Rental properties are one of the greatest investments out there.
But just buying any ole property is a recipe for disaster. You’ve got know what you are doing.
So, today I want to walk you through exactly how I find, finance, and purchase my rental properties—so you can do the same!
Over the past decade, I’ve purchased nearly 100 rental units, spread out over a couple dozen different properties—some single family houses, some multifamily, and even a mobile home park.
I’ve made a lot of mistakes, but I’ve also hit some home runs, so in this blog post, allow me to walk through the four-step process I’ve learned works best for purchasing rental properties.
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4 Simple Steps Anyone Can Use to Purchase Rental Properties
1. Define what you want.
Step one in purchasing rental properties is to define what you want.
Are you looking for a cheap fixer-upper? A nice duplex? A 500-unit apartment complex on the beach?
I really believe that most success in life can be boiled down to two simple steps:
- Know what you want.
- Hustle until you get it.
So that’s why it’s important to define exactly what you want.
And remember: Not every property type works for every area, and not every area works for every strategy. So either find what works in your local area, or find an area that fits what you want to do!
When I got started, I decided that I wanted to buy mostly small multifamily properties—duplexes, triplexes, etc. And so I did.
What are you going to go after?
Related: Should You Buy a Rental Property if You Have Existing Debt?
2. Arrange your financing.
Now, granted, step two and three could be done in any order, but I like knowing where my financing is coming from before I hunt for deals.
I’ve used a variety of strategies for financing my rental property purchases:
- I’ve used traditional 20% down loans from local banks
- I’ve used partners to fund the down payment, allowing me to do it for no money down
- I’ve used seller financing
- I’ve used lease options
- I’ve used commercial loans
I’ve also used even more methods—because there are a ton of ways to finance deals. I like to think of it like a tool box. The more tools you have in your toolbox, the more projects you can take on. In the same way, the more financing tools you are aware of in your mental toolbox, the more properties you can buy!
(For more on the creative side of real estate finance, check out my first book The Book on Investing in Real Estate with No (and Low) Money Down.)
3. Hunt for deals.
And yes, in today’s competitive market, you have to go hunt. They don’t just lie down on your door step begging to come in.
The strategy behind hunting for real estate deals is actually fairly simple, and I use the acronym LAPS to describe it:
- Get leads
- Analyze them
- Pursue them
- And find Success
Now, leads can come from anywhere:
- Real estate agents
- Websites like Realtor.com or Zillow.com
- Direct mail marketing
- Word of mouth
- Whatever else
And once you start getting lots of leads, you start analyzing them to find out how much you can pay. Then, go after the ones that you like. And if you are consistent and persistent enough with this process, you’ll eventually find success.
And that leads to the final step…
4. Purchase your rentals!
And this stage, you’ll need to use a local title company or an attorney (in a few weird states) to do a title search and handle all the paperwork.
The title company pulls everything together and makes it nice and organized. They work with the lender, any agents involved, and you and the seller. They tie everything together to help get you the keys.
And that’s how I purchase rental properties—and how you can start doing the same.
But before you leave, let me give you three quick action steps you can implement today:
- Head over to Realtor.com or Zillow.com and start checking out some properties.
- Try running the numbers on one of those properties using the Biggerpockets Rental Property Calculator. Remember what your momma told you: Practice makes perfect. So start running the numbers daily until you feel comfortable to start building your empire.
- And third, if you liked this blog post, don’t forget to share it on Facebook to help others learn how to purchase rental properties!
Did you hear? My newest book How to Invest in Real Estate: The Ultimate Beginner’s Guide to Getting Started is coming out THIS THURSDAY! But you can pre-order it today and get special bonus content, including access to a live webinar with me and Josh Dorkin, CEO of BiggerPockets and my co-author!
What questions do you have about landing your first rental property?
Leave them below!