{"id":183296,"date":"2025-06-13T12:38:19","date_gmt":"2025-06-13T18:38:19","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=183296"},"modified":"2025-06-13T12:40:15","modified_gmt":"2025-06-13T18:40:15","slug":"seven-steps-to-buying-a-rental-property-in-2025","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/seven-steps-to-buying-a-rental-property-in-2025","title":{"rendered":"Seven Steps to Buying a Rental Property in Today’s Market"},"content":{"rendered":"\n

How do you buy a rental property in 2025 that <\/span>actually<\/span> performs\u2014one that generates cash flow, mitigates market risk, and puts you on a sustainable path toward financial freedom?<\/span><\/p>\n\n\n\n

It\u2019s a question I hear often, and it\u2019s a fair one. The market today isn\u2019t what it was in 2015, 2020, or even 2023. Rates are high, prices in some metros have corrected, and economic uncertainty is forcing investors to think more critically before deploying capital. But despite the noise, it\u2019s still absolutely possible to buy rental properties in this market and do it profitably.<\/span><\/p>\n\n\n\n

While macro conditions are <\/span>always<\/span> shifting, the fundamentals of smart investing remain consistent. What has changed is how you apply those fundamentals in different cycles.<\/span><\/p>\n\n\n\n

So, in<\/span> this guide, I\u2019ll walk you step-by-step through how <\/span>I\u2019d<\/span> approach buying a rental property in 202<\/span>5\u2014f<\/span>ocusing on risk-adjusted returns, market timing, and <\/span>how to succeed<\/span> in a more volatile environment.<\/span><\/p>\n\n\n\n

Step 1: Start With Strategy<\/span><\/h2>\n\n\n\n

Too many new investors start by looking at properties without knowing what they\u2019re trying to accomplish. I know that looking at listings is the fun part, but it\u2019s always better to take a step back and do some strategic thinking before you start targeting properties.<\/span><\/p>\n\n\n\n

The first step before any investment is to <\/span>get clear on<\/span> your investment goals.<\/span> Are you primarily focused on cash flow to support your monthly income? Do you want to invest for appreciation in a high-growth market? Or are you targeting tax advantages and long-term equity buildup?<\/span><\/p>\n\n\n\n

Strategy also involves defining your <\/span>involvement level<\/span>. Are you looking to be hands-on and self-manage a local single-family rental? Or would you prefer a more passive approach with a property manager in a different market?<\/span><\/p>\n\n\n\n

Once you\u2019ve defined your goals, take the time to study macro trends on a national level and in your market. Check out our On The Market podcast and <\/span>BiggerPockets Market Finder<\/span><\/a> to ensure your strategy <\/span>is aligned<\/span> with market realities. You may want to be a cash flow investor in San Francisco, but that doesn\u2019t always work, and sometimes, you need to adjust parts of your strategy to account for the realities on the ground. <\/span><\/p>\n\n\n\n

Step 2: Choose a Market and Neighborhood <\/span><\/h2>\n\n\n\n

Given the strategy you defined, you need to pick a location (both a market and a specific neighborhood) that aligns with that strategy. <\/span>This<\/span> is always the case, as investment performance <\/span>is highly tied<\/span> to location, but it\u2019s especially true in 2025. <\/span><\/p>\n\n\n\n

We\u2019re in the midst of a softening market, where prices are likely to <\/span>drop<\/span> in some major <\/span>metros<\/span>.<\/span> This<\/span> doesn\u2019t mean you can\u2019t buy there, but it does mean you need to <\/span>know<\/span> the dynamics of your <\/span>neighborhoods<\/span> and <\/span>need to buy under<\/span> market value.<\/span> <\/span><\/p>\n\n\n\n

My recommendation is to focus on markets <\/span>that have<\/span> strong long-term fundamentals <\/span>like<\/span> job growth, household formation, and a diversified economy.<\/span> Even though prices may flatten or even fall in some of these markets, <\/span>locations with strong fundamentals will be insulated<\/span> against the <\/span>biggest<\/span> risks,<\/span> and will rebound the quickest in the future. <\/span><\/p>\n\n\n\n

All that said, of course, you don\u2019t want to buy a property that is likely to decline in value, even if you\u2019re in a great market, which is why you need to focus on a buy box that mitigates your downside risk. <\/span><\/p>\n\n\n\n

Step 3: Build a 2025-Proof Buy Box<\/span><\/h2>\n\n\n\n

A buy box is a critical part of buying a rental property in any condition, but in 2025, you need to add some specific criteria. <\/span><\/p>\n\n\n\n

First, build around the <\/span>normal<\/span> elements of a buy box: price range, asset type (SFR, duplex, small multifamily), age and condition, and minimum expected cash flow. (I need a minimum of 2%-3% CoCR after stabilization for an excellent asset and a higher CoCR for lower-appreciating properties.) <\/span><\/p>\n\n\n\n

There is a time and place for risk-tolerant investors to buy for appreciation, but I wouldn\u2019t recommend that in this type of market. You need properties that cash flow to mitigate risk and realize the <\/span>biggest<\/span> upsides in today\u2019s market. <\/span><\/p>\n\n\n\n

Step 4: Build Consistent Deal Flow<\/span><\/h2>\n\n\n\n

Finding good deals in 2025 still takes effort. <\/span>But<\/span> the good news is<\/span>, <\/span>there\u2019s less competition than in recent years\u2014and more <\/span>ways<\/span> to find motivated sellers.<\/span> This<\/span> is the <\/span>positive<\/span> trade-off of investing in a correcting market. <\/span><\/p>\n\n\n\n

Start by building relationships with investor-friendly agents, joining local real estate investor groups, and mining for off-market opportunities. The easiest way to find deals? <\/span>BiggerPockets Deal Finder<\/span><\/a> evaluates cash flow potential for you <\/span>in an instant<\/span> and is a great way to <\/span>get<\/span> massive deal flow.<\/span> <\/span><\/p>\n\n\n\n

The investors getting ahead this year are <\/span>the ones<\/span> who <\/span>are<\/span> proactively <\/span>looking<\/span> to find value.<\/span> There will be a lot of junk and bad deals <\/span>out there<\/span> in this transitioning market, but if you look at enough leads, <\/span>there<\/span> will <\/span>be opportunity<\/span>.<\/span> <\/span><\/p>\n\n\n\n

Step 5: Analyze and Negotiate With Discipline<\/span><\/h2>\n\n\n\n

Now that you\u2019ve got potential deals coming in, it\u2019s time to run the numbers\u2014and this is where I see too many people lose the plot.<\/span><\/p>\n\n\n\n

Use the <\/span>BiggerPockets Rental Property Calculator<\/span><\/a> or your <\/span>own<\/span> spreadsheet to run a conservative pro forma. Include all expenses: taxes, insurance, capital expenditures, repairs, property management\u2014even if you plan to self-manage. Don\u2019t assume perfect conditions. <\/span><\/p>\n\n\n\n

The key in 2025:<\/span> Build in a margin of safety. Prices in many markets are softening, and I wouldn\u2019t assume future appreciation in the next year or so. <\/span><\/p>\n\n\n\n

If the numbers work under conservative assumptions, move on to negotiation. In 2025, many sellers are motivated. Days on <\/span>market<\/span> are up. Price cuts are common. You can (and should) negotiate for discounts, seller credits, rate buy-downs, and even seller financing in some cases. Sellers want certainty\u2014use that to your advantage.<\/span><\/p>\n\n\n\n

Look for properties where you can buy at a discount to recent comps. For example, if you think prices could fall 2%-3% in your market (a reasonably conservative estimate for most metros), then only consider properties where you can negotiate to that level. <\/span><\/p>\n\n\n\n

And please, don\u2019t count on a refinance! You need to assume current rates during your analysis, and if they happen to fall, that\u2019s just a bonus. <\/span><\/p>\n\n\n\n

Step 6: Perform Real Due Diligence<\/span><\/h2>\n\n\n\n

Once your offer is accepted, <\/span>slow down and do<\/span> your due diligence.<\/span> Get a full inspection and price out a scope of work if you\u2019re doing a <\/span>value-add<\/span> project. Review utility bills, verify rent rolls, and confirm property tax history. <\/span>This<\/span> is another benefit of 2025: You can take your time, and don\u2019t need to rush to close. <\/span><\/p>\n\n\n\n

Make sure<\/span> you\u2019re clear on title issues, zoning, insurance coverage, and local landlord laws.<\/span> In this market, you can afford to walk away if something doesn\u2019t check out. You\u2019re not bidding against 20 offers, <\/span>like<\/span> in 2021. Use that leverage.<\/span><\/p>\n\n\n\n

Step 7: Protect Yourself Against Uncertainty<\/span><\/h2>\n\n\n\n

This<\/span> isn\u2019t <\/span>really<\/span> another step, but just a reminder as you get close to closing on a deal in 2025, a few checklist items to remember: <\/span><\/p>\n\n\n\n

    \n
  • Buy for cash flow, not appreciation.<\/span><\/li>\n\n\n\n
  • Keep six to 12 months of reserves per property.<\/span><\/li>\n\n\n\n
  • Don\u2019t overleverage.<\/span><\/li>\n\n\n\n
  • Avoid over-renovation.<\/span><\/li>\n\n\n\n
  • Invest in neighborhoods with long-term demand.<\/span><\/li>\n\n\n\n
  • Stay flexible with exit strategies.<\/span><\/li>\n<\/ul>\n\n\n\n

    Final Thoughts<\/span><\/h2>\n\n\n\n

    Rental properties remain one of the best long-term wealth-building tools available, but 2025 isn\u2019t the year to wing it (no year is). The opportunities are there\u2014I’m seeing them myself! <\/span><\/p>\n\n\n\n

    But you need skill, strategy, and a willingness to adapt to take advantage. You shouldn\u2019t be scared, but you do need to be <\/span>smart<\/span> and patient. If you play it right, this is the type of environment where <\/span>big long-term profits can be made<\/span>.<\/span><\/p>\n\n\n\n

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    \n \n <\/div>\n <\/div>\n<\/div>","protected":false},"excerpt":{"rendered":"

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