO-to-rental properties.

You can find our guide to REO-to-rental properties, including our calculation for how much rent must be collected to carry an investment house, in our May Lessons from the Data.