Real Estate Investing
Investing in Rental Property for Beginners: 6 Steps to Start Building Wealth

Investing in Rental Property for Beginners: 6 Steps to Start Building Wealth

Are you a beginner looking to start investing in rental property? This blog provides you with all the information you need to get started on your journey to real estate investing success. Learn about the steps, tips, and strategies to help you make smart investment decisions.

6 Steps For Rental Property Investing

So you decided you want to start rental property investing. Your first rental property can be exciting! It is a huge step towards building long-term wealth and financial security. But, it can also be a difficult and intimidating process, especially if you’re new to real estate investing! Here are some tips to help you prepare to purchase your first rental property.

Step 1: Your Mindset and Goals

Desk with phone, coffee, pen, plant and a white page saying" dream big, set goals, take action." Tips for  Investing in rental property for beginners

First things first, before you start looking and get into buying a rental property, it’s important to have a growth mindset. This is because real estate investing has many ups and downs. The market will not always be in your favor. Having a mindset that helps you through the hard parts, will help you overcome the many challenges that investing in rental property brings.

Secondly, you want to think about your goal with real estate investing. What are the goals you would like to accomplish? Do you want to build multiple sources of income to gain financial freedom? Maybe you want to go big and build a large investment portfolio and build large wealth. Either way, take the time to think about how much money you want to make, how long you want to hold the property, and what your overall investment strategy is. This way you have a clear path to take and it will help you keep on track.

Step 2: Get Your Finances In Order:

Couple sitting with a financial advisor analyzing their budget so they can start investing in rental property

Another tip for investing in rental property for beginners, is to analyze your finances. Real estate investing requires a significant amount of capital, so it’s important to get your finances in order before you start looking for properties. Consider meeting with a financial planner or advisor to help you create a budget, pay down debt, and save for a down payment. You want to start taking care of any potential issues with your credit score or debt-to-income ratio, way in advance to avoid delays during closing.

Additionally, during this step you want to start saving for the downpayment, closing costs and other fees that will be required for the property you may want to buy. You will also, want to ensure you are able to pay the mortgage on your own or have a fund for it in case of vacancies.

Finding a Loan to buy a rental property

Rental Property Investing

Before you start looking to buy a rental property, you will need to secure financing. There are many options out there and it may seem overwhelming. There are many loans out there that have different requirements. This is why it is important to work on your credit score and debt-to-income ratio, to give you the best loan options. Consider working with a lender who specializes in investment properties and be prepared to provide documentation of your income, assets, and credit history.

Here are a few loans that you can look into to see if you qualify:

4 Common Loans to Buy a Property

Loan TypePerfect for:Requirements
FHA First-time homebuyersCredit score: 580<,
DTI <43%
Downpayment: 3.5%+
VA Home LoanActive duty and veteransCredit score: Depends on lender but typically 600<
DTI: <41%
Downpayment: 0%+
Fannie Mae’s 5% Down LoanFor 2-4 multifamily propertiesCredit Score: 620<
DTI: <45%
Downpayment: 5%+
Conventional LoanAnyCredit Score: 620<
DTI: <45%
Downpayment: 3%+
Note: Majority require you to occupy the property for at least 1 year.

At this step, you will see how much your mortgage payment is, the closing costs, and any other fees. Therefore, you should carefully read through the loan details and ensure you understand everything before signing on that dotted line. Note: There are creative financing options, like hard money and private loans, but we will cover those in a future blog.

Step 3: Find Your Strategy

Next, you want to find the strategy that will work for you. Real estate investing is a huge umbrella that includes several niches and strategies. Do you want to build multiple sources of income and receive cashflow via rental properties? Or maybe you want to buy distressed properties, rehab them and sell then for a profit (fix-and-flips). How would you like to acquire these properties? What type of properties would you like to invest in? There are so many questions that you will need to address to understand what type of strategy works for you. Therefore, take some time to understand your goals and preferences to help you pick a real estate investing strategy before buying your first rental property.

Step 4: Learn How to Analyze a Market and Property

Rental Property Investing

When looking to get into investing in rental property, you need to learn how to analyze a market and the potential investment property. Analyzing means you take the time to research and crunch the numbers to ensure the market and property will be profitable.

Finding Your Market

Once you are ready to start looking for a property, one of the most important steps in preparing to purchase is to research the local real estate market. Conducting market research is crucial to ensuring that you will make a profit on your investment property. Therefore, look at the rental market and vacancy rates. How much rent can you charge in this market? Will it be difficult to find tenants, or does the vacancy rate show that you will find tenants easily. You also want to look at trends in property values to determine the best areas to invest in and what you can expect to pay.

How to Analyze a rental Property

Additionally, you want to understand how to analyze a rental property to ensure that it will be a profitable investment. This is usually done by calculating the cashflow of the property. There are many factors that you need to consider like:

  • Mortgage: Property Taxes, Interest rate, Insurance
  • Vacancies
  • Maintenance and repairs
  • Rental income

There are many tools out there like my Rental Property Calculator to help make these calculations quick and easy!

Download my Free Rental Property Calculator!

Excel spreadsheet How to Analyze a Rental Property for Cashflow

Step 5: Buying and Managing Your Property

Rental Property Investing

When looking to buy a rental property there are several real estate professionals you want to work with. Whether it is when you are at the buying stage or after purchasing your investment property. The world of real estate can get complicated, and you want to ensure to minimize your risk as a new real estate investor.

Who you need to buy a rental property:

Therefore, when buying a property you want to work with:

  • Real estate agent: Find a knowledgeable real estate agent to help you find the right rental property in the right market
  • Property Inspector: Find a detailed property inspector to help you catch an potential issues that a property may be hiding. You can use the findings to help negotiate the price down.
  • Lender: Find a lender that is willing to explain things to you. Some lenders are only after the commission. However, there are many great lenders that will educate you on the loan and help you find the best fit.

Who you need when managing your investment property

As a new real estate investor, you want to understand what all goes into managing your investment, when you buy a rental property. Will you manage the property yourself or hire a property manager? Here are a few people you will need on your team to help you manage your property.

  • Property Manager: If you want a more passive investment property, a Property Manager is who you need. They can charge up to 10% of the rental income.
  • Contractors: You will need several types of trusted contractors for any major fixes. For example, roofer, plumber or electrician.
  • Handyman: For general maintenance, a handyman is someone you need in your corner, unless you plan to conduct the maintenance yourself.
  • Real estate attorney: Hopefully, you will never need to use one, but you want a real estate attorney in your pocket for any legal issues,

Step 6: Have a Plan

Checklist for an action plan for real estate investing.

Finally, when you start investing in rental property, it is important to have a plan. I always suggest at minimum a 5-year plan. In this plan you want to include the steps and goals for real estate investing. This is where a new real estate investor, can fail. Many tend to have no plan for executing their real estate investing strategy and how they will grow. Therefore, create an action plan, as detailed as possible. Additionally, ensure that you review your plan periodically, and adjust accordingly.


Although, this is not a full comprehensive step-by-step, following these steps can help you get started as a new real estate investor. By doing your research, you can prepare to buy a rental property with confidence and start building wealth through real estate investing. The journey to your first investment property and to financial freedom awaits!

Start your real estate investing journey, and start building financial freedom! Click the banner to learn more!

Real Estate Investing for Beginners course
Home buying and real estate market tips with guest speaker Javier Vidana
Home Sweet Home: The Financial and Emotional Journey of Home Buying with Expert Javier Vidana

Home buying isn’t just a big financial step, but an emotional rollercoaster for the first time…

How to overcome self-doubt as a Latina entrepreneur with Rosie Arango
Ditching the Self-Doubt Mindset and Embracing our Unique Skills as a Latina Entrepreneur with Rosie Arango

It is time to ditch that self-doubt mindset as a Latina entrepreneur! Learn how to embrace your uniq…

Tax deductions are some of the tax benefits of real estate investing
The Tax Benefits of Real Estate Investing that can help You reduce Taxable Income

Want to understand the tax benefits of real estate investing and how you can maximize your returns b…

*This post contains affiliate links and I may earn a small commission when you click on the links at no additional cost to you. This helps us provide you with free content, like this blog! You can read my full disclaimer here: MoneyChisme Affiliate Links and Paid Advertisers Disclosure.

Leave a Reply

Your email address will not be published. Required fields are marked *