Your idea is a good start in entering the real estate investment world. But before you embark on investing in condos for rent, make a lot of research first and make accurate cash flow calculations and projections.

If you make one major misstep, you could lose your initial investment money and be battered by a foreclosure record. This is not to douse your investment fervor; this is just to emphasize how crucial it is to make the right decision at every step of the investment process.

In a simplified analysis, the one thing that would make your condo investment a success is the level of rental that you can charge and the type of tenant that you can get. When a tenant is unable to pay, your cash flow projection will be messed up.

Even if there are contracts that would protect you as a landlord, you would have to spend for legal costs, in addition to the costs of efforts and time for pursuing a case, evicting the tenant and finding another tenant.

In making your cash flow projections, consider your monthly income, your current monthly home loan payment, all other monthly expenses, the projected rental income from the condo unit, the monthly loan payment for the condo and all other expenses related to the operation and maintenance of the condo unit.

Calculations would be easier if you are not paying a home loan and you are buying the condo unit for cash, or if you would be paying a loan on only one of them. But this is not the case for many of us.

The best case scenario would be that the rental would be able to cover your monthly payment for the condo loan. But according to surveys, many condo rentals are lower by $200 to $500 than the monthly payment for loans on condos.

Therefore, consider whether you have the money to cover the condo loan payments if your cash flow projections are not realized.

To make a more viable investment in real estate, save first so you can make a bigger down payment and have enough reserves. Taking two or three real estate loans at a time would put you at risk of foreclosure.