How to Buy a Rental Property in the Next 90 Days (With Bonus PDF!)

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I was sitting down for dinner with a friend the other night and he said to me “Brandon, I want to buy my first property but there is so much information out there. I just want to see the whole process, neatly outlined, so I know my step by step plan.”

And I thought “Isn’t’ that we all want when learning something new?

We want to see the whole picture, not just broken up parts.

Today I want to help you do just that – learn the step by step process for getting your first rental property in the next 90 days. For those of you who like something tangible to look at, at the end of this post I’ll show you where you can download a free 1-page PDF summary of this process- neat and clean, just like my buddy ordered.

Alright, let’s get started.

Step One: Get Pre-Approved.

Unless you plan on paying cash (which would be great) you are going to need a pre-approval letter from the bank or other lender.

We start with this step because I don’t want you wasting time only to find out you can’t afford it. Your lender will help you know exactly how much cash you’ll need.

Step Two: Get in Touch With a Real Estate Agent.

Don’t just call the name on the park bench by your house.

Look for an agent who is willing to spend the time needed to help you get the perfect deal.

Get recommendations from others and pick someone you get along great with.

The best part is, a real estate agent is paid by the seller- so it’s free for you to use one!

Step Three: Define What You are Looking For.

Let your agent know exactly what kind of property you are interested in. If it’s a duplex, you don’t want to waste time looking at single family homes. And vise versa.

Step Four: Start Looking

Yes, you’ll actually need to spend some afternoons with your real estate agent looking at potential properties. And like dating, the more you look at, the better you’ll recognize “The right one” when it comes along.

Don’t be afraid of looking at properties that might need a little TLC, but don’t get in over your head either. Once you find the right one, you’ll need to do Step Five, which is

Step Five: Do The Math

A rental property is only as strong as it’s math. (yes, you should Tweet that)

Run the numbers and make sure it pencils out. Be conservative, and be sure to plan for property management, vacancy, repairs, and more.

I’d recommend running the numbers through a good property analysis tool, like The BiggerPockets Rental Property Calculator to make sure you are looking at all the facts and figures.

Moving On

Step Six: Make an Offer

Okay repeat after me:

I WILL NOT OVERPAY

Negotiate with the seller and stick to your math from step 5.

You might go back and forth a few times, and you might even lose the deal and have to start over. But whatever you do …

Do Not Overpay.

Soon enough you’ll get an offer accepted and you’ll be ready to move on to

Step Seven: Do Your Due Diligence

At this point, you want to make sure there are no hidden surprises at the property.

Hire a property inspector to walk through every inch of the property looking for potential problems.

If you find any, either :

  • suck it up if it’s not too bad,
  • ask the seller to fix it if it is bad,
  • and if it’s really bad – walk away.

During this time your agent will help you shuffle the correct paperwork between them, your lender, and your title company.

Step 8: Close on the Property

It’s been a journey, but finally you are ready to close.

You’ll show up to the Title Company (or attorney) and they’ll take care of the rest. You might even get some chocolate at the front desk! Once the title and deed are recorded at the county, you’ll get the keys and be the proud owner of your very own rental property!

Now comes the fun part – managing your properties. And for tips on that, you’ll have to wait for another blog post!

Screen Shot 2014-03-07 at 5.27.08 PMAs promised above, I created a simple 1-page PDF of these steps so you can print it out and hang it on your wall or just keep in your files. To get it, simply click the photo on the right and head over the BiggerPockets FilePlace and download it for free!

Finally, if you could do me two quick favors:

  1. Share this video on your Facebook or Twitter account
  2. Leave me a comment below. I love comments and would love to chat more about this stuff!

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About Author

Brandon Turner (G+) is the BiggerPockets.com Senior Editor and Community Director. He is also an Active Real Estate Investor (Flips, Apartments, and Buy-and-Hold), Entrepreneur, World Traveler, Third-Person Speaker, and Husband. Come hang out with him on Twitter!

45 Comments

  1. Your plan is preschool but does the trick. Rentals are like tying shoes, the hardest part it doing it the 1st time.

    • As someone who owns a SFR and is starting to look at getting another, I think the 2nd go ’round is harder than the first. The “rules” around PITI reserves combined with (in my case) doing a cash-out refi on my current SFR to get at funds for a down payment, whether or not I can qualify for a “next” property given just having done a refi….lots of moving parts! I’m hoping the 3rd will be when it starts to become routine.

  2. My first step for an investor is to get pre approved as well. It gives a clear idea of where you are and where you need to be. Seeing a agent is a close second. Nice work!

  3. I like this very on time video. Keep them coming. Looking forward to the next video on managing apartments

    • Brandon Turner

      Thanks Grant. Ah… 20-25% is the conventional way to invest. Personally, I don’t invest any of my own money, but I still get pre-approved so I can refinance the private money loan into something long term. More on that coming in the near future…

  4. Great article Brandon! With that, I say definitely have a plan for the management of the property as well!

  5. Great video Brandon. You should make more videos. Maybe you could let that other guy that works on Bigger Pockets in on a video. Oh, what’s his name again? Josh…?

  6. Nice and simple. So much information out there is overload for a new investor. This one sheet could replace a lot of these real estate books out there. You don’t need every last detail to get started. If you follow these steps, the details in the middle will fill in as you go.

  7. Great job Brandon. I love it. I feel that you are the best expert that I have come across in two areas.
    1. Rental Property Analysis
    2. Multifamily Investing
    I have learned so much form you and your constant work towards these two ares of investing has kept my eyes glued to bigger pockets.
    Last but not least, you are the reason I joined bigger pockets and recently have saved my self from over paying for at least 3 properties. I didn’t get a signed contract, but I know I will very soon.
    James Syed

    • Brandon Turner

      Thanks! I can’t say I’m that much of an expert – I’m just learning and growing like the rest! But I’m happy to share what I’ve figured out so far! Thank you so much for the kind words!

    • Brandon Turner

      Very true Dawn. This info could fill a book (I’m half way through writing it right now!) and still not cover it all. However, I like breaking things down into it’s simplest parts and encouraging folks to learn “on the job” and to jump into the forums and ask these questions from Pros like you!! (P.S. Thanks for helping out with those answers in the forums every day! You are highly appreciated!)

  8. As usual, Brandon, great production. Dying to know the entire quote of that “cat plaque” in the background – it looks funny!

    I would add, though, that before you get an agent and start looking at property, you really need to spend sometime doing market research so you know the areas you want to focus on, and the returns you can expect to get there. You want to make sure all the effort is worth while as it pertains to your goals. Thanks!

    • Brandon Turner

      “After scolding one’s cat, one looks into it’s face and is seized by the ugly suspicion that it understood every word and has filed it for reference…” :)

      I agree- Market research is very important. However, I think an agent may be able to help with that – if they are a good agent (and we both know that many are not!) Thanks for the comment!

      • Haha, that is a good quote, Brandon, and I’ve had a few where that was very true :)

        Yes, having an excellent agent who specializes in working with investors is key to achieving your goals!

  9. Great article, as always. I would ad that before looking at properties to buy, look at rentals in the area. Get to know what is standard and expected, and what might get you a little more rent. Do you need to add a dishwasher? Or would it just create extra maintenance issues? Same with washer and dryer. Don’t overanalyze, but at the same time learn what is expected so you can do the numbers right.

  10. Chris Vaughan on

    Hi Brandon. I have not purchased a rental property yet but have been looking at a few. Numbers are weak in my area for properties less than 4 to 5 units due to high property values. My question is about preapproval. With rentals I thought banks look more at the property income than the individual when dealing with rentals making preapprovals irrelevant. Perhaps that is only for “small apartment” (ie. commercial)? I am in northern Massachusetts and have looked at a bunch of 2 family that would be hard to make money.

    • Brandon Turner

      Hey Chris,

      Typically a bank will look at single family homes and 2-4 unit properties the same- based on Comps and YOUR ability to pay the mortgage (unless you’ve been a landlord for a few years, then you can use the income from the property to help qualify.) And some areas are just bad for this kind of investment -though within a 2 hour drive of any spot in America I believe there are good investing grounds .You just gotta get out there and find em! Best of luck!

  11. Great post. I am a complete newbie of REI and I am not in a good position to get preapproved for anything. But its easy enough plan to follow! Thanks!

    • Brandon Turner

      Hey Leila – it’s alright, conventional investing is only one part of this game. There are many other ways to invest without banks! Stick close to BP and you’ll discover them!

  12. Jerry Kaidor on

    WRT hiring an agent:

    I have one. I have been using the same broker for 30 years. We have bought & sold everything from single family houses to 50-unit complexes. She is extremely diligent and effective. Nobody puts together a house of cards like she can.

    That being said, the other day I had an interesting conversation with another agent – one of the many who call me occasionally to fish. I had lost out on a 6-million dollar deal – made our offer and the seller took another one. He asked me why I didn’t go straight to the listing broker? He said that it would have given that broker extra incentive to make the deal happen, because he’d have a responsibility to both sides. ( and of course would make both commissions ). He said that you need to go to who has the deal, and on 90% of his transactions he is representing both buyer and seller.

    To me this sounds like a recipe for disaster – going into a big tough arena with nobody in your corner.
    Comments?

    – Jerry Kaidor

    • Jerry I personally like using the listing agent if the property is owned by an individual. I’ve had better luck negotiating with the seller. It is an incentive to the listing agent also to close the transaction especially on the larger deals.

    • Brandon Turner

      Hey Jerry,

      I’ve done both, and it’s tough to say what’s best. I personally think newbies should have someone on their side, but advanced investors should use the selling agent for the reasons you said. In the end – it probably doesn’t matter too much, and the ideal situation would be to have the investor just get their licensee (which I still have not done! )

  13. Brandon, may I suggest adding one sentence to your find a realtor section? Engage One competent broker – not a realtor – who has earned a meaningful real estate designation. And put it in writing. I’m a practicing state certifed appraiser, broker, consultant, licensed instructor and expert witness in three counties. All my clients sign an exclusive. No exceptions. Many “investors” are time wasters. Many do not realize the value in using one broker. @Jerry, there are different types of representation. By example, In Florida, we have single agent and transaction broker. One includes a fiduciary responsibility, the other acts as a referree. (There’s a third form of representation but rarely used.) Visit our website for more info. Thank you.

    • @Brandon Turner

      Thanks for the great tips on getting started. A newbie definitely needs a ‘quick tip’ starter guide like this just to help them wade through the vast amount of materials out there.

      I had question about the Real Estate Agent part – If you’re planning to be an out-of-state (or possibly out-of-country) investor, is it possible to go directly from locating your area to going straight to finding a property manager before trying to look for properties?

      As income properties are businesses, I figure even if you have a good location, if you have a bad manager, you might run into all kinds of headaches.

      If so, can a good PM help you also vet the area – tell you the areas that rent more easily in the area you’re looking at? Maybe the streets, neighborhoods, etc.

      Also, in general, from a purely economic incentive standpoint (and not taking into account how great a person is, their ethics, etc) – is a PM’s incentives more aligned with the investor’s because the PM wants presumably to deal with a rental unit that can be easily filled whereas an agent earns his/her keep from the sale and not necessarily in the rental that occurs afterwards?

      I realize that eventually you have to work with agents or some other person who’s bringing you the deals, but I was wondering what your thoughts would be if a person knew FOR SURE that they couldn’t manage their properties directly and whether PMs could be helpful in that way.

      If anyone has an opinion, I’d love to hear it!

  14. I just looked at a two unit building, not to far from a college. Each unit has two bedrooms. It is in a decent neighborhood. Only issue is, each unit has water damage in the kitchen ceiling. Do you think this is worth the effort? Can you or anyone on this blog give me some advice?

    • Dawn Anastasi on

      I would suggest posting in the Real Estate Analysis section of the forums with some location information and maybe some pictures. That may help people provide some advice.

  15. A lot of good, concise and organized info here. I’m (hopefully) starting my investing journey soon and found this helpful. It’s amazing to me already how many people jump in way too deep knowing close to nothing about the processes.

  16. Bruce Stayner

    While I agree that the first step would be to get preapproval it does not mean that you have to spend that much money. Every house I have bought was way below my preapproval amount. That means I get much better cash flow and I am also in better shape when I decide to go for another one.

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