How to Buy Your First Rental Property (Without Getting in Over Your Head)

Thinking about buying your first rental property? Maybe you’ve heard friends talk about theirs, want to diversify your investments, or are just looking for some practical tips to get started.

Buying a rental property might be one of the smartest wealth-building moves you make.

We bought our first rental 15 years ago, and since then, we've bought and sold six others—across multiple U.S. states and even in Europe. Each property had its own set of challenges (our Italian condo could be a whole book by itself), but every one of them has played a key role in our long-term wealth-building and retirement strategy.

In this post, I’ll share our story and the must-know tips that can help you confidently buy your first rental, avoid common mistakes, and start building wealth through real estate.

Our Rental Property Acquisitions: The Backstory

When we bought our first rental, we weren’t real estate experts. We were just regular people looking for a property with long-term equity growth in mind.

Over time, our strategy evolved. While equity was our original focus, cash flow quickly became just as important. And like many investors, we've found ourselves shifting priorities from one deal to the next depending on the market and life stage.

A solid rental property can be a powerful way to build passive income and long-term wealth outside your 9-to-5. But a bad property can just as easily turn into a money pit.

For our first purchase, we dove headfirst into a major construction project. Would I recommend that route to a first-time rental buyer? Absolutely not. Start small and work your way up to rehab projects—unless you’ve got a tool belt and are ready to earn your sweat equity.

Later properties we purchased needed moderate updates, but we approached them with a clear budget and strategy. We learned to make upgrades based on rental goals—not personal taste. We’ve bought everything from estate-sale homes needing modern upgrades to turnkey properties... that ended up needing a new roof two months later.

Not trying to scare you off—just setting realistic expectations. The tips below will help you avoid common financial pitfalls and protect your cash flow and equity growth.

After 15 years in this game, here’s what we’ve learned—and what we wish we knew when we started. 

1. Know Your Budget (Beyond Just the Purchase Price)

Before you start browsing listings, get clear on what you can truly afford—not just the sticker price.

• Down payment: Most lenders require 20% down on investment properties. If cash flow is your goal, you may even want to put down more.

• Closing costs: These usually range from 1–5% of the purchase price, depending on your area.

• Improvements: Get quotes on upgrades before closing. Ask your realtor for ballpark costs during the pre-buying phase.

• Monthly cash flow: Compare projected rental income with your monthly mortgage, taxes, insurance, and maintenance. Investment property loans often come with higher interest rates—usually around 0.5% more than a primary home loan.

• Slush fund: Always set aside cash for repairs, vacancies, or unexpected expenses.

• Pre-approval: Work with a lender who understands investment properties and get pre-qualified before you shop.

💡 Need help running the numbers? Don’t guess—book a call with us. We’ll walk through the math with you, or you can run your own using an online rental property calculator. 

2. Choose the Right Location

Real estate is hyper-local. Not every “hot market” is ideal for rentals, so research is key.

• Check local rental demand and vacancy rates

• Compare average rents to your expected expenses

• Consider neighborhood trends, schools, job growth, and safety

🏡 Too expensive to buy a rental where you live? Consider out-of-state markets.

Two great tools for market research:

• RealWealth.com  – Excellent for turnkey rentals and market insights (no affiliation)

• AirDNA.co  – Ideal for analyzing short- and mid-term rental potential

We also follow a personal rule: never buy a property sight unseen. Even if it’s just the neighborhood—go see it. The vibe of a rental area can literally change at the next stop sign, school district, or railroad track, and that can impact vacancy rates. 

3. Define Your Investment Strategy

Ask yourself: what’s the goal—cash flow now or equity growth over time?

Did you say both? Ha—same here. But that's the unicorn.

• Cash-flow properties often generate more monthly income

• Appreciation-focused properties tend to build wealth slowly through value growth

Whether you're targeting:

• Short-Term Rentals (STRs) like Airbnbs

• Mid-Term Rentals (MTRs) for traveling professionals

• Long-Term Rentals (LTRs) for stable, monthly income

Make sure your purchase aligns with your financial and lifestyle goals.

📊 Not sure which rental type is right for you? We can help analyze the numbers before you buy. 

4. Build the Right Team

Real estate is a team sport—and your first deal will go much smoother if you have the right people in your corner.

• Lender: Choose one who’s experienced with investment property financing.

• Real Estate Agent: Work with someone who knows rental markets and tenant demand.

• Tax Advisor: Once you go beyond simple W-2 income, it’s time to bring in a tax professional who understands real estate deductions, depreciation, and compliance.

A great team helped us move fast and avoid problem properties—especially in competitive markets.

5. Consider Property Management (Even If You’re Local)

Managing a rental involves a lot more than just collecting rent. Think tenant screening, maintenance calls, lease enforcement, and emergency repairs.

Consider hiring a property manager if:

• The rental is not near where you live

• You don’t have time to manage tenant requests or repairs

• You want a more passive investment

We’ve done both—self-managing and hiring property managers. Managing your own rental can save money if everything goes smoothly. But from our experience, self-managing remotely is tough—for both you and your tenants.

Even now, with some of our rentals nearby, hiring a property manager has been worth every penny. It saves time, reduces stress, and improves tenant satisfaction.

💸 Expect to pay 8–10% of monthly rent for property management, plus a tenant placement fee (typically one month’s rent). 

Final Thoughts: Is Real Estate Right for You?

Let’s be honest—real estate investing isn’t for everyone. But if you’re serious about building wealth, it’s one of the most effective tools available.

In fact, real estate is a common denominator in nearly every wealthy investor’s portfolio.

And it can be part of yours, too.

If you’re feeling overwhelmed or unsure how to start, focus on the numbers. Whether you're considering an STR, MTR, or LTR, we can help with both the pre-buying analysis and the tax compliance after the purchase.

🚨 Warning: After your first purchase, don’t be surprised if you catch yourself scrolling Zillow during your morning coffee, dreaming about the next one. 

Ready to Run the Numbers on Your First Rental?

If you're ready to take the next step—or just want help analyzing potential deals—book a call  with us.

We’ll help you stay compliant, minimize taxes, and build long-term wealth through smart, strategic real estate investing.