First Time Real Estate Investor Tips

Morgan Tondre
NJ · Member since 2024 · 207 posts · 91 votes
1y
Quote from @Shawn Mcenteer:

Hi @Eli Berger $250k is an awesome start. I'll let you know my wife and I got to Fi with far less saved up investing in New Jersey. Similar to how the market looks today, when we bought our first multi in 2015 cash flow was scarce. Every property we purchased did NOT cash flow on day 1. What did happen was the forced appreciation which gave us larges sums or equity, raised rents and created desirable rentals attracting high income earning tenants. These properties that did not look so great on year 1 all of a sudden turned into cash cows year over year.
Long story short I really considered out of state and almost pulled the trigger a few times. Fortunately I stayed in NJ. Today our properties are all cash flow positive, running on auto pilot. We are 10 years in yet to miss a single payment of rent. $250 can go a long way. If you are open to house hacking $250k will stretch you very far.

Agreed @Shawn Mcenteer!
2 Reply

Zachary Clevenger

Investor · Bargersville, IN · Member since 2017 · 95 posts · 52 votes

1y

Hey Eli.
I live in the Indy area and have a few things to note.
$250k is a decent amount, but because so many individuals are flocking to the market prices are naturally going up. I would suggest utilizing leverage with 20-30% down.

Do you research into the area being presented before giving up your cash. A lot of the deals, and I do mean a LOT, are in areas that I would ever invest in. Sure, the monthly cash flow will look great (on paper), but the area will not support quality tenants, appreciation will suffer due to the poor areas, and the possibility of increased repair/maint/turnover cost can be greater as a result.
I am not saying these things to scare you off. I have been seeing a huge flood of out-of-state investors like you coming in and buying these properties.

Be...vigilant.

Chris MullinaxBusiness Member

Property Manager · Kokomo, IN · Member since 2020 · 172 posts · 44 votes

1y

Hey Eli, welcome to BiggerPockets! Really cool that you and your brothers are tackling this as a family venture. Indy is definitely a strong market, but I’d just stress that it can go from really great to really not great, quickly block by block. Doing some deep research or talking with a seasoned investor who’s already active there will give you a much clearer picture of where to focus.

On the team side, we actually have both agents and property management under one roof, so we’d love to connect with you and your brothers to see if we might be the right fit for your goals. That said, I always recommend talking to a few different PM companies to find the one that matches your needs and style best. I’d be happy to set up a call with you and our BDM, and if it’s not the right fit, no worries, our approach isn’t for everyone. Either way, excited to see your investing journey unfold!

CRM Properties4.9518 Reviews

Nicholas L.Pro Member

Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes

1y

@Eli Berger

are you already house hacking? if you're not already house hacking, i'd start with a house hack.

just curious - how do you plan to compete in Indy against local investors? or are you asking us how to do that?

and, why not pick a market a couple hours away so you can be hands-on? BRRRR is a hands-on strategy that is difficult to do from Internet.

also, did i mention house hacking?

[email protected]313-221-8718

Melissa JusticeBusiness Member

Rental Property Investor · Phoenix, AZ · Member since 2024 · 518 posts · 1k+ votes

1y

@Eli Berger,

Hey Eli, welcome! It sounds like you and your brothers have a solid plan and the capital to make a strong start. A few thoughts based on experience with out-of-state investing:

Market Selection: Look for areas with stable employment, good schools, and low vacancy rates. Suburbs or smaller cities with growing job markets tend to perform well for small multifamily. Do your homework on crime stats, rental comps, and local rental demand.

Team Building: Your out-of-state team is everything. Vet property managers by asking for references and calling current clients to verify performance. For contractors, get referrals from your PM or local investors. A local real estate agent or property source provider company who specializes in investor properties is invaluable - they know which neighborhoods cash flow and can guide you away from deals that underperform in reality.

Financing Strategy: With $200K and rehab cash, you’ve got options. For a first deal, many investors like to buy one property with a sizable down or even cash - it reduces risk, makes property management simpler, and helps you focus on learning the ropes. Leveraging 50% on two properties can accelerate scaling but adds complexity and stress, especially for an out-of-state first purchase.

Property Type: Stick to 2–4 units initially. Larger multifamily deals bring more management, rehab risk, and financial exposure. Once you’re confident managing a small out-of-state property, scaling to 6–10 units becomes easier.

Lessons Learned: Biggest mistakes often include underestimating operating expenses and overestimating rental income. Always stress-test your numbers and budget for vacancies and repairs. Don’t skimp on a good property manager - they are your eyes and ears locally.

Always happy to share some turnkey single-family and small multifamily markets in the Midwest and Southeast that are performing well for investors. These can be great options for scaling cash flow and minimizing management headaches.

Best of luck!

Joseph Bui

Lender · Nationwide · Member since 2023 · 362 posts · 237 votes

1y

Hi Eli, I'm an investor myself with a portfolio of 8 doors across Memphis and Detroit. I'm also a licensed mortgage broker would can help you with financing options as well. Happy to help answer any questions you.

As a new investor, I wouldn't go too crazy with the number of units yet. Start small and see what you are comfortable with before getting in too deep.

As for leverage, mathematically, it makes the most sense in terms of ROI to put as little down as possible on each deal. However, in reality, you need to do what allows you to sleep at night.

Let me know if you want to chat sometime.

Source: Fair Isaac Company

Drew SygitBusiness Member

Property Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes

1y

@Eli Berger

How much do you know about Property Classes?

Recommend you spend some time learning about them, so you don’t mistakenly buy a property that will NEVER meet your expectations!

Why is Property Class so important for investors to understand and apply in their investing strategies?

Because the Property Class dictates the Class of the tenant pool that the property will attract.

The Tenant Class greatly impacts rental income stability and property maintenance/damage by tenants.

Both Property Class and Tenant Class will affect what type of contractors, handymen and property management companies you should target and be willing to deal with a property.

The Property Class will also impact the maintenance & renovations you do to,, “Maintain to the Neighborhood”.

Why is that important?

Well, if you buy & renovate a property in Class D area to Class A standards, what Tenant Class will actually rent it?

Or, if you put several Class D tenants in a Class A four-plex, what do you think will happen to the property?

So, if you fail to apply the correct assumptions to a property, your expectations won’t be met, and it may even be a financial disaster.

We use the following to rank Property Classes, in order of importance:

Property Tenant Pool: closely linked to location, but not always.
Property Location: closely linked to tenant pool, but not always.
Property Condition & Amenities: it’s important to, “Maintain to the Neighborhood.”

Key metrics for each Property Class:

Class A Properties:
Tenant Pool: Majority of FICO scores 680+, no convictions/evictions in last 7 years.
Tenant Default: 0-5% probability of eviction or early lease termination.
Section 8: Class A rents are too high and won’t be approved.
Vacancies: 5-10%, depending on market conditions.
Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.

Class B Properties:
Tenant Pool: Majority of FICO scores 620-680, some blemishes, no convictions/evictions in last 5 years.
Tenant Default: 5-10% probability of eviction or early lease termination.
Vacancies: 10-15%, depending on market conditions.
Cashflow vs Appreciation: Typically, 1-3 years for positive cashflow, balanced amounts of relative rent & value appreciation.
Section 8: Class B rents are usually too high for the Section 8 program.

Class C Properties:
Tenant Pool: Majority of FICO scores 560-620, many blemishes, but should have no convictions/evictions in last 3 years. Verifying recent 2-years of rental history very important! Same for 2-years of job/income stability.
Tenant Default: 10-20% probability of eviction or early lease termination.
Section 8: Class C rents usually meet program requirements, proper screening still recommended.
Vacancies: 10-20%, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Should cashflow immediately, at the lower end of relative rent & value appreciation.

Class D Properties:
Tenant Pool: Majority of FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, but should have no convictions/evictions in last 12 months. Verifying last 2-years of rental history and income/employment extremely important to find the “best of the worst”.
Tenant Default: 20-30% probability of eviction or early lease termination.
Section 8: Class D rents meet program requirements, often challenges to pass Section 8 inspection.
Vacancies: 20%+, depending on market conditions and tenant screening.
Cashflow vs Appreciation: Typically, all cashflow with little, maybe even negative, relative rent & value appreciation.

Where did we get our FICO credit score information from?

Check out this chart:

FICO Score	Pct of Population	Default Probability
800 or more	13.00%	1.00%
750-799	27.00%	1.00%
700-749	18.00%	4.40%
650-699	15.00%	8.90%
600-649	12.00%	15.80%
550-599	8.00%	22.50%
500-549	5.00%	28.40%
Less than 499	2.00%	41.00%

Make sure you understand the Class of properties you are looking at and the corresponding results to expect.

Metro Detroit has 132 cities, the City of Detroit 183 Neighborhoods, which we’re analyzing and classifying.

[email protected]248-209-6824

Logical Property Management4.9458 Reviews

[email protected]614-490-1163

Kerlous TadresBusiness Member

Realtor · Columbus, OH · Member since 2023 · 1k+ posts · 1k+ votes

1y

Hey Eli, welcome! I would recommend focusing on neighborhoods with strong rental demand and stable populations, and avoiding high-crime or unstable areas. Work with a local lender who knows the market; they can help structure financing and guide you on realistic numbers. Start building a team with a reliable local property manager who can also connect you with vetted contractors and agents. Stick to 2–4 units for your first out-of-state deal; it’s easier to manage and learn the market.

Kerlous Tadres | Reafco Real Estate540 Reviews

Ethan Price

Specialist · Indianapolis, IN · Member since 2025 · 18 posts · 18 votes

1y

Hey Eli!

I am very excited to hear your story and how you are getting ready for your first investment!

$250k in my opinion is an okay budget for a purchase and rehab of a 2-4 unit. You may have to start with smaller mfr, as in a 2/2 duplex. (Inside hint: check the neighborhood of Little Flower). All depends on area and size of the 2-4 unit but it is definitely possible. Some other favorite neighborhoods of mine are Crown Hill and a group of near-eastside neighborhoods.

I believe the key is to vet and find either a good agent first or a good property manager first. The agent or PM should have a network of vetted contractors and other professionals that they like to work with.

I suggest searching for 1 property first and if another great deal comes across your path then take it. As being an out of state investor and new investor, I normally recommend to get a turnkey property to start in this market due to the weaknesses of inexperience and low market knowledge. Therefore, I highly suggest then focusing on 1 property if you are wanting to do the BRRR method.

Key hint: Be as engaged and active in the process of your investment property as much as possible. Real estate is not passive and no one cares about your investment as much as you do.

Hey Eli!

I am very excited to hear your story and how you are getting ready for your first investment!

$250k in my opinion is an okay budget for a purchase and rehab of a 2-4 unit. You may have to start with smaller mfr, as in a 2/2 duplex. (Inside hint: check the neighborhood of Little Flower). All depends on area and size of the 2-4 unit but it is definitely possible. Some other favorite neighborhoods of mine are Crown Hill and a group of near-eastside neighborhoods.

I believe the key is to vet and find either a good agent first or a good property manager first. The agent or PM should have a network of vetted contractors and other professionals that they like to work with.

I suggest searching for 1 property first and if another great deal comes across your path then take it. As being an out of state investor and new investor, I normally recommend to get a turnkey property to start in this market due to the weaknesses of inexperience and low market knowledge. Therefore, I highly suggest then focusing on 1 property if you are wanting to do the BRRR method.

Key hint: Be as engaged and active in the process of your investment property as much as possible. Real estate is not passive and no one cares about your investment as much as you do.

Terrance HillPro Member

Realtor · Memphis, TN · Member since 2010 · 425 posts · 117 votes

1y

Eli, welcome—sounds like you’re starting from a strong position with capital, a clear strategy, and family support. A few quick thoughts:

Indy Submarkets: Broad Ripple, Irvington, parts of Fountain Square, and areas near Butler/Tarkington can work well for small multis. Be careful around high-crime pockets in East/West Indy—cash flow looks great on paper but management headaches eat it up fast.
Team Building: Referrals are gold—lean on BP networking and local REI meetups. Test contractors with smaller jobs before trusting them with full rehabs. A good PM will walk properties with you and tell you what they'd rent for—that's a quick litmus test for honesty.
Financing: With $200K+, I’d lean toward controlled leverage—maybe 25–30% down on a couple deals. Cash buys are safe but limit growth, and all-in-all, your first few properties should be about learning while still getting solid returns.
Property Type: 2–4 units is a smart first step. Financing is easier (residential vs. commercial), and it’s a smoother way to learn managing tenants before scaling into 6–10.
Lessons Learned: Biggest mistake I see? Underestimating rehab timelines and costs, especially out of state. Always double your “worst case” budget and time frame—it’ll save you a lot of stress.

You’re on the right track—if you build the right team and buy in the right pocket, Indy can be a great market to start in.

Candace Hughes

Real Estate Consultant · Indianapolis IN · Member since 2022 · 22 posts · 20 votes

1y

Hey Eli, welcome to BP! I’m based here in Indy and have managed a variety of rehab projects, from mobile homes to single-family homes. Indy has solid sub-markets, but it really is block by block, so a good local team makes all the difference. One thing I’ve learned from overseeing projects is that consistent communication and clear expectations with contractors and property managers are key, especially for out-of-state investors. Starting with a 2–4 unit here is a smart way to get familiar with the market before scaling. Wishing you the best on your first deal!

If you ever need someone local to keep an eye on projects or help manage the process, feel free to reach out, I’ve been doing project management here in Indy and know how important that support can be for out-of-state investors.