[0:00] Building generational wealth doesn't
[0:01] have to be a dream. It can be a reality
[0:03] through rental real estate investing.
[0:05] You see, real estate allows you to
[0:06] leverage financing. You can take
[0:08] advantage of depreciation. Plus, you get
[0:10] to grow your net worth steadily over
[0:11] time. Who wouldn't want that? So, today
[0:14] I'll guide you step by step on exactly
[0:16] how to find, how to finance, and how to
[0:18] secure your first rental property so you
[0:20] can start building wealth in your real
[0:21] estate empire today. Without further
[0:23] ado, let's dive in.
[0:28] All right, guys. Step number one is we
[0:30] have to prepare your down payment. We
[0:33] can't operate out of order and we can't
[0:35] neglect how much money is required to
[0:37] invest in rental real estate. Buying a
[0:39] rental property usually requires a
[0:41] substantial down payment. For most
[0:43] investment properties, lenders will ask
[0:45] for 15 to 20% of the purchase price as a
[0:48] minimum down payment. That means if
[0:50] you're looking at a $200,000 property
[0:52] you should plan to put down $30 to
[0:53] $40,000. Yes, it's a significant amount
[0:56] of money and for many people it can feel
[0:58] like this big barrier to entry. However
[1:01] don't let that discourage you. I don't
[1:02] want it to discourage you. This is part
[1:04] of why real estate tends to attract
[1:06] people who are disciplined about saving
[1:08] money and managing their finances. If
[1:10] you don't have this much money saved
[1:11] yet, consider focusing first on building
[1:13] a solid emergency fund and increasing
[1:15] your savings. This will give you the
[1:17] comfortability to invest. Now, you can
[1:19] start by putting aside a fixed
[1:21] percentage of your income every month
[1:23] cutting any unnecessary expenses, of
[1:25] course, and even taking on side hustles
[1:26] to accelerate your savings. This is a
[1:28] great way to get started. If your cash
[1:30] is limited, there are alternatives. One
[1:32] option is an FHA loan, which allows you
[1:35] to put down 3 12% as a down payment, but
[1:38] with the requirement that you will live
[1:39] in the property for at least 12 months.
[1:42] Many investors start with multi-unit
[1:44] properties like a duplex, triplex, or a
[1:46] quadplex. Using the FHA loan, they live
[1:49] in one unit while renting out the
[1:52] second, third, or fourth unit. Then they
[1:54] move out that one unit after their
[1:56] one-year requirement, turning all units
[1:58] into rental income. This approach is
[2:01] often referred to as house hacking and
[2:03] is a great way to start investing with
[2:04] minimal cash. Now, keep in mind that FHA
[2:07] loans require mortgage insurance, which
[2:09] adds to your monthly costs. There are
[2:11] also other creative financing strategies
[2:13] such as partnering with investors. You
[2:15] can also look into seller financing
[2:16] shout out Pace Morby, or using personal
[2:19] lines of credit. But for beginners
[2:21] focusing on either a 15 to 20% down
[2:23] payment or an FHA loan is the simplest
[2:25] route. So that's what I'm focusing on
[2:27] for this video today. But here's a pro
[2:29] tip. Even if you're going the
[2:30] traditional 15 to 20% route, please make
[2:32] sure you always save for closing costs
[2:35] moving expenses, and even potential
[2:37] repairs right when you close escrow. A
[2:39] good rule of thumb is to have an
[2:40] additional 3 to 5% of the property's
[2:42] value set aside for these types of costs
[2:43] that can just come up. Now, let's move
[2:45] on. Step number two is building your
[2:48] credit. Your credit score will heavily
[2:50] influence the mortgage rates that you
[2:51] can get and ultimately the success of
[2:53] your investment. The higher your credit
[2:55] score, the lower your interest rate
[2:56] which translates to smaller monthly
[2:58] payments and better cash flow. Baby, if
[3:00] your credit score is below 700, it might
[3:03] be worth taking the time to improve it
[3:05] before even applying for a mortgage
[3:07] loan. Here's what I want you to do.
[3:09] Start by paying down highinterest debt
[3:11] first, making sure all bills are paid on
[3:14] time and then fix any errors on your
[3:16] credit report. I want you to ideally aim
[3:20] for a score of 730 or higher before you
[3:23] apply for a loan. This isn't just about
[3:25] getting approved or Carlton's rules.
[3:27] It's about getting approved under terms
[3:28] that make your investment profitable for
[3:30] you. That's what you care about, right?
[3:31] Let's go over an example. Let's say
[3:33] you're buying a $200,000 duplex with a
[3:35] credit score of 680 and the bank offers
[3:38] you a 6% interest rate. If you approve
[3:40] your credit score to 740, you might get
[3:43] a 5% interest rate. And that 1%
[3:45] difference could save you over $100 per
[3:47] month, which adds up to thousands per
[3:49] year. That extra cash that you can
[3:52] reinvest or save for future property
[3:54] improvements allows for you to build
[3:56] wealth quicker. Keep in mind, real
[3:57] estate investing is a long-term game.
[3:59] It's not a short-term game unless you're
[4:01] a flipper. Starting with good credit
[4:02] sets you up for better deals, higher
[4:05] leverage, and lower costs. This is how
[4:07] real wealth is built in real estate.
[4:09] Now, let's move on to step number three.
[4:11] Step number three is talking with the
[4:13] lenders. Before you officially apply for
[4:15] a mortgage, it's smart to speak with
[4:16] lenders to understand how much you can
[4:18] qualify for. Lenders love this area of
[4:20] helping you. It's the pre-dating stage
[4:23] before they get paid to actually draw
[4:24] out a loan for you. At this stage
[4:26] they're gathering information and you're
[4:28] providing information. You're not
[4:29] committing to anything. So, I want you
[4:30] to avoid hard inquiries for now as they
[4:33] can slightly impact your credit score. I
[4:35] do want you to provide your income. I do
[4:36] want you to share your debts and credit
[4:38] score to lenders and ask for what's
[4:41] called a preliminary mortgage estimate.
[4:43] This gives you an idea of the loan
[4:45] amount you might qualify for, your
[4:47] potential interest rate, and estimated
[4:48] monthly payments. But here's where you
[4:50] have to do things right. You have to be
[4:53] honest. And throughout this process
[4:55] when you're sharing your financial
[4:56] details, lenders can only give accurate
[4:58] estimates if they have a complete
[5:00] picture of your financial situation. You
[5:02] do not have to ego flex with a mortgage
[5:04] lender. You don't own anything yet. So
[5:06] this is where you need to be smart and
[5:08] strategic. You should ask multiple
[5:10] lenders for estimates. Don't only
[5:11] approach one. Different lenders have
[5:13] different underwriting guidelines. And
[5:15] talking to multiple will help you find
[5:17] the most favorable terms. Don't forget
[5:20] you have to ask about lender fees. You
[5:22] have to ask about closing cost and are
[5:25] there any incentives for first-time
[5:27] investors that your mortgage lender
[5:29] could be providing. You can even request
[5:31] a breakdown of how each lender
[5:33] calculates your monthly payments to
[5:35] better compare options for yourself.
[5:37] Getting this information early will give
[5:38] you a realistic picture of what type of
[5:40] properties that you can afford. It also
[5:42] helps you avoid falling in love with a
[5:43] property that's out of your financial
[5:45] reach like many people do early on when
[5:47] they shop for real estate. Guys, having
[5:49] a clear understanding of your borrowing
[5:51] power allows you to make more confident
[5:53] and strategic decisions when you're
[5:54] shopping for your ideal investment.
[5:55] Let's go to step number four. Deciding
[5:57] on the type of property. Now that you
[5:58] know your budget, it's time to decide
[6:00] what type of property you want to buy.
[6:02] Options include single family homes. You
[6:04] got duplexes. You can go triplexes. You
[6:06] can even go quadlexes. You can look at
[6:08] condos and even a small apartment
[6:11] building. When you're deciding, consider
[6:13] these factors. Budget number one. If I
[6:15] go multi-unit properties like triplexes
[6:17] or quadlexes, that's going to be more
[6:19] money up front. Obviously, you're buying
[6:20] more units. If you're just starting, a
[6:22] duplex or a single family home might be
[6:25] more manageable. Next is HOA fees. What
[6:27] do HOA fees look like on the property
[6:29] you're potentially about to buy? You
[6:31] want to avoid condos as a beginner. I'm
[6:32] just being honest. Higher HOA fees can
[6:34] eat into your cash flow, and rules
[6:36] around renovations can limit your
[6:38] ability to improve the property over
[6:40] time. Please make sure that you review
[6:42] any HOA restrictions carefully before
[6:44] committing. Next is looking at your
[6:46] local market. I want you to speak with
[6:48] local realtors who specialize in
[6:50] investment properties. They know which
[6:52] neighborhoods offer the best rental
[6:53] potential and property appreciation. So
[6:56] what you're going to do is you're going
[6:57] to research trends like what are vacancy
[6:59] rates in this city? What is the rent
[7:01] growth? Is it the rent growing at 3% 5%
[7:04] annually? And what are the nearby
[7:05] amenities to ensure strong long-term
[7:08] returns? I want to know what people do
[7:09] in this neighborhood. For example, if
[7:11] you live in a city with strong rental
[7:13] demand for small apartments, a duplex or
[7:15] a triplex might be perfect. If you're in
[7:17] a suburban area where single family
[7:19] homes rent well, that might be the
[7:20] better option for you. But you have to
[7:22] remember the goal as a beginner is to
[7:23] start small and have something that's
[7:24] manageable. You can always scale to
[7:26] larger properties once you have
[7:28] experience and cash flow. Taking a
[7:29] thoughtful, informed approach now will
[7:32] save you headaches later and set you up
[7:34] for long-term success. Step number five
[7:36] is to conduct your initial property
[7:38] research. This is where the fun starts
[7:40] to begin researching properties to find
[7:41] the best investment opportunities. But
[7:43] if you skip steps one through four, you
[7:45] might end up chasing properties that
[7:47] don't fit your financial situation. So
[7:49] when you start your research, look for
[7:50] properties that are cash flow positive
[7:53] meaning the monthly rental income
[7:55] exceeds the property's monthly expenses.
[7:57] Expenses include your mortgage payments
[7:59] and property taxes and insurance and
[8:01] utilities and maintenance costs. So, you
[8:04] need cash flow after all of those costs.
[8:06] So, here's an example of a cash flow
[8:08] positive property. A duplex rents for
[8:10] $2,000 per unit per month. The total
[8:12] monthly income is $4,000. The monthly
[8:14] mortgage and expenses are $3,500.
[8:18] That leaves $500 of positive cash flow.
[8:21] Positive cash flow ensures that you're
[8:23] making money every single month, even
[8:25] before accounting for appreciation or
[8:27] equity buildup. I highly recommend only
[8:30] investing in properties that are cash
[8:31] flow positive. Please don't get a
[8:32] property that breaks even and you're
[8:34] like, I'm getting tax benefits. It's
[8:36] just so much easier that way in the long
[8:38] scheme of things. Here are some other
[8:39] tips. Avoid properties needing major
[8:41] renovations. You're not in the business
[8:43] of renovating everything starting out.
[8:44] You're in the business of wanting to
[8:45] learn cosmetic updates like paint or
[8:48] flooring. That's fine. We'll we'll live
[8:49] with that. But avoid homes with
[8:51] structural problems or any expensive
[8:53] repairs like roof replacements. We're
[8:55] not in the business of replacing roofs
[8:57] right now. Consider the neighborhood. I
[8:59] want you to look for low crime areas
[9:01] good schools, parks, and amenities. You
[9:03] are not looking for areas where your
[9:05] favorite rapper grew up, okay? You are
[9:07] trying to attract renters. Use online
[9:10] tools like Zillow, Rento Ometer, and
[9:13] mortgage calculators to estimate rental
[9:15] income and monthly cost. You should have
[9:17] an Excel sheet based off the city and
[9:20] state that you are looking to invest in
[9:21] that has the mortgage calculator that
[9:23] estimates rental income and monthly
[9:25] costs. These tools are extremely
[9:26] beneficial and can make the process of
[9:28] finding good properties infinitely
[9:30] easier. Also, keep in mind negotiations
[9:33] can also improve your returns. If a
[9:35] property is close to being cash flow
[9:36] positive, you can make a lower offer to
[9:38] the seller. Many sellers are open to
[9:40] negotiations, especially if the property
[9:41] has been on the market for a little
[9:42] while. And step number six, get approved
[9:45] by the lender. Once you have a property
[9:47] in mind, it's time to get preapproved.
[9:49] Yes, I know you knew this, but this is
[9:50] different from speaking with a lender.
[9:51] Pre-approval involves a hard credit
[9:53] inquiry and a detailed evaluation of
[9:55] your financial situation. So, the lender
[9:57] will review your credit score. They'll
[9:58] review your income and employment
[10:00] history, but then they'll start looking
[10:01] at your debt to income ratio. They'll
[10:03] look at the assets that you currently
[10:04] have. They'll look at your reserve
[10:05] accounts and the property's rental
[10:07] income potential. They may also ask for
[10:09] recent tax returns. They may say, "Hey
[10:11] I want to see your bank statements to
[10:12] verify how long has cash been seasoning
[10:15] inside of your checking account." and
[10:16] they'll ask for any documentation of any
[10:19] other income source to get a complete
[10:21] picture of your financial health. This
[10:23] can include your Robin Hood account.
[10:25] Preapproval gives you a definite idea of
[10:28] how much you can borrow and under what
[10:31] terms. But what it does for you is it
[10:33] signals to sellers that you're a serious
[10:34] buyer, which can strengthen your offer
[10:37] when you go to put down an offer.
[10:39] Additionally, having that preapproval
[10:41] it speeds up the closing process once
[10:43] your offer is accepted, giving you an
[10:45] advantage in competitive markets. Step
[10:48] number seven is to make an offer. Now
[10:49] that you're preapproved, you can start
[10:51] making offers. You can work with a
[10:52] knowledgeable real estate agent who
[10:53] understands the investment market. A
[10:55] good agent can identify the best deals
[10:57] before they even hit the market. To be
[10:58] honest with you, they should be
[10:59] contacting you, telling you, "Hey, I
[11:00] have an offmarket deal. I would love to
[11:02] get you over here to check it They can
[11:04] also advise on competitive yet
[11:06] profitable offers and help structure
[11:08] offers contingent on inspections, for
[11:11] example. Always include contingencies
[11:13] for inspection and financing. You'll
[11:15] learn this over time. These protections
[11:18] allow you to back out and renegotiate if
[11:20] issues arise. So, please take the time
[11:22] to carefully analyze each property's
[11:24] potential return on investment before
[11:25] submitting an offer. And please don't
[11:27] rush the offer process. It's better to
[11:29] wait for the right property than to
[11:30] overpay or buy a property that just
[11:31] doesn't fit your investment goals. We've
[11:34] made it to step number eight. You're
[11:35] going to complete the inspections. Once
[11:37] your offer is accepted, schedule
[11:39] inspections immediately. Do not delay
[11:41] escrow. Inspections reveal hidden
[11:43] problems like water damage, mold, or
[11:44] structural issues. Knowing the repair
[11:46] cost upfront can save you thousands of
[11:48] dollars or help you back out of the
[11:50] deal. A thorough inspection can also
[11:52] uncover maintenance concerns that might
[11:54] not be obvious, such as outdated
[11:56] electrical systems, plumbing issues, or
[11:59] roofing problems that could become
[12:00] costly down the road. If significant
[12:02] issues are found, you can request the
[12:04] seller to fix them. Ask for a price
[12:06] reduction, or even just walk away from
[12:08] the deal if the issues are too much of a
[12:10] problem. So, this is why I always tell
[12:12] new investors, never skip this step.
[12:14] Even experienced investors make mistakes
[12:16] when they ignore inspections. It's
[12:18] better to address potential problems
[12:20] early than face unexpected expenses
[12:23] after closing. Additionally, inspection
[12:25] reports can provide valuable leverage in
[12:28] negotiations and help you plan future
[12:29] renovations. This is how you can be
[12:31] strategic as you're building a business
[12:33] ensuring your investment remains
[12:35] profitable. Step number nine, let's
[12:37] close the deal. Closing is the final
[12:39] step. It involves signing documents
[12:41] transferring funds, paying closing
[12:42] costs, and eventually officially taking
[12:45] ownership. After closing, you can make
[12:46] renovations if needed. You can also list
[12:48] the property for rent on Zillow, Red
[12:50] Fin, Trullia, and start generating
[12:52] income. Then it's time to start
[12:54] leveraging tax benefits. I'm talking the
[12:56] big ones we talk about on this channel
[12:58] depreciation, mortgage interest
[13:00] deductions, and operating expense
[13:01] deductions, like having a management
[13:02] company that you set up that manages the
[13:04] rental property. Pretty smart, huh? Now
[13:06] owning a rental property isn't just
[13:08] about cash flow. It's also a strategic
[13:10] tax move. I'm sure you knew that. Real
[13:12] estate offers deductions that can reduce
[13:14] your taxable income significantly. If
[13:15] you want to learn a little bit more
[13:16] about the tax benefits of real estate, I
[13:18] put together a whole video for you. You
[13:20] don't even have to worry. It's right
[13:21] here. Just check it out. But the bottom
[13:22] line is is buying your first rental
[13:24] property is a big step, but with careful
[13:27] planning and the right strategy, it's
[13:28] entirely achievable. Everybody should
[13:30] own real estate if they believe that
[13:32] it's the right type of investment for
[13:34] long-term growth. So, I want you to
[13:35] start by saving for your down payment
[13:37] today. I want you to focus on improving
[13:39] your credit as we head into 2026. I want
[13:41] you to start researching the market and
[13:42] working with professionals who know the
[13:44] investment space, not ones that just
[13:46] tell you that would be a great idea for
[13:48] you to start investing. If you follow
[13:49] these steps, preparing financially
[13:50] securing the right financing, finding
[13:52] the right property, protecting yourself
[13:53] through inspections, you'll be well on
[13:55] your way to becoming a successful real
[13:56] estate, investor., All right,, everyone.
[13:58] That's all I got for today's video. I
[13:59] hope this video helped you understand a
[14:01] little bit, more, about, the, process, that
[14:03] goes into buying your first investment
[14:04] property. If you loved today's video, do
[14:06] something for me. Like, comment, let me
[14:08] know if you already own rental real
[14:09] estate and if you've done a cost
[14:10] segregation study. And be sure to check
[14:12] out our channel and our live events. We
[14:14] will be happy to help you get into your
[14:15] first investment property. My name is
[14:17] Carlton Dennis. Thank you so much for
[14:18] subscribing to our channel today. I look
[14:19] forward to seeing you on the next video.
[14:21] Cheers.