Buying Your First Rental Property – How to Know if You’re Ready to Invest

house for rent

If you already have a steadily growing investment portfolio of stocks, bonds, and mutual funds, then perhaps it’s time to add a new type of investment to your collection: rental property. Investing in rental properties can be an enriching venture, but it demands a lot of planning and financial involvement to be successful.

Buying Your First Rental Property

Are you ready to invest and buy your first rental property? Here are some things to consider while making your decision:

What’s Your Current Financial Situation?

To get an accurate depiction of your current financial situation, you’ll need to calculate your personal net worth. This involves assessing your debts, income, and other investments. Also, take a look at the interest rates you’re paying and receiving. If you are earning quite a bit more on your investments than you are paying on your loans, then why rush to pay off debt when you could invest that money elsewhere for greater returns?

Obviously, there is an element of risk here. Your rates of return aren’t guaranteed, so that is something to consider. But, all too often, people assume that having debt means you’re not ready to invest. On the contrary, you should always look for new ways to make your money work for you. This is why saving up for a rental property might be an ideal option, even if you’re not totally debt-free yet.

Do You Have Time to Manage a Rental Property?

Rental properties aren’t just monetary investments; they also require ongoing maintenance, contact with tenants and repair companies, and other time-sucking tasks that all homeowners deal with. You’ll likely have to pay a management company to deal with tenant issues if you live out of state.

If you live locally, you’ll be in charge of managing tenant complaints, finding new renters each time someone moves out, and scheduling repairs. Since owning a rental property takes a lot of money and time, it’s important to ask yourself beforehand if you have enough time to make this investment dream a reality.

Hurdles to Investing in Property

Can you invest in property while paying off student loans? What if you’re still renting your own primary residence? While these two scenarios may seem detrimental to any investment plan that involves purchasing an investment property, it’s still worth looking into property investments because the payoff could be enormous down the road if you get in a budding housing market earlier on.

For student loan debt or other debts you currently have, compare those interest rates and payoff projections with the historical and future projections for the housing market you’re considering investing in. If you can cover your current payments on student loans while funneling most of your leftover income into a savings account for a down payment, you can minimize your risk of default while reaping the rewards of rental property investments.

Don’t forget that student loan interest is also tax-deductible, and paying off a student loan could lead to a temporary drop in your credit score, as nonsensical as that sounds. So investing in a rental property while paying off student loans could be a financially rewarding option.

Also, your primary residence is actually a liability. When you own your home, you are responsible for the mortgage payment, maintenance, and taxes. So if you’re still renting your place of residence, a financially smarter move might be purchasing a rental property to build up the assets in your portfolio before taking on the massive expenses involved in owning your own home. When you rent out the house, you have rental income to pay the expenses. Not so when you live in the home yourself. 

Investing in Real Estate with Roofstock


Roofstock is the #1 marketplace for buying and selling single-family rental homes. Roofstock has listings in over 40 markets across the US. 1 in 10 homes in the U.S. are single-family rentals (SFR), which equates to over 15 million households. 

Single-family rentals are a stable asset class with considerably less volatility than stocks. Single-family rentals prices have remained almost perfectly uncorrelated with stock prices since 1971, with a correlation coefficient of only 0.07. 

Their online marketplace empowers everyday investors to own cash-flowing income properties and build wealth through real estate. Roofstock makes it easy to invest remotely. Over 60% of their customers are buying rental property located more than 1,000 miles away. With their market analysis, Roofstock provides research and data analysis to help you determine which locations meet your investing objectives.

Roofstock’s marketplace offers rental homes for sale in 40 markets and 21 states nationwide, continuing to expand. Roofstock surpassed $1 billion of collective transaction volume within two years of its marketplace launch, making it one of the fastest-growing FinTech startups of all time.

And, their industry-leading Roofstock Guarantee empowers investors to buy remotely with total confidence. Their certified properties are inspected and come with a 30-Day, Money-Back Guarantee so that you can invest remotely with confidence.

Roofstock - Buy Rental Homes and Invest in Real Estate Online? Select from rental homes across the U.S. Online tools help you analyze returns. Property listings, financing, & property management all at Roofstock. Roofstock - Buy Rental Homes and Invest in Real Estate Online? Full Disclosure: We earn a commission if you click this link and make a purchase, at no additional cost to you. Last Updated: 12/15/2018

Invest in Commerical Properties with Streitwise

Streitwise is a real estate crowdfunding platform for both accredited and non-accredited investors. Anyone who has as little as $5,000 available to invest and a desire to diversify their portfolio beyond stocks and bonds should consider investing in commercial real estate with Streitwise.

Streitwise directly owns and operates its own commercial properties, whereas many other web-based investment platforms serve as middlemen between everyday investors and real estate property managers.

Since its inception, Streitwise has produced almost a 10% dividend for its investors, whereas public REITs produced 3.79% dividends and public bonds produced 2.78% dividend yields. Streitwise just declared their latest dividend payout for Q2 2021, at $0.21/share, or 8.4% annualized dividends. The site has hit its target return range for a 17th straight quarterly distribution with each dividend payout over 8%. 
You can also check out my complete review of Streitwise on Money Q&A. If you’ve been wanting to get more active in real estate investing for just a small sum, then a platform like Streitwise might be a great addition to your investment portfolio.

Unless you’re financially secure in nearly every aspect of your life, the decision to invest in a rental property won’t be as simple as “sure, why not?” Instead, you’ll need to assess your whole financial situation.

You should determine how much time and money you’re already devoting to other obligations and research the housing market you’re interested in. This will help you decide if the potential gains outweigh the risks of prolonging your debt repayment and possibly holding off on purchasing a home for yourself.

Are you ready to invest and buy your first rental property? What’s holding you back?

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