When Will You Be Ready to Buy Your First Rental Property?

I am at a point now where I consider myself a successful real estate investor. I still have many big goals and I am by no means done learning, but I have a good solid base. I own 10 long-term rentals and I own 6 fix and flips with 4 more under contract.

However, it was not a quick journey to get where I am today.

I have been a licensed real estate agent since 2001 and I didn’t buy my first rental property until 2010. There are many reasons it took me so long to buy a rental; money, ambition, priorities are a few of them. How long does it take to get comfortable and become a successful investor?

Why Did it Take Me So Long to Invest?

I have been doing fix and flips since before I got my license in 2001, but I worked with my father on those flips up until September of 2013. With the flips prior to September, I had very little, if any, of my own money invested and very little risk was involved. I don’t count those flips as personal investments for myself. Every since I started in real estate I wanted to be able to invest in rentals, not because I had done a lot of research on rental properties, but because my family invested in them and they seemed happy with the results. I didn’t actually get serious about buying rental properties until 2007. By serious I mean planning out how much money I would need, how I would get that money and researching why rental properties were a good investment.

I was ready to buy my first rental property in 2009; I had the money saved and I knew what I wanted. Then my wife and I decided we wanted to buy a bigger and nicer house. We found a great deal on a foreclosure and boom, there went all the money we had saved on the down payment for the house. I saved up for another year and then we refinanced our house and I had enough money for a rental property. This time I pulled the trigger and I bought a rental in December of 2010 more than three years after I really decided I would start buying rental properties. The ultimate reason it took me so long to invest in rental properties was a lack of money for down payments. I was not disciplined to save enough money and when I did save money, I gave into the temptation to purchase bigger and better things. I still have that temptation, but I do my best to invest first!

Is it a Bad Thing to Wait Three Years to Buy a Rental Property?

Three years may seem like an eternity to many people, but it goes fast!

Those three years were extremely valuable to me, because I learned about the market and exactly what I wanted in a rental property. I am a real estate agent and immersed in the market, but investing in rentals is a completely different game then selling houses or flipping. Three years also allowed me to save more than enough for a rental property. I could have bought something sooner if I would have jumped in the game right when enough for the down payment and repairs.

Stretching your limits is not a good way to start investing in rental properties.

I had more than enough for a down payment, repairs, an emergency fund; enough to feel secure if something went wrong.

Do You Have to Wait Three Years to Buy a Rental Property?

No, you can buy a rental property much quicker than I did.

You can save money faster, buy a cheaper property, use creative finance or convert the home you live in into a rental. If you want to invest sooner make sure you are prepared for buying a property! Make sure you have enough money and make sure you know what you are doing. There are a lot of articles about analysis paralysis and I agree you have to take action to be successful. There is also a fine line between taking planned, smart action and buying a property just to get in the game. Remember there are many things an aspiring investor can do to take action before they actually buy a property.

How Do You Know When You are Ready?

It is tough to know when you are ready to buy, but here are a few tips.

1. Do you have an emergency fund saved for your family? A good figure would be 6 months of expenses. Once you have an emergency fund and enough money to invest in a property you might be ready.

2. Do you know your market and can you identify a great deal? If you have to rely on your Realtor, your friends and the BiggerPockets Forum if the house you want is a good deal, you might not be ready.

3. Do you know why you want to buy a rental property? Have you mapped out how much money it will make you, what your cash on cash returns and cash flow will be? Do you have a long term plan and know how many properties you want to buy? If you are just buying a rental because you heard it is a good thing to do, you might not be ready.

4. Do you have financing in place and ready to go when you find that great deal? If you have not talked to a lender then you are definitely not ready.

Conclusion

This article is not a free pass for you to not take action. You may not be ready to buy a house, but that doesn’t mean you should not be out looking at houses, talking to lenders or building a strategy. If it takes you a long time to actually buy a house, don’t stress out about it, but don’t give up either.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.