How to Buy Your First Rental Property in 2026 (Step-by-Step Guide!)

[00:00] Building generational wealth doesn't

[00:01] have to be a dream. It can be a reality

[00:03] through rental real estate investing.

[00:05] You see, real estate allows you to

[00:06] leverage financing. You can take

[00:08] advantage of depreciation. Plus, you get

[00:10] to grow your net worth steadily over

[00:11] time. Who wouldn't want that? So, today

[00:14] I'll guide you step by step on exactly

[00:16] how to find, how to finance, and how to

[00:18] secure your first rental property so you

[00:20] can start building wealth in your real

[00:21] estate empire today. Without further

[00:23] ado, let's dive in.

[00:28] All right, guys. Step number one is we

[00:30] have to prepare your down payment. We

[00:33] can't operate out of order and we can't

[00:35] neglect how much money is required to

[00:37] invest in rental real estate. Buying a

[00:39] rental property usually requires a

[00:41] substantial down payment. For most

[00:43] investment properties, lenders will ask

[00:45] for 15 to 20% of the purchase price as a

[00:48] minimum down payment. That means if

[00:50] you're looking at a $200,000 property

[00:52] you should plan to put down $30 to

[00:53] $40,000. Yes, it's a significant amount

[00:56] of money and for many people it can feel

[00:58] like this big barrier to entry. However

[01:01] don't let that discourage you. I don't

[01:02] want it to discourage you. This is part

[01:04] of why real estate tends to attract

[01:06] people who are disciplined about saving

[01:08] money and managing their finances. If

[01:10] you don't have this much money saved

[01:11] yet, consider focusing first on building

[01:13] a solid emergency fund and increasing

[01:15] your savings. This will give you the

[01:17] comfortability to invest. Now, you can

[01:19] start by putting aside a fixed

[01:21] percentage of your income every month

[01:23] cutting any unnecessary expenses, of

[01:25] course, and even taking on side hustles

[01:26] to accelerate your savings. This is a

[01:28] great way to get started. If your cash

[01:30] is limited, there are alternatives. One

[01:32] option is an FHA loan, which allows you

[01:35] to put down 3 12% as a down payment, but

[01:38] with the requirement that you will live

[01:39] in the property for at least 12 months.

[01:42] Many investors start with multi-unit

[01:44] properties like a duplex, triplex, or a

[01:46] quadplex. Using the FHA loan, they live

[01:49] in one unit while renting out the

[01:52] second, third, or fourth unit. Then they

[01:54] move out that one unit after their

[01:56] one-year requirement, turning all units

[01:58] into rental income. This approach is

[02:01] often referred to as house hacking and

[02:03] is a great way to start investing with

[02:04] minimal cash. Now, keep in mind that FHA

[02:07] loans require mortgage insurance, which

[02:09] adds to your monthly costs. There are

[02:11] also other creative financing strategies

[02:13] such as partnering with investors. You

[02:15] can also look into seller financing

[02:16] shout out Pace Morby, or using personal

[02:19] lines of credit. But for beginners

[02:21] focusing on either a 15 to 20% down

[02:23] payment or an FHA loan is the simplest

[02:25] route. So that's what I'm focusing on

[02:27] for this video today. But here's a pro

[02:29] tip. Even if you're going the

[02:30] traditional 15 to 20% route, please make

[02:32] sure you always save for closing costs

[02:35] moving expenses, and even potential

[02:37] repairs right when you close escrow. A

[02:39] good rule of thumb is to have an

[02:40] additional 3 to 5% of the property's

[02:42] value set aside for these types of costs

[02:43] that can just come up. Now, let's move

[02:45] on. Step number two is building your

[02:48] credit. Your credit score will heavily

[02:50] influence the mortgage rates that you

[02:51] can get and ultimately the success of

[02:53] your investment. The higher your credit

[02:55] score, the lower your interest rate

[02:56] which translates to smaller monthly

[02:58] payments and better cash flow. Baby, if

[03:00] your credit score is below 700, it might

[03:03] be worth taking the time to improve it

[03:05] before even applying for a mortgage

[03:07] loan. Here's what I want you to do.

[03:09] Start by paying down highinterest debt

[03:11] first, making sure all bills are paid on

[03:14] time and then fix any errors on your

[03:16] credit report. I want you to ideally aim

[03:20] for a score of 730 or higher before you

[03:23] apply for a loan. This isn't just about

[03:25] getting approved or Carlton's rules.

[03:27] It's about getting approved under terms

[03:28] that make your investment profitable for

[03:30] you. That's what you care about, right?

[03:31] Let's go over an example. Let's say

[03:33] you're buying a $200,000 duplex with a

[03:35] credit score of 680 and the bank offers

[03:38] you a 6% interest rate. If you approve

[03:40] your credit score to 740, you might get

[03:43] a 5% interest rate. And that 1%

[03:45] difference could save you over $100 per

[03:47] month, which adds up to thousands per

[03:49] year. That extra cash that you can

[03:52] reinvest or save for future property

[03:54] improvements allows for you to build

[03:56] wealth quicker. Keep in mind, real

[03:57] estate investing is a long-term game.

[03:59] It's not a short-term game unless you're

[04:01] a flipper. Starting with good credit

[04:02] sets you up for better deals, higher

[04:05] leverage, and lower costs. This is how

[04:07] real wealth is built in real estate.

[04:09] Now, let's move on to step number three.

[04:11] Step number three is talking with the

[04:13] lenders. Before you officially apply for

[04:15] a mortgage, it's smart to speak with

[04:16] lenders to understand how much you can

[04:18] qualify for. Lenders love this area of

[04:20] helping you. It's the pre-dating stage

[04:23] before they get paid to actually draw

[04:24] out a loan for you. At this stage

[04:26] they're gathering information and you're

[04:28] providing information. You're not

[04:29] committing to anything. So, I want you

[04:30] to avoid hard inquiries for now as they

[04:33] can slightly impact your credit score. I

[04:35] do want you to provide your income. I do

[04:36] want you to share your debts and credit

[04:38] score to lenders and ask for what's

[04:41] called a preliminary mortgage estimate.

[04:43] This gives you an idea of the loan

[04:45] amount you might qualify for, your

[04:47] potential interest rate, and estimated

[04:48] monthly payments. But here's where you

[04:50] have to do things right. You have to be

[04:53] honest. And throughout this process

[04:55] when you're sharing your financial

[04:56] details, lenders can only give accurate

[04:58] estimates if they have a complete

[05:00] picture of your financial situation. You

[05:02] do not have to ego flex with a mortgage

[05:04] lender. You don't own anything yet. So

[05:06] this is where you need to be smart and

[05:08] strategic. You should ask multiple

[05:10] lenders for estimates. Don't only

[05:11] approach one. Different lenders have

[05:13] different underwriting guidelines. And

[05:15] talking to multiple will help you find

[05:17] the most favorable terms. Don't forget

[05:20] you have to ask about lender fees. You

[05:22] have to ask about closing cost and are

[05:25] there any incentives for first-time

[05:27] investors that your mortgage lender

[05:29] could be providing. You can even request

[05:31] a breakdown of how each lender

[05:33] calculates your monthly payments to

[05:35] better compare options for yourself.

[05:37] Getting this information early will give

[05:38] you a realistic picture of what type of

[05:40] properties that you can afford. It also

[05:42] helps you avoid falling in love with a

[05:43] property that's out of your financial

[05:45] reach like many people do early on when

[05:47] they shop for real estate. Guys, having

[05:49] a clear understanding of your borrowing

[05:51] power allows you to make more confident

[05:53] and strategic decisions when you're

[05:54] shopping for your ideal investment.

[05:55] Let's go to step number four. Deciding

[05:57] on the type of property. Now that you

[05:58] know your budget, it's time to decide

[06:00] what type of property you want to buy.

[06:02] Options include single family homes. You

[06:04] got duplexes. You can go triplexes. You

[06:06] can even go quadlexes. You can look at

[06:08] condos and even a small apartment

[06:11] building. When you're deciding, consider

[06:13] these factors. Budget number one. If I

[06:15] go multi-unit properties like triplexes

[06:17] or quadlexes, that's going to be more

[06:19] money up front. Obviously, you're buying

[06:20] more units. If you're just starting, a

[06:22] duplex or a single family home might be

[06:25] more manageable. Next is HOA fees. What

[06:27] do HOA fees look like on the property

[06:29] you're potentially about to buy? You

[06:31] want to avoid condos as a beginner. I'm

[06:32] just being honest. Higher HOA fees can

[06:34] eat into your cash flow, and rules

[06:36] around renovations can limit your

[06:38] ability to improve the property over

[06:40] time. Please make sure that you review

[06:42] any HOA restrictions carefully before

[06:44] committing. Next is looking at your

[06:46] local market. I want you to speak with

[06:48] local realtors who specialize in

[06:50] investment properties. They know which

[06:52] neighborhoods offer the best rental

[06:53] potential and property appreciation. So

[06:56] what you're going to do is you're going

[06:57] to research trends like what are vacancy

[06:59] rates in this city? What is the rent

[07:01] growth? Is it the rent growing at 3% 5%

[07:04] annually? And what are the nearby

[07:05] amenities to ensure strong long-term

[07:08] returns? I want to know what people do

[07:09] in this neighborhood. For example, if

[07:11] you live in a city with strong rental

[07:13] demand for small apartments, a duplex or

[07:15] a triplex might be perfect. If you're in

[07:17] a suburban area where single family

[07:19] homes rent well, that might be the

[07:20] better option for you. But you have to

[07:22] remember the goal as a beginner is to

[07:23] start small and have something that's

[07:24] manageable. You can always scale to

[07:26] larger properties once you have

[07:28] experience and cash flow. Taking a

[07:29] thoughtful, informed approach now will

[07:32] save you headaches later and set you up

[07:34] for long-term success. Step number five

[07:36] is to conduct your initial property

[07:38] research. This is where the fun starts

[07:40] to begin researching properties to find

[07:41] the best investment opportunities. But

[07:43] if you skip steps one through four, you

[07:45] might end up chasing properties that

[07:47] don't fit your financial situation. So

[07:49] when you start your research, look for

[07:50] properties that are cash flow positive

[07:53] meaning the monthly rental income

[07:55] exceeds the property's monthly expenses.

[07:57] Expenses include your mortgage payments

[07:59] and property taxes and insurance and

[08:01] utilities and maintenance costs. So, you

[08:04] need cash flow after all of those costs.

[08:06] So, here's an example of a cash flow

[08:08] positive property. A duplex rents for

[08:10] $2,000 per unit per month. The total

[08:12] monthly income is $4,000. The monthly

[08:14] mortgage and expenses are $3,500.

[08:18] That leaves $500 of positive cash flow.

[08:21] Positive cash flow ensures that you're

[08:23] making money every single month, even

[08:25] before accounting for appreciation or

[08:27] equity buildup. I highly recommend only

[08:30] investing in properties that are cash

[08:31] flow positive. Please don't get a

[08:32] property that breaks even and you're

[08:34] like, I'm getting tax benefits. It's

[08:36] just so much easier that way in the long

[08:38] scheme of things. Here are some other

[08:39] tips. Avoid properties needing major

[08:41] renovations. You're not in the business

[08:43] of renovating everything starting out.

[08:44] You're in the business of wanting to

[08:45] learn cosmetic updates like paint or

[08:48] flooring. That's fine. We'll we'll live

[08:49] with that. But avoid homes with

[08:51] structural problems or any expensive

[08:53] repairs like roof replacements. We're

[08:55] not in the business of replacing roofs

[08:57] right now. Consider the neighborhood. I

[08:59] want you to look for low crime areas

[09:01] good schools, parks, and amenities. You

[09:03] are not looking for areas where your

[09:05] favorite rapper grew up, okay? You are

[09:07] trying to attract renters. Use online

[09:10] tools like Zillow, Rento Ometer, and

[09:13] mortgage calculators to estimate rental

[09:15] income and monthly cost. You should have

[09:17] an Excel sheet based off the city and

[09:20] state that you are looking to invest in

[09:21] that has the mortgage calculator that

[09:23] estimates rental income and monthly

[09:25] costs. These tools are extremely

[09:26] beneficial and can make the process of

[09:28] finding good properties infinitely

[09:30] easier. Also, keep in mind negotiations

[09:33] can also improve your returns. If a

[09:35] property is close to being cash flow

[09:36] positive, you can make a lower offer to

[09:38] the seller. Many sellers are open to

[09:40] negotiations, especially if the property

[09:41] has been on the market for a little

[09:42] while. And step number six, get approved

[09:45] by the lender. Once you have a property

[09:47] in mind, it's time to get preapproved.

[09:49] Yes, I know you knew this, but this is

[09:50] different from speaking with a lender.

[09:51] Pre-approval involves a hard credit

[09:53] inquiry and a detailed evaluation of

[09:55] your financial situation. So, the lender

[09:57] will review your credit score. They'll

[09:58] 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.