One of the most difficult challenges when it comes to real estate investing is buying that first property. I know this can be daunting and full of uncertainty and this is why in this video, I've prepared a system that will help make you successful. I'm going to walk through the five steps necessary to buy your first rental property. And as always, those who stick around until the end will get a bonus from your real estate millionaire friend. Hey, what's up? Darron Boros here. My mission is to help a thousand people create a million dollars of net worth with real estate investing. Subscribe, not to miss what's coming. Let's start by looking at the subtle differences between buying your first property and buying your first rental property. Here's a little tip. If you're thinking about this in the right way, your first property and your first rental property should be the same purchase. In fact, that's a myth that I hear a lot in real estate. After I buy my own property, then I'll buy a rental property. It doesn't have to be that way. In fact, if you're using a strategy like house hacking or doing what I did on my very first property, you may not even live in it. But let's dive into the five steps and I'll touch on that a little bit more later on. Step one is to understand how much property you can afford. You should obviously know what kind of money you have to work with, but it's important to understand how much of that money you want to deploy. If you're only factoring in the down payment when looking at what you can afford, there are so many other elements to consider, depending on whether you are first time home buyer, if this will be considered your primary residence, and depending on the location of the property. Down payment money is one element of what it's going to take to purchase a rental property. You also have to consider legal fees, land transfer taxes, insurance, and potentially a reserve fund. Those are all costs that will come into play before you even close on the property. If you plan to renovate, you'll also have to factor in those costs. And finally, once the property is up and running and generating income, you'll have to run your cash flow numbers to see what kind of return you can expect. You can create an Excel spreadsheet if you're so inclined, or if you want to get a little more sophisticated, I suggest using a real estate investing software like Deal Check to run a full analysis on your numbers. If you're unsure how to run your numbers on a rental property, check out this video right here where I break down all the categories you should be including when analyzing a rental property. Now, I know this may seem counterintuitive because we don't even know which property we're going to buy yet, but that's not all that's important right now. Pick any property and run some basic analysis on it to understand the process. And then, when you have an actual property to look at later on, this will come in very handy. Step two is getting organized. Now that you know how much property you think you can afford, it's time to verify that. If you plan to purchase a property using bank financing, you'll want to start working with a mortgage agent to find out exactly what you can qualify for. The mortgage agent is going to ask you a series of questions that you should know the answer to. Where are your down payment funds coming from? What does your credit score look like? Are all of your taxes up to date? And do you have steady income that can be verified? It's important to understand how banks review rental property purchases. They see them as much higher risk, and therefore the underwriting process or due diligence, they perform on a rental property is always much more scrutinized than a property that will be owner occupied. Because of that, it's important that you go in, organized, and with a complete application. For instance, you'll want to show exactly where your down payment funds are coming from, whether that's from your own money, or perhaps you have someone assisting you with a cosine or a gift note. Regardless, make sure that you can show a history of those funds for a minimum of 90 days prior to closing on your first property. You'll also want to take a look at your credit score. You see if there are any red flags, and if there are, you'll want to get those cleared up before applying for a mortgage. Make sure all of your taxes are filed and up to date as well. If you're self-employed or don't have a verified income source that you can show history on, you'll want to work with your mortgage agent to figure out a strategy to be able to qualify for a mortgage. I will say this, lenders love T4 income employees, so if you know that a T4 income job is coming to an end, make sure you submit any mortgage applications prior to making any job changes. Step three is choosing a strategy. There are so many different types of rental properties you can invest in. You could buy a single family dwelling, a condo, a duplex, triplex, a multi-family property, and so on and so on. Beyond the actual property type, you'll want to narrow down a strategy that you plan to use with that property. You may want to look at short-term rentals, a rent to own, or you may want to house hack. The type of strategy you decide on should mirror your investing goals. If you plan to focus on building cash flow, for instance, a single family dwelling with a long-term rental tenant may not be the best and most useful strategy. But if your plan is to build equity over time, a single family dwelling can be a solid investment. I like the idea of putting together a five-year plan similar to what you would do if you were starting a business and follow that plan to get to your investing goals. Step four to purchasing your first property is choosing a market. Notice that I put choosing a strategy before choosing a market because depending on your strategy, that may depict which market you want to pursue. If you're looking to build cash flow, you would avoid purchasing a single family dwelling in the Toronto market as it will most likely have negative cash flow. But if you wanted to employ that same strategy in a market like Monkton, New Brunswick or Orlando, Florida, this may be a solid strategy. So it's important to look at the strategy in conjunction with the market, but the strategy should always come first. One thing I see a lot of novice investors do is fixate on investing in their backyard because they believe that they need to check up on the property and screen their own tenants. This can sometimes be detrimental to your investing as we are often emotionally attached to properties we can see on a regular basis. So you may want to look at investing in an out of town or even out of province market as your first investment. It really depends on your comfort level and heavily depends on the team of professionals around you, which leads me to point number five. But before that, if you're feeling you need more in-depth education before making your first purchase, you can sign up for my free Masterclass webinar. I'll leave a link in the description below. After you know what you can afford, you've chosen a strategy and you've chosen a market. Now it's time for step five, which is to build your team. Depending on the strategy, you may or may not need all of these people on each transaction, but no matter what you do, you will definitely need a good lawyer and a good accountant in your real estate investing business. The other members of your team that are going to be vital to your success are your mortgage agent who you should have already engaged in step two, your realtor, your property manager, your home inspector, your contractor, and your insurance broker. My advice when it comes to choosing these service providers is to seek out professionals who are catering their businesses to working with real estate investors. They will help you move your business forward just that much faster. One of the first questions I like to ask when I'm vetting a new service provider is, are you an investor yourself? The answer doesn't always have to be yes, but if someone is a real estate investor themselves, they will definitely have a better understanding of the process and what will make a successful transaction. The best place to start with finding qualified service professionals is always getting recommendations from fellow investors who are investing in the same market. If you're not sure how to find local investors, I find the best ways to join a local Facebook group or any other networking group of real estate investors. And now comes the hard part, deciding on whether you want to or are ready to move forward. The thing that holds most first time investors back is the confidence to pull the trigger. The good news is, the more educated you are, the less scary this becomes. Try to block out the noise and look at the facts because I can assure you, everyone will have an opinion on this. The problem is that all the advice you'll get will come with a bias for whoever is giving you that advice. Your realtor and mortgage broker want you to proceed with the purchase because they get paid based on that transaction. Your friends and family may push you to wait and hold off for alternative reasons. Sometimes our friends and family wouldn't feel comfortable making a similar decision. They'll try to manipulate you into feeling the same way. My advice is if the numbers make sense, you're in a good position to take on a rental property and you've done your homework on the market conditions and fundamentals in your area, then go for it. The best time to buy real estate was in the past, but the second best time is as soon as you possibly can. As I mentioned, right off the top, your first purchase is often the hardest one. And then trust me, they get way easier after that. To continue your weekly education, check back here every Tuesday as I release a new video. If you have questions about buying your very first property or any other real estate investing questions, feel free to drop those in the comments section below. You can also follow me on Facebook and Instagram where I post their regularly. Thanks for watching and I'll see you soon.