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The Weekend Real Estate Investor: 7 ways to overcome the fear of buying your first rental property

7 ways to overcome fear in buying your first rental propertyWhen I was still in the corporate world, and just beginning my career as a part- time real estate investor, I chose to begin with the purchase of a single rental property. A very simple and a very low-risk approach.
Here are the 7 ways I overcame the fear factor, bought my first investment property, and then moved on to build a profitable portfolio of rental properties.

No. 1 – I chose to stay with what I was familiar with and look at properties close to my home

So I started in markets I knew and understood, and stayed close to my home with my first purchase. I didn’t venture out to unknown markets where I didn’t know the property values, the rent values or the good and bad parts of the neighborhoods. I stayed close to home where I was comfortable. That made it easy and it removed fear of the unknown with respect to the property I chose to buy.

No. 2 – I bought my first rental investment property right off the MLS

To most real estate investors that may be a shock or sound very untraditional. But I am here to tell you that for first- time investors, that may be the only option or place you know to go, or can go. I literally contacted a Realtor and told them what I wanted, where I wanted the property, and why I wanted it – for investment purposes. That Realtor went to work immediately and I bought a property directly off the Multiple Listing Service ( MLS).

Yes you can buy great deals off the MLS and investors do it every day, whether they are new investors or tenured investors. You may have to be a little more patient, negotiate a little harder, and you may have to move a little quicker. But those deals are out there and attainable, especially if you are looking for rental properties.

No. 3 – I bought an affordable property

I did not have to be the hero and buy the fancy house. I resisted the temptation to buy a house that I wanted to live in.

A lot of times I see new investors or young investors think they can only buy the familiar – what they are used to or what they would live in. Quite often those would not be the best investment properties or they may be incredibility expensive and too expensive for an investment.

So don’t be afraid to buy a house that does not appeal to your needs or your immediate lifestyle, but will appeal to a larger market of tenants. So I bought a house I could afford.

No. 4 – I knew my numbers going in

For your investment purchase don’t think, on your very first property, you have to buy a property that is tremendously below market value. Yes that is great. And yes that will happen with time and experience. But you can find good rental properties that will cash flow just fine and the numbers will be perfect and they don’t have to be 20%, 30% or 40% below market value in order for those numbers to work.

If you, as a novice investor with limited resources, limited time or a limited network are focused on finding that home run of a deal, you may never take that first step and buy a property. You may not have the visibility or accessibility to get to those below market value properties initially. That will come with time as you build your network. You do not need to be there on your first property.

Buy a property that cash flows. You are just looking for a property that your monthly expenses are less than the monthly rental rates. If you know your rental rates, and you know your monthly expenses – principal, interest, taxes, insurance and maintenance you are going to get a cash-flowing property.

No. 5 – I resisted the temptation of buying a property at extremely below market value – or the fixer upper

That’s great if you have the skills, resources, time or the money. But don’t let that be the thing that keeps you out of the market in buying your first investment property.

There are plenty of turnkey rentals out there for sale. You can literally purchase them and they are ready for rent. Don’t forgo taking your first step because you are not handy, or you don’t know how to fix or repair a property and you think that is the only type of property you can buy. That’s not true. There are plenty of turnkey rental properties out there you can buy and rent immediately.

No. 6 – I knew I had options with how to manage a rental property

There are two options there: For one property, you can probably manage it yourself and it will probably be a real good learning experience. That’s what I have done and continue to do.

However, if that’s just not your bag of tricks, there are plenty of excellent property managers out there. So don’t let that be the obstacle to your first step in purchasing a property – the fact that you don’t know how to manage it. You can learn. Or you can pay somebody to do it. There are plenty of people who will do it for you at a nominal fee and still allow you to have a profitable investment.

No. 7 – I was not afraid of repairs

Repairs are similar to property management. You can do them yourself, and when I had one property, my first property, I did.

Or, you can find contractors to do those repairs for you. But don’t let the fact that you are not handy with a hammer or a paint brush scare you away from taking that first step.

There are plenty of people out there to do the work for you, quickly and affordably with quality. Or you may be able to do it yourself on nights and weekends. You will be surprised what you are capable of doing and how little time it takes and how little cost you incur.

Beyond the buy: Maybe the fear is not buying the first property, but it is marketing the property

As I said at the beginning, sometimes the proverbial next step after buying the property is where the fear lies and stops the investor from buying in the first place.

You may know exactly what you want to do first: I want to buy a three bedroom, two-bath brick house in this particular neighborhood, five miles from my house and I want to spend “this much” and I am going to rent it for “this much.” Perfect. You know what you want to do, but you don’t take that step because you have a fear of the unknown which lies in the fear of marketing the property.

“How will I ever find a renter?” you may ask or, “I don’t have the time or patience or I don’t want to run the risk the property will be vacant.”

That is the fear of the unknowns. But you’ve got to get there. When you do the first steps, purchasing the property, you will be amazed at how quickly you will figure out the next step, marketing it.

As I have talked about previously, I have been able to market properties very simply by placing a sign in the yard. And I will venture to say you will have just as much success as I have in marketing your properties whether you use a sign, Craig’s list, or list them with a Realtor for rent.

Those are three great options that will create quick and profitable results for you. You can do it. You just have to get to that step in the process.

I was once told to overcome the fear of an action, go as far as you can see, and when you get there you will see farther. That is exactly what I have experienced as I have built my rental portfolio over the past 15 years from one property to many.

I will give you some quick examples

  • I used to buy rental properties close to my home. Now I buy properties all over the Dallas-Fort Worth market.
  • I used to buy properties only over the MLS. Now I buy properties on the wholesale market where I can find them cheaper and quicker.
  • I used to buy properties at a certain price point. Now I buy properties at twice that market value. I have figured out how to be profitable and purchase much higher value properties that generate much more cash flow.
  • I used to buy properties that purely cash flowed. Now I buy properties that cash flow and provide instant equity by buying them below market value.

These are all just examples of how I took the first step.

Now, over time, I have been able to take the next steps, which were once unknown to me, of building a larger, more profitable portfolio. I did not understand when I started, but once I started all these aspects of building a profitable portfolio became much more visible, attainable and understandable. But I had to take that first step to get there.

7 ways to overcome fear in buying your first rental property
Here is one of Kevin’s first rental properties.

As I look back today, that first property that I bought 15 years ago, I still have it today. It’s fully paid for, by my tenants.

And, it continues to generate a healthy profit month in and month out.

It’s been a wonderful investment and it was my most novice investment. It was my most uninformed investment, but I kept to the principles I mentioned above.

I kept things simple and I was able to find success in that first investment and many beyond and so can you as a new or novice investor.

Listen to Kevin’s full discussion of this topic here on BlogTalkRadio.com.




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