Best advice for first rental property

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G. Brian DavisPro Member
Investor · Hatboro, PA · Member since 2016 · 2k+ posts · 842 votes
2y

Hi @Lamar Athill, glad to hear you're getting into real estate investing!

I started my career with rentals. One thing I wish I'd known before buying any properties was how to accurately calculate cash flow. It's not "the rent minus the mortgage." In fact, the rule of thumb in the industry is called the 50% Rule: that 50% of the rent will go toward non-mortgage expenses (vacancy rate, repairs, maintenance, insurance, property taxes, management, accounting, etc.).

I also didn't realize how many different skills were required, from financing to managing contractors to permits to city inspections to managing tenants or property managers. And many others.

Personally, I no longer invest in rental properties. I found it too much work and not enough return. Nowadays I invest relatively small amounts in real estate syndications (passive group investments). I recently wrote about this for BiggerPockets: https://www.biggerpockets.com/blog/dollar-cost-average-real-....

Feel free to hit me up with a message any time!

Brian

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  • Matthew CrivelliBusiness Member
    Lender · MA · Member since 2021 · 1k+ posts · 1k+ votes
    2y

    @Lamar Athill

    Be careful inheriting tenants in CT. If they decide not to pay you, it could end up being a nightmare trying to get them out. Also, get a home inspection and have a home inspection contingency in your contract. 

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  • Lamar Athill
    OP
    Member since 2023 · 11 posts · 4 votes
    2y

    Thank you for that advice Matthew! 

    0Reply
  • Jacopo Iasiello
    Investor · Miami Beach, FL · Member since 2017 · 362 posts · 109 votes
    2y

    Hi Lamar,  Acquiring rental properties can be a rewarding venture, but it's important to approach it with careful planning and consideration. Here some of my advice first Educate yourself 
    Understand the local rental market trends, property values, and rental demand. Second Set Clear Goals Are you looking for long-term wealth accumulation, steady income, or both? Setting clear goals will guide your investment strategy. Third Financial Preparation Evaluate your budget, savings, and credit score. Consider seeking pre-approval for financing to know your purchasing power. Fourth Start Small Select properties that align with your budget and investment goals and also consider Location Matters, Due Diligence, Build a Reliable Team, review Risk and Reward and continuous learning the most important. I hope it helps! :)

    0Reply
  • Dan M.
    Real Estate Investor · Unadilla NY · Member since 2017 · 418 posts · 297 votes
    2y

    Get some real estate related books and take it with a grain of salt that some of the books are out of date to an extent.

    You have to learn how to analyze a property, without being really good at it, or at least moderately good at it, you'll never know if a property is worth buying. I recommend doing at least 5 per day. 

    0Reply
  • Jeff Roth
    Real Estate Consultant · Ann Arbor, MI · Member since 2022 · 460 posts · 250 votes
    2y

    HI Lamar-

    Great question!

    I would find an investor friendly Realtor locally that is also an investor themselves or local to the area you want to invest.

    They will have experience and connections to help you find and evaluate investment properties.

    I would ask the investor friendly Realtor for a property manager referral as the property manager will be an important member of your investing team. They should be involved in the selection of the investment property and giving input on how to maximize the return on investment.

    Finally, I would recommend you consider starting with at least a duplex if you can, so you hopefully always have a rent check coming in during a vacancy.

    To your success!

    1Reply
  • G. Brian DavisPro Member
    Investor · Hatboro, PA · Member since 2016 · 2k+ posts · 842 votes
    2y

    Hi @Lamar Athill, glad to hear you're getting into real estate investing!

    I started my career with rentals. One thing I wish I'd known before buying any properties was how to accurately calculate cash flow. It's not "the rent minus the mortgage." In fact, the rule of thumb in the industry is called the 50% Rule: that 50% of the rent will go toward non-mortgage expenses (vacancy rate, repairs, maintenance, insurance, property taxes, management, accounting, etc.).

    I also didn't realize how many different skills were required, from financing to managing contractors to permits to city inspections to managing tenants or property managers. And many others.

    Personally, I no longer invest in rental properties. I found it too much work and not enough return. Nowadays I invest relatively small amounts in real estate syndications (passive group investments). I recently wrote about this for BiggerPockets: https://www.biggerpockets.com/blog/dollar-cost-average-real-....

    Feel free to hit me up with a message any time!

    Brian

    2Reply
  • Samuel Eddinger
    Meriden, CT · Member since 2018 · 698 posts · 500 votes
    2y

    My advice to any first time investor is to only buy a property you are willing to hold long term.  In those cases, if the market goes down, you are willing to hold long enough for the market to rebound.

    My second piece of advice is to only buy properties that you would live in yourself.  If you would not live in the property, it is hard to get good tenants that would so your vacancy and bad debt will be higher than expected (costing you money).

    I'd be happy to have a phone call with you.  DM me if interested.

    2Reply
  • Gregory SchwartzBusiness Member
    Rental Property Investor · College Station, TX · Member since 2016 · 1k+ posts · 1k+ votes
    2y

    Get around other local investors in your market. BP is a great resource to get questions answered and to meet people. However, nothing tops in-person connection. Go to local meet-ups, meet people for coffee, and take them to lunch. 

    Set expectations upfront, this is not easy but it is 100% worth it. 

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  • Michael SmytheBusiness Member
    Real Estate Agent · Metro Detroit · Member since 2023 · 4k+ posts · 3k+ votes
    2y

    @Lamar Athill

    Recommend you first figure out the property Class you want to invest in, THEN figure out the corresponding location to invest in.

    If you apply Class A assumptions to a Class B or C purchase, your expectations won’t be met and it may be a financial disaster.

    So, when investing in areas they don’t really know, investors should research the different property Class submarkets.

    Here’s our OPINION for the Metro Detroit market (use as a template for your target area!) that we’ve learned in our 24 years, managing almost 700 doors across the Metro Detroit area, including almost 100 S8 leases.:

    Class A Properties:
    Cashflow vs Appreciation: Typically, 3-5 years for positive cashflow, but you get highest relative rent & value appreciation.
    Vacancy Est: Historically 10%, 5% the more recent norm.
    Tenant Pool: Majority will have FICO scores of 680+, zero evictions in last 7 years.

    Class B Properties:
    Cashflow vs Appreciation: Typically, decent amount of relative rent & value appreciation.
    Vacancy Est: Historically 10%, 5% should be applied only if proper research done to support.
    Tenant Pool: Majority will have FICO scores of 620-680, some blemishes, but should have no evictions in last 5 years

    Class C Properties:
    Cashflow vs Appreciation: Typically, high cashflow and at the lower end of relative rent & value appreciation. Can try to reposition to Class B, but neighborhood may impede these efforts.
    Vacancy Est: Historically 10%, but 15-20% should be used to also cover tenant nonpayment, eviction costs & damages.
    Tenant Pool: majority will have FICO scores of 560-620, many blemishes, but should have no evictions in last 2 years. Verifying last 2 years of rental history very important! Also, focus on 2 years of job/income stability.

    Class D Properties:
    Cashflow vs Appreciation: Typically, all cashflow with zero or negative relative rent & value appreciation
    Vacancy Est: 20%+ should be used to cover nonpayment, evictions & damages.
    Tenant Pool: majority will have FICO scores under 560, little to no good tradelines, lots of collections & chargeoffs, recent evictions. Verifying last 2 years of rental history and income extremely important to find the “best of the worst”.

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

    What else can we assist you with?

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  • Nicholas L.Pro Member
    Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes
    2y

    @Lamar Athill

    it's house hacking

    it's that simple

    it's not easy, but it's simple

    house hack

    2Reply
  • Corey ConklinPro Member
    Investor · Member since 2021 · 129 posts · 209 votes
    2y

    Why do you want to get into rental properties?

    Is it because you saw that someone got rich being a real estate investor? you want "financial freedom"? Create "generational" wealth? Or you saw that someone got rich overnight investing in real estate?

    If you are doing it for those reasons then you are going to have a rude awakening. 

    If you don't have any skill sets that translate to being a real estate investor and you plan to "build a team" to do it all for you then you are also in for a rude awakening. 

    The reality of real estate investing is that it take A LOT of work. If you don't understand that going in to it, you will fail.

    Now that I'm off of my soap box. The best way to get into real estate with little money is house hacking which I believe someone already said. If you have money then go buy a rental property, advertise it to rent and go from there. You'll learn as you go, just jump in and start taking action.

    0Reply
  • River SavaPro Member
    Lender · USA · Member since 2022 · 1k+ posts · 1k+ votes
    2y

    Hi Lamar - 

    Best place to start is by educating yourself and networking. Books, online resources, and local investment groups, etc. Clarify your investment goals to guide your property choices. Analyze local market trends, rental demand, and economic indicators to pinpoint growth potential, and reach out to local investors / RE professionals in your area.

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  • Wale LawalBusiness Member
    Real Estate Broker · Houston | Dallas | Austin, TX · Member since 2018 · 5k+ posts · 2k+ votes
    2y

    @Lamar Athill

    Real estate investment may be intimidating as well as exhilarating when you first start out. Define your investment goals, familiarize yourself with related terms, evaluate your financial situation, begin small, investigate markets, establish investment standards, cultivate professional connections, carry out exhaustive due diligence, investigate funding alternatives, and determine whether to manage the property on your own or by hiring a property management company.

    Decide what you want to achieve—stable cash flow, long-term growth, tax advantages, or all of these—and dedicate some time to learning about them by reading books, using the internet, taking classes, and attending seminars. Examine your financial situation, taking into account your credit limit, savings, and accessible funding. To begin with and develop confidence, start small by beginning with a single rental property or a modest multi-unit property.

    To choose the ideal property kinds for your investment goals and risk tolerance, do in-depth market research to uncover attractive investment markets and examine local market trends. To get helpful advice and support, connect with lenders, contractors, property managers, investors, real estate agents, and other experts.

    Options for financing include private loans, partnerships, FHA, VA, and conventional mortgages. After weighing the advantages and disadvantages of each choice, select the best one for your needs.

    Never forget that real estate investment is a long-term endeavor that calls for tolerance, tenacity, and ongoing education. To create an effective and lucrative rental property portfolio, start with a strong foundation, maintain discipline, and adjust to shifting market conditions.

    Good luck!

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  • Crystal SmithPro Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
    2y
    Quote from @Lamar Athill:

    I am new to real estate and Im looking acquire some rental properties. What would be good advice on how to get started


     How to get started:

    1. Get your financing in place

    2. Hire a realtor

    3. Get on every wholesaler list possible 

    4. Start networking with other investors

    5. Start developing a list of property management companies, General Contractors, handymen

    6. This is probably the most important- Make sure you understand the financials associated with rentals

    7. Start getting recommendations for real estate attorneys

    8. Consider establishing an LLC for your real estate- On my first property I had a loan from a bank but I had established a Property management LLC to manage the property. While I lived in the property my tenants did not know I was the owner. All payments went to the LLC.

    I probably forgot something.

    By the way I saw a few negative comments in the thread about why you should not do this.  Ignore them.

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  • Billy Smith
    Shawnee Mission, KS · Member since 2016 · 716 posts · 313 votes
    2y

    Current real-estate prices are making SFH so expensive is not worth it after getting mortgage .If paying cash do the math find out what your return on your money is .

    0Reply
  • Lamar Athill
    OP
    Member since 2023 · 11 posts · 4 votes
    2y
    Quote from @Crystal Smith:
    Quote from @Lamar Athill:

    I am new to real estate and Im looking acquire some rental properties. What would be good advice on how to get started


     How to get started:

    1. Get your financing in place

    2. Hire a realtor

    3. Get on every wholesaler list possible 

    4. Start networking with other investors

    5. Start developing a list of property management companies, General Contractors, handymen

    6. This is probably the most important- Make sure you understand the financials associated with rentals

    7. Start getting recommendations for real estate attorneys

    8. Consider establishing an LLC for your real estate- On my first property I had a loan from a bank but I had established a Property management LLC to manage the property. While I lived in the property my tenants did not know I was the owner. All payments went to the LLC.

    I probably forgot something.

    By the way I saw a few negative comments in the thread about why you should not do this.  Ignore them.

    How do I get on a wholesale list?


    0Reply
  • Crystal SmithPro Member
    Moderator
    Real Estate Broker · Chicago, IL · Member since 2014 · 2k+ posts · 1k+ votes
    2y
    Quote from @Lamar Athill:
    Quote from @Crystal Smith:
    Quote from @Lamar Athill:

    I am new to real estate and Im looking acquire some rental properties. What would be good advice on how to get started


     How to get started:

    1. Get your financing in place

    2. Hire a realtor

    3. Get on every wholesaler list possible 

    4. Start networking with other investors

    5. Start developing a list of property management companies, General Contractors, handymen

    6. This is probably the most important- Make sure you understand the financials associated with rentals

    7. Start getting recommendations for real estate attorneys

    8. Consider establishing an LLC for your real estate- On my first property I had a loan from a bank but I had established a Property management LLC to manage the property. While I lived in the property my tenants did not know I was the owner. All payments went to the LLC.

    I probably forgot something.

    By the way I saw a few negative comments in the thread about why you should not do this.  Ignore them.

    How do I get on a wholesale list?



     You'll have to start networking with investors in your community to find out who the wholesalers are.

    312-681-7487
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  • Brandon C.
    Real Estate Investor · Milwaukee, WI · Member since 2017 · 25 posts · 9 votes
    2y

    A lot of people get started by house hacking.

    0Reply
  • Rachid AbadliBusiness Member
    Investor · Sacramento, CA · Member since 2024 · 125 posts · 33 votes
    13h

    Five things I wish someone had told me before my first rental:

    1. Get a state-specific lease — not a generic template. Your state's required disclosures and deposit rules matter.

    2. Screen everyone the same way — written criteria, applied identically. One exception becomes a Fair Housing complaint.

    3. Budget 1% of property value/year for maintenance — things break, and they break at the worst time.

    4. Keep 2 months' rent in reserves — vacancy happens, and you'll need to float the mortgage.

    5. Document everything — every maintenance request, every communication, every payment. If it's not written down, it didn't happen. This is the #1 thing that protects you in a dispute.

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  • Aiden AvtgisBusiness Member
    Real Estate Agent · Cleveland, OH · Member since 2024 · 27 posts · 14 votes
    12h

    Real estate is a huge pond with a lot of different lanes, and the smartest move in the beginning is figuring out who you want to be in that pond. Some investors thrive in the chaos of rehabs, others want quiet, predictable rentals. Some want to be hands-on, others want something that runs like a business they barely touch. Skip the spreadsheets and spend a little bit of time imagining the version of yourself you’re building. Look at different types of properties, picture yourself owning them, and pay attention to which ones feel exciting versus which ones feel exhausting. Once you know the kind of investor you’re becoming — long‑term builder, cash‑flow chaser, hands‑on operator, or systems‑driven owner — the numbers start making a lot more sense, and the right strategy becomes way easier to spot.

    0Reply
  • Arman AhmedPro Member
    Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 904 votes
    10h
    Quote from @Lamar Athill:

    I am new to real estate and Im looking acquire some rental properties. What would be good advice on how to get started

    Start by learning how to analyze a deal before worrying about buying one. Get comfortable with rent, expenses, financing, repairs, and cash flow, then start looking at actual properties so the numbers become real. And don’t feel like you have to invest in your own backyard either. If you’re open to out-of-state, the Midwest is worth putting on your radar.

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