New landlords ask me the same dozen questions, usually late at night, usually right before they sign something. Here are my straight answers.
None of this is a promise of how a property will perform for you. Rental investing involves real risk, and results depend on your market, your purchase price and your execution. For legal and tax questions, talk to your attorney and your CPA.
If you want the full sequence, start with the rental property investing overview. If you’re weighing financing, read about the BRRRR method. If you’re looking at duplexes, the small multifamily site goes deeper. And when you’ve got a real property in front of you, bring it to REI Skool, my free community, and let other investors check your numbers before you commit.
Straight answers
Is rental property a good investment?
It can be, when you buy at a real discount, underwrite every expense, keep reserves and hold for the long term. It’s a poor investment when you overpay, skip the numbers or need the cash flow to cover your own bills. The property doesn’t decide; your purchase discipline does.
How many rentals do I need to retire?
There’s no honest universal number. It depends on what you need to live on, how the properties are financed, what they actually net after every expense, and how much risk you can carry. Work backward from your own budget with a CPA or financial planner, and focus on buying the next one right instead of chasing a count.
How much money do I need to buy my first rental?
It depends on the price, the loan program and the reserves you need, so I won’t give you a figure. Talk to a lender about down payment and reserve requirements before you shop. House hacking with owner-occupant financing and partnering are two common ways people start with less of their own cash.
What is the 1 percent rule?
Monthly rent should be at least 1% of your all-in cost: purchase plus repairs plus closing. I use it as a fast screen, not a verdict. A property that passes still needs a full analysis of taxes, insurance, capex, vacancy and management. Details at https://rental-property-investing.benlovro.com/one-percent-rule/.
Should I buy a single family rental or a duplex?
I prefer small multifamily, duplexes and up, because more than one rent check under one roof softens the hit of a vacancy and management is more efficient. Single family homes can be easier to sell and attract longer-term tenants. Compare both with full numbers in your market.
How much should I keep in reserves for a rental?
Enough to survive a vacancy and a major repair at the same time without panic. The right amount depends on the property’s age, the systems’ condition, and how many units you own. Lenders may also have reserve requirements. Build reserves before you buy the next property.
Do rental properties help with taxes?
Rental property can be depreciated, and operating expenses are generally deductible, but how that applies depends on your whole tax picture. I’m an investor, not a tax professional. Talk to your CPA before you make any decision based on taxes.
Should I put my rental in an LLC?
Many investors hold rentals in an LLC for liability and organization reasons, but it can affect financing, insurance and taxes. It’s a legal and tax decision, so talk to a real estate attorney and your CPA about your situation.
What's the biggest mistake new landlords make?
Overpaying, then underestimating expenses. Most rental pain traces back to a purchase price that left no margin and an analysis that left out capex and vacancy. I buy rentals at roughly the 70% rule for exactly that reason.
Should I self-manage or hire a property manager?
Self-managing can be a great education if you live nearby, have time and build a system. A manager makes sense when distance, time or temperament says so. Either way, include management in your analysis. Full breakdown at https://rental-property-investing.benlovro.com/property-management/.
What is a DSCR loan?
A rental loan qualified mainly on whether the property’s income covers its debt payments rather than on your personal income. Lenders define the ratio differently and requirements change with the market, so talk to a lender early. More at https://rental-property-investing.benlovro.com/dscr-loans/.