Your step-by-step guide

💰 Investment Properties

Turning real estate into income. Whether you want to rent out a property or flip houses, here's what you need to know to start smart.

Types of Real Estate Investing

Buy & Hold (Rental) 🏠

Buy a property, rent it out, collect monthly income. This is the most common and usually the safest for beginners.

Good Things:

  • Monthly income (cash flow)
  • Property value grows over time
  • Tax benefits (deductions!)
  • Tenants pay down your mortgage

Challenges:

  • Dealing with tenants (late rent, complaints)
  • Maintenance and repairs (your problem)
  • Vacancies (no rent = still paying mortgage)

House Flipping 🔨

Buy a fixer-upper, renovate it, sell it quickly for profit. Looks easy on TV - it's not!

Good Things:

  • Potential for big, fast profit
  • Creative and hands-on
  • No landlord duties

Challenges:

  • Requires renovation knowledge
  • Costs always exceed estimates
  • Stressful deadlines
  • Higher risk (market can turn)

Best for Beginners?

Start with buy & hold. Less risky, steadier income, and you learn as you go. Flipping requires more experience, money, and stress tolerance. Once you've successfully managed 2-3 rentals, then consider flipping if you're interested.

The Money Side (Important!)

Investment Property Loans Are Different

Banks see investment properties as riskier, so the rules are tougher:

  • Down payment: 20-25% (vs. 3-5% for primary home)
  • Interest rate: Usually 0.5-0.75% higher
  • Credit score: Need 640+ (better rates at 720+)
  • Cash reserves: Must show 6 months of payments saved

Quick Example: What You Need

Property price: $200,000 Down payment (20%): $40,000 Closing costs (3%): $6,000 Repairs/reserves: $10,000 Cash you need: = $56,000

💡 First-Timer Hack: Buy a duplex or triplex, live in one unit, rent out the others. You can use a regular mortgage with low down payment because it's your primary residence. This is called "house hacking" and it's genius.

The 1% Rule (Super Important)

This is the quick test to see if a rental property will make money. Monthly rent should be at least 1% of purchase price.

✅ Good Deal

$180,000
Purchase Price
$1,900/mo
Rent

Passes the 1% rule. Likely to cash flow positive!

❌ Probably Not

$250,000
Purchase Price
$1,800/mo
Rent

Fails the 1% rule. You'll probably lose money each month.

Your Monthly Expenses (Don't Forget These!)

  • Mortgage payment (principal + interest)
  • Property taxes
  • Insurance (landlord policy, not regular homeowner)
  • Maintenance (budget 1% of property value per year)
  • Vacancy (assume 8-10% of time empty)
  • Property management (if you hire someone: 8-10% of rent)
  • HOA fees (if applicable)

Finding the Right Property

Location, Location, Location

The #1 rule of real estate. Look for:

Good Neighborhoods

  • Low crime rates
  • Good schools (families pay more)
  • Near jobs and amenities
  • Growing, not declining

Property Features

  • 3 bed / 2 bath minimum (easiest to rent)
  • Off-street parking
  • Updated kitchen/baths
  • No major repairs needed

Research Rents First!

Before making an offer, check Zillow, Apartments.com, and Craigslist to see what similar properties rent for. Call a few property managers - they know the real numbers. Don't guess or use the seller's estimate.

Being a Landlord (The Reality)

This is where the work happens. You're running a small business now.

Your Main Jobs

  1. Find good tenants - Screen carefully! Check credit, income (3x rent), past landlord references, criminal background
  2. Collect rent - Use online payment systems (Venmo, Zelle, PayPal). Late fees in lease if not on time
  3. Handle repairs - Respond quickly to maintenance requests. Keep a list of reliable contractors
  4. Follow laws - Landlord-tenant laws vary by state. Know your rights AND tenant rights
  5. Keep records - Every expense, every repair, every communication. Tax time you'll thank yourself

Should You Hire a Property Manager?

DIY Landlord

If you live nearby, have time, and want to maximize profit.

Keep 100% of rent

Hire Manager

If you live far away, have a full-time job, or just want it hands-off.

Cost: 8-10% of rent

The Tax Benefits (A Big Deal!)

This is one reason why real estate is so popular. You get to deduct a LOT from your taxes.

What You Can Deduct

  • Mortgage interest
  • Property taxes
  • Insurance
  • Repairs and maintenance
  • Property management fees
  • Travel to check on property
  • Depreciation (this is HUGE - see below)

Depreciation (Free Money!)

The IRS lets you pretend your building wears out over 27.5 years. So a $200k house = $7,273 deduction per year, even though the property is probably gaining value. Talk to a CPA who specializes in real estate - they'll save you thousands.

(You do pay depreciation recapture tax when you sell, but it's still a great deal overall)

Common Beginner Mistakes

❌ Not Budgeting for Vacancies

Your property WILL be empty sometimes. Between tenants, during repairs, etc. Budget for 1-2 months vacant per year.

❌ Buying in the Wrong Location

Cheap price doesn't mean good investment. High-crime areas = constant turnover, property damage, stress. Pay more for a better neighborhood.

❌ Skipping the Inspection

ALWAYS get an inspection, even if you're handy. Hidden problems (foundation, roof, electrical) can kill your profits.

❌ Being Too Emotionally Attached

This is business, not your dream home. If the numbers don't work, walk away. Another deal will come along.

Ready to Start Building Wealth?

Let's discuss investment opportunities and run the numbers together.

Talk To Your Agent