These are questions you should ask your tax advisor. The way I look at it if you have lots of money to play around with, this would be one, and only one way to invest. There are many other ways. I personally would not go this way having dealt with rentals in the past and paying huge capital gains when I had to sell. Also if you have someone else manage it you do not get the tax breaks (as much), but if you manage it you will get calls all hours of the night/day to fix something.

Generally, a condo will appreciate less than a single family home. Many condo associations prohibit or limit monitor rentals.

Anytime you are a landlord, you will have to be selective in chosing the people to whom you rent. Your accountant can outline the advantages and disadvantages, and the various categories of ownership and means of depreciating the value. It is possible to delay capital gains when selling, if you reinvest in another rental property.

We have owned and rented out some single family homes and now own a vacation rental condo on Maui. Appreciation-wise that has been a good investment and the rentals have carried the property most years. It has been less trouble than the long-term rental homes we owned in Illinois. (Talk about expensive real estate, condos out there are now selling at $900 per square foot! Of course the taxes are equally skyrocketing.)

If you aren't going to live there, it isn't a "second home," it is an investment property. Your mortgage rate will be a little higher than for owner-occupied, but the interest, maintenance, depreciation, and fees will be tax deductable. See tax publications #527 and #946. You also might want to consult with a tax specialist at least the first year to make sure you have all the income and deductions in the right place.

As someone pointed out, you will also have look for townhome and condo associations that allow rentals. They are very common in Florida, but I don't know about CT.

As for finding good tenants, luck seems to be the biggest factor. Landlords who do complete credit checks and reference get burned from time to time. If you have enough cash flow, you might consider getting hiring a property manager to take care of everything, but filing taxes, for you.

Unless you put a decent amount down be very careful about cash flow.
While rents may be high, if they are high enough to cover a low down payment mortgage the folks will be buying, not renting.
The rental market is also more volatile than the owner/investment market. You need financial reserves to pay the mortgage and expenses betwen leases.
Most investment mortgages are 20% down for a reason, and second mortgage money can be very expensive for investment properties. The perceived risk is much higher than owner occupied.
Be sure to run the numbers and make sure you have a neutral or positive (or at least small negative) cash flow.

We paid 300k for a rental house, put 20% down, rent it at $1600 which is $150 short of the mortgage payment with taxes and insurance added in. Each month about $250 is subtracted from the principle - so I call that breaking even. We only did this because we are planning to retire to that house. As a straight investment I think this would suck. I bought at pretty much the top of the market and I think it will be a long while before I see any significant amount of inflation at work.

Thank you so much for all the great info. I will look into those tax publications. I never use any accountants because I think I can do a better job.

I think we will also put down 20%, we can afford to pay about $1000 a month extra on top of the rent, but would love to pay only about $500/month.

I want my mother to live there when she retires in about 7 years, so there is no rush in buying. I am thinking of buying in about 2 to 3 years from now. I am hoping that the interest rates will stay low that long.

I want to invest in real estate because we all have to live somewhere. I would love to have my mother and/or my kids live close to us. I was thinking that if we offer them a house/condo to live in at least one of them would want to live in it. again, thanks. Julie.

"We paid 300k for a rental house, put 20% down, rent it at $1600 which is $150 short of the mortgage payment with taxes and insurance added in. Each month about $250 is subtracted from the principle - so I call that breaking even."

After taxes you are probably positive.
Take the extra exemptions on your Federal W-2 if yopu are entitled and you can avoid the negative each month.

You're quite correct brickeyee - As I recall, I get close to 2k a year off my taxes.

A condo/townhome is a mistake if you're looking at it in terms of a rental. Why? Because of all those bylaws and regulations, which renters are less likey going to follow and yet, you as the owner, are still responsible for.