7 Steps to Buying Your First Rental Property

Hey, it's Jason Hartman. Welcome. And as I promised, I want to talk to you about the seven steps to buying your first income property, your first rental property. You know, we've all got to start somewhere. I bought my first rental property when I was 20 years old. It was in Huntington Beach, California, on Coventry Lane. I remember it well. I wish I knew the exact address because of course, the property is still there. I sold it. I'd like to see what it's worth nowadays. But California properties, or properties in any expensive, what we call cyclical market, as opposed to the more solid, prudent, linear markets, they just don't make sense from a cash flow perspective. So I don't regret selling any of my cyclical market properties, even on the cycles where they appreciate a lot. And you're thinking, gosh, I wish I still own that. But you have to calculate the cost of holding it all of those years when it has terrible cash flow and it's not appreciating or it's dramatically depreciating. Right. So, you know, all of our clients are at different stages of their investing career. Some of them are brand new and they want to buy their first rental property. And some very seasoned investors who are building very large portfolios of income property, a lot of rental property, a lot of doors, as they say. Right. So one of the things I love about income property, though, is that it's so durable. Like that property, that first rental property I bought at age 20, you know, it's still there. It's still either someone is living in it or it's still producing income for its current income property owner, its current investor. And, you know, when I think of real estate and I go back to look at places that I either lived in or owned, or, you know, a restaurant that I had a meal in years ago or an office that I leased years ago, it's still there, you know, it's still producing income for its owner. Reminds me of these old books I was looking at today. Some of our clients gave me these books. Two different clients. One is the famous Dale Carnegie, how to Stop Worrying and Start Living Now. You know, his famous book was how to Win Friends and Influence People. But look at these. Look at these old pages of this book. The copyright on this book is 1944. I think this is a slightly newer printing of it. And I think it was 1948. This is a 1948, but it was first printed in 1944. And in this book I talk about this often. Donald Weil, this real estate broker, he Wrote this great poem called the Reluctant Investors Lament that I love. And this is from 1977. Another one of our clients gave this to me a few years back. And it's. It's really cool. These old used books, you know, really, really historical. But income property is the same way. It's so durable, you know, it's still here. So you got to be a real estate investor. It's the most historically proven asset class in the world. And how do you start? How do you buy your first property? First thing you got to do, learn my 10 commandments of successful investing. This is the core strategy, the core content that I created back in 2005. Now, I was in the real estate business long before 2005, but I decided there had to be a core philosophy for investors, that if you just do these 10 things right, even if you don't do all 10 right. And listen, I don't do all 10 right all the time. Mostly I do, but with my own portfolio, you know, I do crazy things sometimes and I break my own rules and, you know, every time I do, I regret it. Pretty much. At least so far. Knock on wood. Okay, so try and follow my ten Commandments. There's some great ones in there. Thou shalt become educated. Thou shalt maintain control. Thou shalt not gamble. Thou shalt only invest in tax favored assets, etc. Etc. There's some great stuff in my Ten Commandments. Learn the Ten Commandments. Whether you work with my team or not, just learn the Ten Commandments. It will be very helpful. It'll serve you well. Okay, the next thing is decide if you're a do it yourselfer or if you want someone to do it with you. No one can really do it for you in the income property world. If you want to be a direct investor and maintain control of your financial future, you've got to have some involvement. Anybody that tells you there's passive income or these are passive investments, they are lying to you. Do not believe that. There is no such thing as a passive investment. I repeat this often, it doesn't exist. Even a bank account is not a passive investment. And I recently talked about that on one of my podcasts where I've got a couple of bank accounts. Listen, I know you're going to say don't keep so much money in the bank, right? But you know, it's hard to deploy capital sometimes. You know, we're all busy and not every ounce of capital I have is working for me very well, honestly. Okay, so I've got a couple of bank accounts and I just put them up to the FDIC limit. You know, I just got 250,000 in each of them, right? And I get this notice from my bank saying we're going to send your money to the state if you don't come in and make a transaction in the account. Right? Because it's been sitting there. And so you've got to keep the account active or it will. What's called escheat. That's what they call it when they send the money to the government because they think the account has been abandoned. So there is no such thing as a passive investment. If you're investing in stocks, bonds, mutual funds, you better pay attention. Nothing is passive. It does not exist. Do not believe that. It's a myth. Okay, so decide if you're a do it yourself or if you're going to go out and do fix and flips or and you know, you're going to be cruising around neighborhoods looking for ugly houses that need rehab and repair or do you want to do our plan now? Our plan is where we basically are like a financial services firm for real estate investors where we are helping you invest. We teach you how to invest. We provide a referral network with actual properties you can buy, Unlike the scammy gurus out there where you've got to go and try and do everything they tell you about. By the way, watch my video on, you know, buying a property with nothing down. Okay, More, more in that video. But you've got to go out and duplicate everything they say in the real world and that is really hard to do. We actually have the properties for you to buy. Okay, so we provide a referral network and then offer ongoing support and service and software and all the tools you need to be a good investor. So we try to make it as passive as possible, but there's no such thing as a passive investment. So make the core decision. This is a core decision. Are you a do it yourselfer or do you want someone to do it with you? If you're a do it yourselfer, that's a whole other set of competencies that than if you are a semi passive investor who has a day job, who has responsibilities, who has other things to do, and you just want to create an income property portfolio for your future. We help you do that. Okay, so make that decision. Source money. That's step three. Where are you going to get the money to invest? Do you already have the money? Are you going to use equity from your home? Are you going to use a self directed IRA or a solo 401k? Are you going to have self directed retirement funds, home equity, equity in other properties, money in the bank account, money in the stock market? Or more on the do it yourself concept, right? If you're doing that, are you going to go out and raise money from, hey, they call them friends, family and fools, right? The three Fs, right? Friends, family and fools who might invest with you, right? Do you need an investment partner? How you going to get the money if you think you're going to do it with nothing down? You may not want to even bother with that strategy or that thinking. Listen to my other video on whether or not you should buy a property with nothing down. I know a lot of you are thinking, well, why wouldn't I? Because hey, it's no money down, but there's a lot to that. Okay? So check out that video on that subject. If you are going to be a do it yourselfer, you got to go hunt for properties, okay? That's step four. You got to go looking. You've got to get really good in just one market. You've really got to learn that market. You've got to know it like the back of your hand. The proverbial back of your hand, okay? And if you're not going to be the do it yourselfer, then work with a team. Like our team can find the properties for you, okay? So our team can find the properties. You work with your investment counselor to find the properties. And then simple as this, this is the last step. Put a property under contract, buy it. Okay? Buy the property. Now there's a lot to do after that. There's a lot to think about after that. Right? Because after that, you know, you gotta, you gotta learn how to either hire a property manager and manage your manager. Manage your own property. If you're a do it yourselfer, you might be thinking, well, I'm going to go flip properties or I'm going to wholesale properties or something like that. Do you want to make this a business? Do you have time to make this a business? Right? Are you going to give up your career to be a real estate investor? And a lot of people make that decision and a lot of people have made a lot of money in that decision. Some people that haven't either had the right circumstances or the right luck or, you know, just didn't dedicate enough to it, it hasn't worked out for them and they lost money by ending their career. The safest bet is to keep your career and have a team to help you do it right, but different set of competencies definitely. So I hope this video has been helpful to you. We have a whole bunch of others on a whole bunch of other things as well as a very highly acclaimed podcast that I've been doing for the last, gosh, I don't know, almost 15 years now. So about 1200 episodes of our podcast out there. It's all free. It's on itunes. Just type Jason HARTMAN in the iTunes store you'll find all my podcasts but the Creating wealth show is the main show for real estate investors. And then other videos on this YouTube channel where we can talk about rent to value ratios, buying with nothing down, where we talk about managing your manager self management of your properties. The Hartman Risk Evaluator, which tells you how to really, really reduce risk when you're investing. Very unique process that I came up with myself after being in the business for 19 years, and that was a while ago. I've been way more than 19 years now. But the Hartman Risk Evaluator can be very helpful to you as well. We talk about investing inflation and economics and the effect of all those things on your investments. So please subscribe, leave a comment down below and we'll try to get to you and answer your questions. And thanks again for watching and happy investing.