First deal planning
James CostelloPro Member
Member since 2026 · 1 post · 2 votesFirst deal planning
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Jay TolugantiPro Member
Investor · Clearwater, FL · Member since 2025 · 226 posts · 78 votesCongrats on successful exit. Unlike paper assets like stocks, bonds mutual funds, real estate rental investing can be slow to grow. Most of the investors, including me, keep that in mind and buy reantal houses fpr appreciation mainly but also make sure rent covers current and future needs of that property. My point is, real estate works better as passive income.
Below are my recommended books:
Strategy:
Rich man in Babylon
Robert Kiosaki
- Rich Dad Poor Dad
- Cashflow Quadrant
- Guide to investing
- Real book of Real Estate
Real Estate Journey:
Ken McKelroy
- ABCs of Real Estate Investing
- Advanced book of Real Estate Investing
- ABC of Property management
10 Replies
- 1moJay TolugantiPro MemberInvestor · Clearwater, FL · Member since 2025 · 226 posts · 78 votesCongrats on successful exit. Unlike paper assets like stocks, bonds mutual funds, real estate rental investing can be slow to grow. Most of the investors, including me, keep that in mind and buy reantal houses fpr appreciation mainly but also make sure rent covers current and future needs of that property. My point is, real estate works better as passive income. Below are my recommended books: Strategy: Rich man in Babylon Robert Kiosaki - Rich Dad Poor Dad - Cashflow Quadrant - Guide to investing - Real book of Real Estate Real Estate Journey: Ken McKelroy - ABCs of Real Estate Investing - Advanced book of Real Estate Investing - ABC of Property management
- Investor · Pacific Northwest · Member since 2026 · 538 posts · 302 votes4w
I actually think your first deal has a different job than your tenth deal.
You already have something most first-time investors don’t: you ran a contracting business. That means construction risk, scope creep, vendor management and what things actually cost are probably less mysterious to you than they are to most new landlords.
So I wouldn’t necessarily wait for a “home run.”
But I also wouldn’t buy an $85K house just because it produces $250/month on paper. I’d ask what has to go wrong before that $250 disappears.
Roof. HVAC. Sewer. Turnover. One non-paying tenant. A $7K repair on an $85K house is a very different event than it is on a $500K asset.
For the first one, I’d rather see you buy something that produces a boring, defensible return and teaches you the entire operating cycle: acquisition, financing, lease-up, collections, maintenance, reserves, taxes, insurance, turnover and eventually disposition.
That first property becomes your calibration tool.
And I’d protect that $20K cash harder than most people will tell you to. Your equity is useful, but liquidity buys time when something goes sideways. Don’t turn every available dollar into a down payment just to say you own a rental.
The “home run” may actually be deal number three, because by then you’ll know what an $85K house really costs you to own instead of what the spreadsheet says it costs.
Your first investment doesn’t need to make you rich. It needs to make your second investment smarter.
Given your contracting background, there may be a pretty interesting way to structure this around the advantage you already have rather than starting from scratch. Happy to connect on it.
- Property Manager · Melbourne, FL · Member since 2019 · 245 posts · 120 votes4w
$250 a month can disappear with one HVAC call. I wouldn't wait forever for a home run, but the deal needs some way to get better. Low rent you can raise, cheap rehab, extra bedroom, seller terms, something. Thin cash flow and no upside is just hope.
- 4wArman AhmedPro MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 917 votes
Quote from @James Costello:
I've recently sold my contracting business for 90k + 20 percent interest.
We own a house with 50k equity plus 20k cash. Im ready to get started on real estate invested. I wanna do long term rentals but I'm open to all options. Im aiming for cash flow in the first few deals. I've found a few houses for 85k that will cash flow after expenses and capx and vacancy 200 to 300 a month with conservative rent comps. Should I do these deals or wait for a homerun?
If the $85K deals really cash flow $200–$300 a month after all expenses, CapEx, and vacancy, I wouldn't wait around for a "home run." For a first deal, a boring property that works conservatively is often better than chasing a perfect one. Just make sure the neighborhood and tenant demand are solid. If you're open to out-of-state, I'd also compare Midwest markets where that same cash-flow strategy can sometimes be easier to find.
- 4wDiana KhanPro MemberAttorney · 10451 Mill Run Cir #755 Owings Mills, MD 21117 · Member since 2024 · 368 posts · 144 votes
@James Costello, one thing I’d watch because of your contracting background is this: you already know how to fix a house, but you can’t fix a weak rental market.
That skill is a real advantage, but I’d still make sure the area has steady renter demand and that the deal still works if things are a little worse than expected.
When I look at a deal, I like to ask simple questions. What if rent is a little lower? What if I have one bigger repair? What if the property sits empty longer than planned?
If the deal still feels okay after that, I’d be much more comfortable with it.
For a first rental, I would rather have a simple deal that gives you room for mistakes than something that only works if everything goes perfectly.
- Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes4w
Quote from @James Costello:
I've recently sold my contracting business for 90k + 20 percent interest.
We own a house with 50k equity plus 20k cash. Im ready to get started on real estate invested. I wanna do long term rentals but I'm open to all options. Im aiming for cash flow in the first few deals. I've found a few houses for 85k that will cash flow after expenses and capx and vacancy 200 to 300 a month with conservative rent comps. Should I do these deals or wait for a homerun?
I say go for it. To protect your investments make sure that you purchase home owners warranty that covers all of the mechanical system, appliances, roof leaks.... The yearly cost for the insurance will reduce your cash flow, but you'll appreciate it when a major system goes out & the warranty picks up the cost to replace the system. Also start researching now sub $100K loan products.
- 4wG. Brian DavisPro MemberInvestor · Hatboro, PA · Member since 2016 · 2k+ posts · 852 votes
I wouldn't wait for a home run. If those $85K properties really cash flow $200–$300 a month after vacancy, CapEx, repairs, management and everything else, I'd take a serious look. I'd spend a lot of time making sure that cash flow is real. Verify the rents, taxes, insurance, repairs and condition. A few hundred dollars of cash flow can disappear pretty quickly if one assumption is off.
I’d also keep a good cash reserve rather than putting everything into the first few deals. You just sold your business, so I’d be especially careful about tying up all your available cash. If the numbers still work after all that, I’d start buying. Your first deal doesn’t need to be a home run. It needs to be a solid deal that you understand, can afford to hold, and can build from. I’d rather own a few boring properties that consistently make money than wait forever for the perfect deal.
- 4wAshish AcharyaBusiness MemberCPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
James, with $20K in cash plus equity in your home, I wouldn’t rush to deploy everything just because you’ve found a few properties that look like they’ll cash flow.
For a first rental, I’d focus on how much cash is left after closing, not just whether the property produces $200–$300/month on paper. I’d want enough reserves for vacancy, repairs, insurance increases, taxes, and one decent-sized surprise without having to tap credit cards or your home equity.
I'd also pressure-test those $85K deals pretty hard. Make sure the cash flow still works after realistic vacancy, CapEx, maintenance, management, and financing. A deal that looks good before reserves can look very different once you underwrite it properly.
From the tax side, once the property is placed in service, depreciation becomes part of the return. Cost segregation may also be worth evaluating depending on the property and your tax situation, but I wouldn’t use the tax benefit to justify an otherwise thin deal.
Since you just sold a contracting business, I’d also look at the tax impact of that sale before deciding how much capital is truly available to invest. Depending on how the sale was structured, you may have tax due that needs to be reserved for.
For a first deal, I’d rather see you buy one property with enough liquidity left over than stretch into multiple deals too quickly.
Happy to connect and share some of our resources that might be helpful!
INVESTOR FRIENDLY CPA®5241 Reviews - 4wGregory AcsPro MemberLender · MD · Member since 2025 · 162 posts · 62 votes
I don’t think your first deal has to be a home run. If the numbers are truly conservative and you’ve accounted for repairs, vacancies, reserves, and financing costs, a solid deal that performs as expected can be a much better foundation than waiting indefinitely for the perfect one. I’d rather buy a deal that helps you learn the process and leaves room to grow than force a deal or wait forever for one that may never come.
- Coral Springs, FL · Member since 2018 · 464 posts · 95 votes3w
Everyone's giving you solid advice on the $85K deals, but I want to offer a different angle that leverages your contracting background specifically.
The problem with $200-300/month cash flow on $85K retail purchases is that one bad repair wipes out a year of profit. You're right to want cash flow, but the acquisition price is what determines whether that cash flow survives contact with reality.
There's an acquisition method that solves this: tax deed auctions. Properties sell at 50-70% of assessed value. An $85K house at retail might be assessed at $120-140K — at auction, you're buying it for $60-85K with instant equity built in.
Here's why your contracting background matters:
- Tax deed properties often need rehab (which scares off most bidders)
- You already know what repairs actually cost vs. what contractors quote
- Your competitive advantage IS the rehab — it's other people's weakness
The math changes completely:
- Property assessed at $130K, auction price $70-80K
- $15-20K rehab (you managing this yourself saves 20-30% vs. hiring a GC)
- All-in basis: $85-100K in a $130K+ market
- Rent at $1,100-1,300/month
- Now your cash flow is $400-600/month, not $200-300
- And you have $30-45K in instant equity from the below-market acquisition
I'm in Broward County, FL and we have 16 properties at the next tax deed auction (October 26). The spreads between opening bid and market value range from $80K to $300K+. Your contracting skills + deep discount acquisition = the kind of cash flow that survives the HVAC replacement, the vacancy, and the surprise repair everyone's warning you about.
West Virginia also does tax deed sales — the process is different but the discount principle is the same. Happy to share what I've learned about evaluating these properties if you want to compare the approach.
Don't settle for thin cash flow when your skill set lets you acquire at a basis where strong cash flow is the default, not the exception.
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