Real estate investing is widely recognized as one of the most reliable ways to build wealth in the U.S. While many individuals can develop portfolios that appreciate over time and generate income, the most challenging step is often getting started. I began my real estate journey while at Harvard, building my first portfolio from my dorm room. Over the years, I expanded that portfolio to over 4,700 units and managed more than $450 million in real estate assets. Yet, despite these achievements, my first purchase remained the most difficult. Those early investments taught me a valuable lesson: success in real estate investing depends heavily on having the right team. Sound advice and high quality partners can save you thousands—or even hundreds of thousands—while poor decisions can lead to equally significant losses.
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When buying your first property, there are several critical factors to consider—from choosing the right location and securing financing to managing the property effectively and making it profitable. Each of these elements requires careful planning and the right guidance. In this article, I’ll walk you through these key points and highlight the experts who can support you at each step. With the right preparation, you can avoid many of the common pitfalls that first-time investors face and start your real estate investing journey on the right foot.
Selecting the Right Location
Why Location Matters: The location of your property will significantly impact its rental income, appreciation, and overall success. Investing in the right area can lead to higher property values, fewer vacancies, and better tenants. Look for places with job growth, new infrastructure, or planned developments. For single-family homes, proximity to good schools or public transportation makes a big difference, while small multifamily properties benefit from being close to shopping centers and entertainment hubs.
Real-World Example:: A friend of mine bought a duplex in a neighborhood just before a tech company announced a major expansion nearby. Within a year, the property’s value increased by $40,000, and rents jumped by $200 per unit. That’s an extra $4,800 annually in rental income—income they would have missed if they hadn’t bought in the right location. Having a knowledgeable real estate agent on your side can help you spot these growth opportunities early.
Understanding Financing Options
Finding the Right Loan for You: Financing can feel complicated, especially for first-time investors, but it doesn’t have to be. Loans like FHA, USDA, or VA loans make it easier to get started with smaller down payments. FHA loans, for example, require as little as 3.5% down, and VA loans offer 0% down for eligible veterans. Many states and cities also offer down payment assistance programs that can cover part of your closing costs or upfront expenses. A good loan officer or mortgage broker can walk you through these options and make sure you get the best deal for your situation.
Real-World Example: I know an investor who thought they needed 20% down for a $250,000 property—an upfront cost of $50,000. After working with a knowledgeable mortgage broker, they realized they qualified for an FHA loan, dropping their down payment to just $8,750. On top of that, the broker connected them with a state assistance program that covered $5,000 of that amount. In the end, they only needed $3,750 for the down payment—saving them more than $46,000 compared to what they originally expected.
Cost-Effective Property Management
Managing Your Property Wisely: Managing a rental property yourself might seem like a good way to save money, but it can quickly become overwhelming. Property management involves more than just collecting rent—it means handling tenant complaints, scheduling repairs, and keeping vacancies low. Hiring a property manager may cost around 8-10% of your rental income, but they can help prevent costly mistakes that inexperienced landlords often make.
Real-World Example:: A first-time landlord I know decided to manage a four-unit property on their own. When a tenant stopped paying rent, they tried to handle the eviction themselves but made procedural mistakes that delayed the process by months. They lost about $6,000 in missed rent. A professional property manager could have handled the eviction efficiently, minimizing their losses. In hindsight, the $3,000 a year they would have paid the manager would have saved them at least twice that amount in lost rent.
Maximizing Returns
Growing Your Investment: To maximize returns, you need to be strategic about how you improve your property and manage your finances. Small upgrades—like adding modern appliances or fresh paint—can justify higher rents. Staying ahead of market trends and adjusting your rental rates regularly also ensures you’re not leaving money on the table. Additionally, smart tax strategies, such as deducting operating expenses and depreciation, can make a big difference in your net income.
Real-World Example:: An investor I know decided to invest $10,000 in upgrading the kitchen and bathrooms in their rental house. Because of these improvements, they were able to raise the rent by $300 a month. That’s an extra $3,600 a year, meaning the upgrades paid for themselves in less than three years. After that, every dollar of additional rent was pure profit. Small, thoughtful upgrades like this are a great way to increase cash flow.
Conclusion
Investing in real estate is one of the best ways to build wealth, but it’s not something you want to do on your own. Surrounding yourself with the right team—real estate agents, mortgage brokers, property managers, and contractors—makes all the difference. Yes, hiring experts will cost you upfront, but the money they help you make (or save) far outweighs the expense. Trying to go it alone might save you a few bucks now, but it could cost you tens of thousands in the long run.
If the process of owning property yourself feels like too much, there are other ways to profit from real estate. You can invest in REITs (Real Estate Investment Trusts), which give you exposure to real estate without direct ownership. There are also opportunities with crowdfunding platforms that focus on real estate projects. And finally, you can invest with UseNectar.com, where we offer the chance to earn returns on loans secured by large multifamily properties—without the day-to-day responsibilities of being a landlord. Whatever path you choose, make sure you have the right team on your side. It’s the smartest investment you can make.
Author: Derrick Barker is CEO of Nectar.
