How Millennials Can Buy Their First Rental Property

Disclosure: This post contains affiliate links. If you click through a link and make a purchase, it will earn me a small commission, at no additional cost to you! See our disclaimer for details.

You’ve heard about real estate investing, but what is it?

Rental investing has always been an amazing option for passive income, but only has recently become popular among younger adults. How can you buy your first rental property?

Historically, rental property investing has been a smart way that the rich maintain and growth their wealth.

Yet it is becoming far more simple and affordable to get into this unique market and make passive income gains!

Now, before we begin, do understand that everyone has different experiences with any and every type of investing. There is always risk.

Rental investing can be very successful, helping people to quit their 8-5 jobs and live a financially free life. Like any investment, it isn’t guaranteed.

What’s exciting is that getting prepped for purchasing your first property, to start earning passive income, isn’t as hard as you’d think!

We compiled the top tips about how to prepare and save up for your first rental investment!

If you have any other tips, we’d love to see you comment below the post! Let’s help everyone on their financial journey!

Learn about our first rental investment here!

FREE RENTAL INVESTING COURSE

Get free access to articles and videos and learn everything you need to grow wealth as a new rental investor!

i'M READY TO LEARN!

8. Establish Your Spending and Saving Habits

Rental investing does take a bit of capital ahead of time.

The first place to start, if you plan to one day purchase your first property, is to manage your money!

Sounds simple enough, but it’s a serious concept.

Too many of us are spontaneous spenders. Many like to live up to the Joneses down the block.

Millennials are at a unique point in time where they may not have enough money to buy a property and afford a nice home for themselves.

But, there are good chances you can afford to purchase a small renal property and live in a smaller home.

As in, by accepting and fully embodying a minimalist or frugal lifestyle, affording your first few rental properties will be extremely easier!

It’s easy to say but difficult to do.

That’s why it’s important to start out now. What’s great is that you can do this while working on the following steps!

Get yourself a free net worth tracker, begin a budget, and watch your spending. It can take a few months to prep and establish your habits, but it will be well worth it down the road!

If you are a reader, there are some popular resources for learning about budgeting and changing your habits with money. Check out the books section of our blog for tons of books!

7. Get Everyone on Board

Becoming a rental investor can be a huge commitment.

It can be life-changing for your family (whether you’re newly married, live with roommates, or still live at home), which is why this is the next step to take to prepare for your first property!

When you decide you want to work toward your first purchase, and you begin personal finance management (budgeting and saving), you will change. Your views about money will transform!

If you live with another individual, a spouse, or if you have a family, it is important to not keep your financial goals to yourself. You should have open discussions with your significant other about your ideas.

Some ways to discuss rental investing:

Have monthly budgeting meetings with your spouse/significant other
Teach your kids about money and spending
Discuss retirement goals with your spouse/significant other and establish a plan to learn how to reach them

Your kids don’t need to understand what you’re doing regarding your future investments, but by teaching them about money, it will be a motivational tool to stay on track with your own budgeting and saving.

6. Fully Understand Your Current Financial Situation

When you’re ready to budget, the next step is to discover your net worth!

Our favorite way is through a free app called Personal Capital.

Through this app, both on desktop and your phone, you can watch your budget, analyze your spending, discover what it will take to retire at a certain age, and learn about your personal investments.

Check out our detailed review of this app here!

It is important to learn about your net worth so you can start out budgeting and prepping for your home with a full understanding of your current financial situation.

It’s easy to ignore your debt, liabilities, and loans! You may feel ashamed or want to ignore it.

However, purchasing a home will only add to your debts! This isn’t necessarily a bad thing, if done correctly.

The whole idea is to watch your spending habits, learn about your cashflow, understand your investments (or learn about what you want to invest in), and prepare for your financial journey.

Rental investing is only one of many tools to reach retirement sooner. With Personal Capital, you’ll be able to see all of your investments and money combined, and analyze how you can continue to work toward financial freedom!

5. Get Rid of Debt First

Now that you’ve looked at your financial situation, and have started analyzing your personal financial situation, it is important to establish a plan of how to rid of your debt.

There are countless ways, from printables, to checklists and cash envelopes.

It isn’t required to rid of all your debts before investing in rental properties, but important to consider how much more debt will be added when you begin!

To minimize future stress, it is recommended to use a method to pay off your small debts. Credit cards, small loans, IOU’s, etc.

Some popular methods to debt reduction include:

Using a debt snowball
The debt avalanche method

Of course you may be wanting to find your first property now. Maybe your coworker or cousin has been talking about their growing portfolio of investments, and you feel left behind.

Don’t worry. It is critical that you don’t rush into this!

By building up your habits and ridding of debt first, you’ll be far more prepared to focus on your fun and exciting investment. It will be worth building your foundation first!

4. Tackle Student Loans

Student loans only continue to grow interest.

As a millennial, or young adult, you probably have student loans to your name.

Of course you want to prepare everything you can to get your perfect first investment home! One of the best ways to prepare is to get rid of your nagging student loans.

Now, if you have more than $100k in loans, you may be shaking your head at this. “Paying that off will take forever!”

Understandable!

If you have under $100k, it is recommended you establish a plan and meet with a financial advisor to learn how to pay it off sooner. It takes every previous step in this article to get that money paid off. And, possibly a few years.

Depending on your determination, you could pay off loans significantly fast, or over decades.

If you have over $100k, you could potentially plan to have rental properties help pay off your loans over time.

So, as you plan, give a serious look into how you want to rid of your loans! Although it seems unrelated to your rental investing, it is absolutely related to your financial situation!

3. Consider Partnerships

Once you get to this step, you are far ahead of the majority of all millennials and young adults.

Very few people actually stick to a budget. Not many properly plan for retirement. Others don’t understand what investing even is, or how to do it.

But you’re far ahead. You’ve spent time analyzing your financial situation, you understand your net worth, you have learned a lot.

Your debts are reduced and you’re ready to make another step forward.

Unfortunately, you don’t have firsthand experience with rental investing.

In the next step, we’ll dive into a handful of ways to gain experience before buying, but first, let’s talk partnerships.

In many cities, there are meetups and talks that are held by entrepreneurs, investing firms, or even small groups. Go visit Facebook or Google to see if you could join one to learn from people who actually have experience!

Or, if you know of anyone personally who have rental properties, that’s even better!

The idea now is to learn!

Plus, you probably won’t have the capital necessary to buy a rental in cash at the moment. Consider a partnership!

If you have money to put into a home, and know someone who has experience, you could jointly purchase your first property with an experienced property owner.

The trick is finding someone who would be willing to help you learn.

Some tips to establishing an investing partner include:

Have a meeting with the individual, just to learn about them. Become interested in them. Like any relationship, investing partnerships and like business partnerships. If you won’t get along, it won’t work.
Ask for tips and advice. Don’t just go straight into asking to purchase together. Learn about everything you don’t know, like paperwork, legal information, etc.
Ask about how they began, what methods they used to purchase their first few homes, and what didn’t work. This will help guide you to a new way to finance your first property, or to figure out if a partnership would even be a good option for your situation.

2. Understand the Market

As you are working toward each of these steps, it is critical to start learning about rental investing!

We’ve categorized a few of the most important topics to learn about, and ways to learn:

Open Houses

An amazing way to learn about how rentals are in your location is to go to open houses.

It’s free and you can learn about areas of a city, pricing, home values, etc., over a series of weekends. Plus, you’ll potentially have the opportunity to chat with many realtors to better understand homes and locations.

This doesn’t mean you should go to open houses for expensive homes. Rental properties are typically in mid- to lower-income areas, so scope out those areas for any open houses!

Realtors

With the open houses comes the opportunity to find a realtor!

Also, if you had the great chance to speak with anyone who is experienced with rental investing, you may find realtors who just find potential rentals for investors!

You want to make sure to ask a realtor:

What is their experience with older homes
How much experience or training they have with older units (AC/heater), and if they know pricing
If they have experience with rentals, and know the pricing of different areas of town
If they have worked with people who buy for the purpose of renting (paperwork is different, and they look at homes much differently)

Looking at a home for renting is absolutely different than looking for a home you’ll personally live in! The realtor needs to understand this as well.

With a rental, you’re looking for durability and longevity. You aren’t always looking for aesthetic. This is why it is important to start viewing homes on the Internet, and chatting with realtors at open houses. There is so much to learn!

And, every city is very different.

Prices differ, home styles can vary drastically from what climate it is in, to how the city is built. By speaking with someone who is more experienced, you have the potential to learn far more than what you will learn in books! (although, it is still extremely important to learn from books)

Be Your Own Inspector

As you gain experience with learning about rental areas around you, and as you ask questions, you’ll start learning about what it takes to look at a home like an inspector does.

Since you won’t be looking at a home for yourself, you’ll need to look at other important details.

For example, important details you’ll need to learn are:

What types of cracks are in the brick? Vertical or horizontal?
What types of heating and cooling units does the home have? What’s the price to update it?
What type of foundation does the home have, and can you tell if it is damaged?
You’ll need to recognize water damage or signs of water leakage.
Can you notice any termite or bug damage?

These are just a few of the many things you’ll have to learn to recognize when going through homes.

Of course, you should get an inspector when you do ultimately put an offer on a home, but by being able to pick out these large, pricey items it will save you plenty of time in the long run!

When at open houses, or when discussing with other home buyers, ask about these items and what to look for. Primary information and learning from other’s expereince is great!

Ready to find rental deals in your area? Download DealCheck for free or get 25% their premium service with our special code VIP25OFF!

1. Do Your Detailed Research

The best asset to your rental success is your education.

You don’t have to become a realtor or go to college to be a successful rental property investor!

You also don’t have to be wealthy to grow a huge portfolio of properties.

It is about learning everything you can to optimize your chances for buying the perfect properties, getting the best tenants, making the best financial decisions and purchases, and building your wealth!

So, there are a ton of great ways to learn how any young adult can get to the point of purchasing their first property!

Books

Books can be really underrated.

But if you’re determined to learn all you can, you’ll take advantage of them!

People spend their whole lives learning, experiencing, failing, and eventually winning, then write a book about it.

Why not learn from the best?

Some great books for those of you who would like to learn about rental investing include:

If you have other great book recommendations, put them in the comments!

Podcasts

One of our favorites is Bigger Pockets, but there are plenty other awesome podcasts to check out!

If you are not a podcast listener, consider turning one on while showering, or when you are getting ready in the morning.

If you don’t listen to audiobooks in the car, learning from a podcast is a great alternative!

Like books, podcasts offer a unique opportunity to learn from people who are successful and can help you reach your financial goals sooner. It is definitely worth checking out!

Classes

If you live in or near a larger city, there are tons of classes that are held to teach about rental investing.

Now, be careful with the classes that cost a lot of money. Many classes feed off of the public’s desire to “get rich quick” and will sell you on testimonials and promises of how easy it is to get into the rental business and how successful you can be.

But by this point, you should have put enough effort into learning that you can scope out the old, recycled material.

Try to attend speaking events, if possible, to learn about the topic. Or, consider learning from an inexpensive class online.

Be sure to not spend too much upfront on information that you could find free online. Sure, the ease is nice, but if you are young and don’t have much money to put toward your first property, be weary with what is being advertised.

Let’s Summarize!

Be sure to check out the story behind our first rental investment, here!
There are tons of free resources available, from books, to podcasts, to classes, and just talking to others about their successes and failures. The free app DealCheck is a great place to learn about your area! Take advantage of all the learning you can do!
Be sure to get a full understanding of your own net worth and get a good grip of your own personal finances. Learn about investing and about retirement. Learn about other ways to diversify your portfolio as your take each step toward your first property purchase. You got this!

(Do you have Pinterest? Pin this for later!)