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Tips for Buying Your First Investment Property

Looking to earn passive income and build long-term wealth? Investing in real estate is one of the most effective ways to do this, and the income earned can help knock items off your bucket list—travel more, retire early, etc.


But if you’re a first-time investor who’s yet to learn the ropes, you might know little about buying your first property. No worries, we’re here to help!


1. Use a mortgage to buy an investment


You’ve likely heard the phrase “cash is king in the real estate world.”


Cash deals tend to close faster. But as the new kid on the block, you might lack the means to buy a property outright.


Just because other investors approach deals with cash doesn’t mean you have to. In fact, getting a mortgage for an investment property might be the best decision.


As a first timer, your properties might not be the prettiest on the block. They might need repairs, upgrades, and of course, regular maintenance, and these don’t come cheap!


The absolute last thing you want is an empty savings account and nothing left for improvements. A mortgage opens the door to investing without tying up your cash.


2. Save a larger down payment


Even if you don’t empty your savings you’ll still need some skin in the game, or more specifically a down payment.


But not your typical down payment amount.


Investment properties require more of your own money, between 15% and 20%—ouch!


You might also need several months of mortgage payments in reserves. But don’t get discouraged.


Many new investors have been in your shoes, and when it comes to drumming up cash, a little creativity goes a long way. Do you own a primary residence? If so, consider tapping your equity for the down payment—but only if you can afford the payment!


3. Start with a single-family unit or a duplex


Your ultimate investment dream might be a large multi-unit building, and you should absolutely reach for the stars. But it’s important to not take on too much too soon.


Some newbies seek larger investments because of the income potential. Yet, investing in real estate isn’t only about profits. It’s also about repairs and maintenance.


The more units you have, the more work you have. So before jumping into a large investment, gain experience with a single-family dwelling, or at the most, a duplex.


4. Go with a turnkey property


And while we’re on the subject of making life easier for yourself, turnkey properties are your friend.


These properties might be hard to come by. But even if a property isn’t 100% move-in ready, the less repairs you have to make, the less time you’ll spend getting it ready for a tenant.


5. Buy a multi-unit home


If you’re absolutely set on a multi-unit building—but don’t have a big down payment—consider buying a two to four-unit building with an FHA loan. And get this…you only need a 3.5% down payment. It’s a win-win!


There’s one tiny little catch, though.


This only works when the building serves as your “primary residence.” So in other words, you must live in one of the units.




Ready to play with the big boys? Let our team of loan experts help you find the right loan to make an investment property happen.



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