Entering Rental Properties
Member since 2026 · 5 posts · 5 votes
Entering Rental Properties
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Nicholas L.Pro Member
Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ voteshello and welcome. reactions:
-yes, it's VERY easy to get into. go on Zillow - buy any house. rent it out. voila, you're an investor.
-what's hard is MAKING MONEY on that house. as an investor you're competing with people who want to live in houses. they can pay way more than an investor can because they don't need a return.
-i always get nervous when people say "i have $X of equity." equity is EXPENSIVE to tap - doing so is a great way for the BANK to make money, and not you. if you don't have a bunch of cash, actual cash, you're not ready.
-you got great advice from @Kevin Sobilo. note his example where you buy a property, "successfully" rent it out, and then sell and lose money. that's not why most of us are doing this.
-BRRRRs are tough and annoying and obnoxious. i just did a home run BRRRR last year and a not so great one this year. every step is difficult. it's not 2016 anymore - you can't just buy a property, refresh it and refinance. you will lose money doing that. there is fierce competition for BRRRR-able inventory - no one is out there surfacing properties that are just waiting for you to buy and paint.
hope this helps. happy to dialogue further
19 Replies
- Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes2mo
@Anthony Pistelli, a few thoughts:
1. One thing I often warn new investors about is the intention to buy one property.
With only 1 property, you are likely to experience more UPS and DOWNS. When things are good, you barely even notice or think about it, and when they are bad it will preoccupy your mind constantly.
If you have even a handful of units, when 1 is problematic the income from the others covers for the issue and makes the impact felt much less.
With only 1 property, you never actively manage things enough to become proficient and therefore increase your changes of bad things happening as well.
2. So, I generally recommend that before you buy 1 property you have a plan for how you will continue to acquire properties over a relatively short time until you have at least a few.
If you spend every last dime to acquire 1 and have to wait several years for cash-flow to generate another down payment that is not a very ideal situation.
3. The equity you tap from your primary residence with any kind of loan will not be tax deductible as an expense for your real estate investment. So, keep in mind that is not an ideal way to come up with a down payment.
4. Some people use a HELOC to flip houses with, which might make more sense since they pay interest on the money only while its in use and can stop anytime.
5. As with many people, I recommend doing a self-assessment. What knowledge, skills, and experience do you bring to the table. What kind of time commitment are you prepared to make in addition to the capital you invest. What role(s) do you envision for yourself.
The answers to these can help you figure out what strategy(ies) you might wish to use.
- Member since 2026 · 5 posts · 5 votes2mo
@Kevin Sobilo thank you so much for this. We are definitely looking to scale and acquire multiple properties, but we are just getting started and trying to decide the best entry point for us. I just started listening to the pod and am still learning about the BRRRR method. I'm normally very conservative financially so this all feels risky to me. Especially since we both work full time jobs. I'm hearing all these stories but is this really that easy to get into?
- Realtor · Hanover Twp, PA · Member since 2018 · 3k+ posts · 3k+ votes2mo
1. Investing literally means RISK!
When you SAVE, your savings account is literally insured by the government (FDIC) in case the bank itself goes under! So, your risk is almost nonexistent.
With any kind of investing, there is a REAL risk of loss. As an agent, I once represented a businessman (he owned a home heating oil company). He had bought 2 rental properties an hour or so from where he lived. I think he thought it was "easy money" and managed them VERY VERY poorly.
One was a 6 unit, that he bought for $165k and we STRUGGLED to sell it for $45k because it was SO bad by the time he knew he was in over his head. Another was a 2-3 unit that he bought for $65k that we sold for $10k. Yes, this was quite a while ago before prices went up.
My point is someone whom you would expect to have a head for business didn't appreciate what it would take to make things work and lost their shirt. So, it does happen!
2. The risk is manageable and there is opportunity for sure! So, don't think that my EXTREME example from #1 is the norm by any means.
3. You can be financially conservative and invest in real estate. I would say step #1 would be to REALLY understand what the risks are. Not just a list of what they are, but how likely are they to happen, what can you do to mitigate them, what options will you have to manage them if they happen, how impactful might they realistically be for you, etc.
Most fear related to risk is going to come from not feeling like you have a handle on them. Driving a car has "risks", but you learn the best practices for safety such as not following too close, not driving drunk, wearing your seatbelt, etc. You aren't afraid of it because you come to know the risks and do things to mitigate the risk and the impacts. For example, you carry insurance to mitigate the impact. Insurance doesn't stop bad things from happening, but they keep the bad situation from ruining your whole life.
4. Is it "easy" to get into. I guess technically yes you can buy a property easily especially since lending in this country is pretty liberal generally. However, I think you really mean is it easy to do well with it.
If you really want to invest seriously, it isn't really easy or quick. The people who do well with it, tend to make it a passion of theirs. They are very vested in the effort for a LONG time.
5. You mention working full-time like its a barrier? Are you looking to invest passively and not invest your time as well? If so, consider that carefully. It certainly can be done, but don't think you can buy rentals and self manage without it taking real time and effort especially in the beginning when you are learning everything new.
6. Real estate investing is a commitment! Its a "get rich SLOW" scheme in most cases or at least at first... Perhaps think of it as a snowball rolling down a hill... For a long time is rolls along barely growing in size, but eventually it really starts to grow almost suddenly bigger and bigger. That initial phase where it barely seems to grow can last quite a while, but eventually it pays off for most people who stick with it.
7. A typical example of what might happen if you don't have the commitment to stick with it. You buy a duplex for $250k with 20% down. You try it for a couple years but after your first eviction you are fed up and you have incurred some tenant damage and you want to sell.
Since your eviction and tenant damage have eaten up everything you earned over your hard costs the first couple years you have made $0 so far. Since you are selling so quickly you are only able to get the same $250k you paid for it. However, after paying commissions, closing costs, transfer taxes etc you end up losing about $17,500 on the sale because you have paid down the mortgage so little in that short time that you cannot get even your initial down payment back.
This is why COMMITMENT is important. If you owned that property 10 or 15 years you sell well ahead even if the sale price is the same but if you aren't committed going in its hard to win unless you are lucky.
8. Obviously, my examples focused on buy & hold since you didn't mention doing significant rehabs and also mentions full time jobs as being a consideration.
- Real Estate Broker · Atlanta · Member since 2024 · 1k+ posts · 606 votes2mo
@Anthony Pistelli Congratulations on taking the first step. With $200k in equity, you have a few options, including a HELOC, a home equity loan or a cash-out refinance depending on your goals and current interest rate. Before borrowing, make sure the numbers work, have adequate cash reserves and build a solid team of local professionals. I would also recommend joining your local REIA to connect with experienced investors in your market.
- 2moArman AhmedPro MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 935 votes
Quote from @Anthony Pistelli:
My wife and I have recently decided to purchase a property for long-term rental in our city. We have some cash but we also have around $200k in equity in our house. What are some good options for us to get started?
Having $200K in equity gives you a lot of options, but the biggest mistake is jumping into a deal without a clear strategy. I’d start by defining whether your goal is cash flow, appreciation, or building a larger portfolio. Don’t feel limited to your local market either; a lot of investors are finding better opportunities in Midwest markets where acquisition costs are lower and rental numbers can make more sense. The key is buying the right property and building a strong team around you with lenders, contractors, and property management in place before scaling. - 2moAlfath AhmedBusiness MemberReal Estate Agent · Columbus, OH · Member since 2022 · 1k+ posts · 1k+ votes
Quote from @Anthony Pistelli:
My wife and I have recently decided to purchase a property for long-term rental in our city. We have some cash but we also have around $200k in equity in our house. What are some good options for us to get started?
If you are going to use your HELOC or re-finance, then get into doing BRRRR deals. Not sure how your market is and if you can find deals at 75% or close ARV. That is key and building a good team and system that repeatedly runs. I built a 30 unit portfolio in my market by doing that.
ReafCo | Ahmed Group 536 Reviews - 2moDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
Quote from @Anthony Pistelli:
My wife and I have recently decided to purchase a property for long-term rental in our city. We have some cash but we also have around $200k in equity in our house. What are some good options for us to get started?
A common issue, so Copy & Paste info below:
You’re ALWAYS better off investing locally, where it’s easier to:
- Learn the market
- Network to find deals
- Network to find contractors
- Be more hands-on
- Driveby property to keep tabs on it
- Network to find a decent Property Management Company (PMC)
Next best location is somewhere else you lived, where you have an existing network of family & friends to help you as accomplish the above list as needed.
If you invest OOS, your biggest challenge won't be finding properties to meet your goals on paper, it’ll be successfully building a knowledgeable & trustworthy local team.
The biggest mistake we see OOS investors making in our market, over and over again, is not fully understanding Neighborhood/Property/Tenant Classes and how they impact your probability of success!
They all run their ROI numbers assuming Class A results – when buying Class B, C & even D rentals.
Then they’re shocked when their performance expectations aren't met😞
If you choose to invest OOS, and have little to no landlord experience, we highly recommend targeting Class B Neighborhoods/Properties/Tenants. If you target Class C, you better be prepared emotionally & financially for plenty of challenges.
You can find Class B properties in the Midwest to BRRRR, but it will take more digging and YOU will need to understand how to analyze & identify them - because a lot of agents, wholesalers, PMCs, etc. will try to sell you Class C or D misrepresented as Class B:
- Many of them don't know/care what Class the properties are, so they're incompetent.
- Others know exactly what they are doing, so should be labeled as crooks!
EITHER WAY YOU LOSE!
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.
For example, Metro Detroit has 132 cities and the City of Detroit 183 Neighborhoods, which we’re analyzing and classifying to make better investing decisions.
Horror Stories from those that did NOT Understand What they were Buying:
https://www.biggerpockets.com/forums/48/topics/1137397-baltimore-a-path-to-never-ending-pain
https://www.biggerpockets.com/forums/432/topics/1231840-sell-at-a-loss-or-rent-at-a-loss
https://www.biggerpockets.com/forums/311/topics/840134-memphis-turnkey-tenant-turnover-costs
Logical Property Management4.9459 Reviews- Member since 2026 · 5 posts · 5 votes2mo
@Drew Sygit thanks so much, this has been really illuminating for me. I would much rather stay local for many of the reasons you stated early in the post. I did not really understand the classes until now either so that's given me a lot to chew on. What would be a good first step for me in your opinion? I think I know what I can afford but should I go speak to a vendor first or just start looking for properties? Or both at once?
- 2moDrew SygitBusiness MemberProperty Manager · Royal Oak, MI · Member since 2012 · 12k+ posts · 9k+ votes
Quote from @Anthony Pistelli:
@Drew Sygit thanks so much, this has been really illuminating for me. I would much rather stay local for many of the reasons you stated early in the post. I did not really understand the classes until now either so that's given me a lot to chew on. What would be a good first step for me in your opinion? I think I know what I can afford but should I go speak to a vendor first or just start looking for properties? Or both at once?
Lender first as any non-desperate agent will want to know your budget.
Class B is typically the sweet spot for rentals.
Class C is often too risky for newbies.To be really successful, you do NOT want to pay market price.
So, look for properties on the market 90+ days or the ugly ones you fix up.Lastly, look for an agent that OWNS RENTALS!
- Most "investor-friendly" agents are really just "commission-friendly" as they have no idea how to calculate ROI, Cash-on-Cash, etc. and just know how to sell emotionally.Logical Property Management4.9459 Reviews - Member since 2026 · 5 posts · 5 votes2mo
@Drew Sygit okay, gotcha. Thank you so much!
- 2moJake YuskaitisBusiness MemberLender · New Jersey, USA · Member since 2022 · 254 posts · 67 votes
depends on your FICO. You can always pull cash out to buy a distressed property then fix it up and pull the cash out of that. rinse and repeat.
Frontier Funding LLC533 Reviews- Member since 2026 · 5 posts · 5 votes2mo
@Jake Yuskaitis FICO is excellent. Is the BRRR method I keep reading about?
- 2moVijay FriedmanBusiness MemberMiami, FL · Member since 2026 · 766 posts · 122 votes
Quote from @Anthony Pistelli:
My wife and I have recently decided to purchase a property for long-term rental in our city. We have some cash but we also have around $200k in equity in our house. What are some good options for us to get started?
@Anthony Pistelli
Anthony, having both available cash and significant home equity gives you a few different options. Before tapping the equity, I'd compare how each financing approach affects your cash flow, reserves, and long-term investing goals. It's also worth underwriting a few rental properties now so you know what purchase price and rental income fit comfortably within your plan. Best of luck getting started! - Property Manager · Warsaw · Member since 2026 · 107 posts · 38 votes2mo
Before financing, you need the strategy locked first — otherwise you're solving the wrong problem.
Nail down first:
- Target market/neighborhood and expected cash flow numbers
- Property type (SFH, small multifamily) that fits your management bandwidth
- Buy-and-hold return targets — does the deal actually pencil out?
Then financing follows the strategy:
- HELOC for down payment (flexible, interest-only)
- DSCR or conventional investment loan for the property itself
- Reserves held back regardless of loan type
- 2moNicholas L.Pro MemberFlipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
hello and welcome. reactions:
-yes, it's VERY easy to get into. go on Zillow - buy any house. rent it out. voila, you're an investor.
-what's hard is MAKING MONEY on that house. as an investor you're competing with people who want to live in houses. they can pay way more than an investor can because they don't need a return.
-i always get nervous when people say "i have $X of equity." equity is EXPENSIVE to tap - doing so is a great way for the BANK to make money, and not you. if you don't have a bunch of cash, actual cash, you're not ready.
-you got great advice from @Kevin Sobilo. note his example where you buy a property, "successfully" rent it out, and then sell and lose money. that's not why most of us are doing this.
-BRRRRs are tough and annoying and obnoxious. i just did a home run BRRRR last year and a not so great one this year. every step is difficult. it's not 2016 anymore - you can't just buy a property, refresh it and refinance. you will lose money doing that. there is fierce competition for BRRRR-able inventory - no one is out there surfacing properties that are just waiting for you to buy and paint.
hope this helps. happy to dialogue further
- 2moEvan HoppleBusiness MemberReal Estate Agent · Columbus Cleveland Dayton, OH · Member since 2023 · 284 posts · 420 votes
Quote from @Anthony Pistelli:
My wife and I have recently decided to purchase a property for long-term rental in our city. We have some cash but we also have around $200k in equity in our house. What are some good options for us to get started?
I generally wouldn't buy a long-term rental with 100% financing. In the majority of markets, it's very difficult to generate meaningful cash flow at that leverage, so the numbers often don't make much sense.Since you already have significant equity in your home, I'd look at using a HELOC as a short-term financing tool for a BRRRR strategy. Buy a property with upside, renovate it, rent it out, and then refinance into a long-term loan to pay off the HELOC and recycle your capital into the next deal.
As your portfolio grows, your personal income may no longer support qualifying for additional conventional loans. At that point, many investors transition to DSCR loans, which are underwritten primarily on the property's income rather than their personal income, making it easier to continue scaling.
Reafco Real Estate - 2moAshish AcharyaBusiness MemberCPA, CFP®, PFS · FL · Member since 2017 · 5k+ posts · 3k+ votes
Whether to use the cash, tap the home equity, or some mix of both is really a financing decision, so the specific structure is worth running past a lender for the actual numbers. On the tax side though, a HELOC or cash out refi on your primary home only keeps its interest deductible if you can trace those funds directly to the rental, so keep that money in its own account and don't let it mix with personal spending, or you risk losing that deduction if it's ever questioned. Using savings instead keeps things simpler since there's no tracing requirement at all, no loan on your primary home to worry about, just straightforward cash into the purchase.
Once you close, get a cost segregation study done regardless of how you funded it, that's usually where a meaningful chunk of the tax benefit comes from on a first long-term rental. And since you're both presumably still working, keep in mind rental losses will likely be limited by the passive activity rules early on unless one of you qualifies for real estate professional status, so don't expect big write offs against other income in year one.
Happy to connect!
INVESTOR FRIENDLY CPA®5241 Reviews - Rental Property Investor · Palo Alto, CA · Member since 2026 · 42 posts · 22 votes2mo
Hi Anthony,
Nicholas made an excellent point that just because you own a house and rent it out doesn't mean you're necessarily making money. Maybe if your goal is high levels of appreciation or tax benefits, or something else it could work out but if your goal is to have smooth monthly cash flow it can get very tedious especially since nowadays many of the properties sit on thin margins.
That's why it's extremely important to stress model a property before ever thinking about continuing forward on a deal.
For example, recently I was looking at a property in Columbus, OH using a model that I developed which shot back a $303 monthly cash flow which was nice to see and reasonable given that OH is pretty cash-flow friendly compared to other states but when I started adding in a repair / vacancy shock, monthly capex reserves, turnover, raising vacancy rate, interest rate, and other things, it knocked me down to only $35.34 per month which isn't as glamorous as the $300 prior to adding other necessities in which LTR investors need to keep in mind.
Feel free to message me to talk about this further.
- 2moJimmy LieuBusiness MemberReal Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes
Quote from @Anthony Pistelli:
My wife and I have recently decided to purchase a property for long-term rental in our city. We have some cash but we also have around $200k in equity in our house. What are some good options for us to get started?
Great question and welcome! Since you already have some cash and a good amount of equity, you're in a solid position. A lot of investors start by using a HELOC because it gives you flexibility to access only what you need for the down payment, closing costs, or even repairs while keeping your primary mortgage in place. A home equity loan is another option if you prefer a fixed payment and interest rate. Before tapping your equity, I'd make sure the rental still cash flows comfortably even with the added debt. Run the numbers conservatively using realistic rents, maintenance, vacancies, and capital expenses. If this is your first rental, I'd also avoid stretching your budget too thin. Buying one solid property, learning the process, and then repeating it usually works better than trying to maximize leverage right away. Happy to connect and answer any questions you have!
Jimmy Lieu, Red 1 Realty4.9120 Reviews
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