Afraid to Buy Your First Rental? Here’s How to Finally Start (Rookie Reply)

0:00What if the biggest mistake new investors make is waiting too long to buy their first property? And what if the fastest way to lose money isn't a bad deal, but a bad contractor? Today, we're answering three questions every rookie needs to hear. How to start when you feel stuck, how to avoid getting ripped off by contractors, and how to capitalize when you stumble on a potential cash cow.

0:28This is the Real Estate Rookie Podcast, and I'm Ashley Kerr. And I'm Tony J. Robinson. And with that, let's get into today's first question. So this question comes from Corey in the BiggerPockets forums. And Corey says, I'm completely new to real estate and would like to know if someone could help me and guide me through getting my first deal. Great question, Corey. And that's the entire reason that the Real Estate Rookie Podcast exists is to help guide you through your first deal and beyond, obviously. Now, that said, it is also a very loaded question because there is a lot that goes into guiding someone through their first deal.

1:01So I think the goal for me and Ashley isn't to give you a super kind of tactical step-by-step for every single thing you need to do, but give you a general overview of the big things you should focus on and some of those more major milestones. I think the first step, and Ashley, let me know if you disagree with this, but I think the first step is just to clarify what is your why and what is your end goal? because every person who invests in real estate has a slightly different mix of motivations and resources and skills and abilities and goals. And those mixes can lead to slightly different plans in terms of what should you be doing within real estate.

1:38And I think oftentimes people aren't getting niche enough. So you could say, well, my goal is to, my why, the reason is because I want to quit my job or I want to build wealth for my family. But what you're not thinking about is the actual steps and the lifestyle to get to that. So if you want to quit your job, does that mean because you want to go and you want to live on the beach and you don't want to work anymore, you want to be retired? Or does it mean you want to work for yourself and you're going to... So like the difference between the two is you're most likely going to be able to quit your job sooner if you've put yourself into a new job where you're working for yourself.

2:22So maybe you're becoming a co-host. You're, you know, managing all of these short-term rentals. You're an operator. Maybe you are flipping houses, which is a very active income. Or maybe you are buying long-term rentals. We had a guy on, you know, not too long ago that was an out-of-state investor and he set up property management. And he had his long-term rentals just sitting there accumulating appreciation. They had some cash flow. And he was really just banking on them building wealth. And he was still working his full-time job with no reason to actually quit anytime soon. He liked his job.

3:00He wanted to stay into it. Because the strategy that you pick, I think, really depends on not only what your why is, but what you want to be doing to actually get to that point to reach that goal too. And I think once you have clarity around that why and what that end goal is, the next step is to understand, and Ashley, you kind of touched on this, but understand your strategy and your niche. And I think oftentimes we confuse those two things, but they're actually slightly different. The strategy would be long-term, traditional long-term rentals, midterm rentals, short-term rentals, obviously, flipping, wholesaling.

3:44But within, even let's talk about flipping, because I think when a lot of people think about flipping, they only think about flipping single-family homes. And while that's true, that that's probably the most popular form of flipping, we've met and interviewed people who flip raw land. And they buy land, they sit on it, and they flip it later for some sort of profit. We've met people who flip land, but improved land. So they'll buy the land. They'll do all of the initial work to get it ready to get built on and they'll sell it to a builder and the builder can plug and play. We've met people who buy small parcels of land.

4:16We've met people who buy large parcels of land. So even within the strategy of flipping, there are different niches in terms of what you can flip. You can flip apartment complexes, big or small. You can flip hotels if you want to. So just understanding both the strategy and the niche that makes the most sense for you, given your current resources, abilities, goals, et cetera. Yeah. And I think like a big motivation for people to get into real estate is because they want to do something they love. They want to have a passion and like designing a house excites them or flipping a house. And there are two ways to take this as to you hate your job.

4:55You want to, you know, live, you do something that you enjoy. But you actually have more of an opportunity to be successful at first and to make more money if you take advantage of your current resources. And when I first started, I was working as a property manager. I knew everything about property management. I had a mentor that was a long-term investor. So right there, I had an advantage because I had those skill sets. I had that network. I had all of that where if I would have said, you know what, like doing an Airbnb that actually looks like more fun and I would really like that more designing it, coordinating with the guests, like I wouldn't have even have known where to start with an Airbnb and it would have taken me longer to accumulate all of that knowledge.

5:51I didn't know a single person that was doing a short-term rental at the time. I would have had to learn everything from the ground up. So eventually I did pivot. Eventually I built my foundation of long-term rentals and I was able to pivot to try some short-term rentals. The first one, I went$40 ,000 over budget. If that would have been my first deal, that would have bankrupt me. So as much as you want to pursue your passion and do something that excites you and love, see if there actually is an opportunity and you have an advantage doing one of the strategies that will actually propel you to reach success even faster.

6:31I think the other piece of getting started is building out your team. And for Ricky investors, the people you should focus on initially, a good lender. And I say lender, maybe even first, because I think before you can focus on markets or properties, you need to understand what can you actually afford? What is your purchasing power? So you know how much cash you have to deploy for a down payment, closing cost renovation, set up, whatever it may be. But you need a good lender to tell you what loan amount can you get approved for. So talking to a great lender, working with a great agent, right? Someone who knows the market or can expose you to different markets.

7:12And luckily, BP has the resources to help you find both of those folks. We've got the agent finder, biggerpockets.com slash agent finder. We also have the lender finder. So go in there, go talk to some folks and get a sense of what can I afford? How much can I actually buy? And then once you've got that idea, then go start talking to agents who fit within your purchasing power. Yeah. So I think if you start to think about all these things and actually take the time to write them down. There's actually a really great journal. What is it called that Brandon Turner had created? The Intention Journal.

7:43It's on the BiggerPockets bookstore. And it is just like a great resource to actually build out what your why is, what your goals are, but also like action items that you can do every single day to move the needle. Highly recommend checking that out at the BiggerPockets bookstore. The next thing that we'll touch on is, and this is more so mindset, but it's that momentum beats perfection. And we can get so caught up in analysis paralysis, waiting for the absolute, and I'm using air quotes here, perfect deal that we end up waiting forever. And now you looked up and it's been a decade and you still haven't gotten started.

8:23And I think inaction has killed more real estate investing dreams than slightly misaligned action, right? More people just not doing anything has stopped more investors from becoming investors than maybe buying a deal that didn't pencil out exactly how they wanted it to. So momentum is what we want to focus on. And that's how we get from no deals to one deal, from one deal to five deals, from five deals to 10 deals and so on. We need to take a short break here, but the last thing I'll add to this is building confidence. And that can be with just making those very small moves, low risk moves, and networking, analyzing deals, shadowing someone, finding a mentor, those can all help you get to the next step.

9:05So coming up, if you're worried your contractor is overcharging, how would you actually know for sure? We'll break it down right after this with a quick word from our sponsor. You insured the walls, the roof, the plumbing. That means the building is protected, but the business may not be. Most real estate investors cover the property. But if you run deals through an LLC, manage properties, hire contractors, or work with clients, landlord insurance only goes so far. It doesn't cover lawsuits, professional mistakes, workers' comp claims, or cyber fraud. That's where Next comes in. General liability for real estate businesses.

9:38Errors and omissions for agents and brokers. Workers' comp. Cyber insurance. Coverage built for real estate operators, not homeowners. Protect your real estate business at biggerpockets.com slash next. We all joke that rentals are passive, but if you're spending nights matching receipts or guessing what a property earned last month, that's not passive at all. Baselain fixes that part of landlording, the financial chaos. Their banking and AI bookkeeping system automatically tags every transaction, updates cash flow insights in real time, and builds the reports you need for tax season. You can even automate transfers and move money around without paying wire fees.

10:10It's just cleaner. Sign up at baselain.com slash BP and get a$100 bonus. Baselain is a financial technology company and not a bank. Banking services provided by ThreadBank. Most investors spend all their time talking about their high-level returns, but that's not the number that actually matters. What actually matters is what you keep after taxes, and that's where multifamily real estate quietly stands out. With built-in advantages like depreciation, the right deals can generate steady cash flow while reducing the tax drag. BAM Capital structures its multifamily investments around those fundamentals, pairing tax efficiency with disciplined operators and a long-term approach.

10:48This isn't about chasing hype or guessing market timing. It's about building durable, tax-aware wealth over time. Learn more at biggerpockets.com slash BAM. Okay, welcome back. Our next question comes from Matthew in the BP forums. Newer to house flipping and also just moved to Charleston, South Carolina. I've got a 2-1, 900-square-foot house that needs a full rehab, including new roof. All new drywall, flooring, adding plumbing for washer, dryer, and dishwasher, getting electrical up to code, full kitchen and bathroom remodel, etc. My general contractor is estimating$90k in rehab. This is about$100 per square foot.

11:28Is this reasonable for the area or is he pricing this way too much? Even for a heavy rehab, I was expecting closer to$65 per square foot, totaling a$60k rehab. So this is roughly 30K more than what I was expecting. Would appreciate a fellow investor familiar with the region's opinion on pricing. Are you familiar with the region's pricing in Charleston, South Carolina? I actually know nothing about pricing for rehabs in Charleston, South Carolina. I am going to say I don't think. I think you'll agree with me. I don't think that we need to to answer this question as in a full gut rehab. So new roof.

12:16Let's say it's 900 square foot house. So let's break this down. Tony, if you were doing a 900 square foot house in, we'll say, Tennessee, because that's closer than Joshua Tree to South Carolina, what would the cost of a new roof be about? I actually haven't had to do a new roof in Tennessee, but we got quoted on a new roof for a property in California. And it was like five or six grand, I want to say. Yeah, that's exactly what it was for here. I did a duplex not too long ago and it was$5 ,000. Okay, so then flooring. My flooring guy charges, I think it's$450 per square foot, but that's including the flooring plus labor.

12:58So if we got 900 square feet at 450 a square foot, what does that come out to? My math genius. Oh, you're pushing it right here. Nine times four, 360 add-on. It's like a little over 5 ,000 bucks, give or take. We're just going to assume the whole place is getting LVP flooring, okay? Adding plumbing for washer, dryer, and dishwasher. sure. That I probably could say we have a really good relationship with our plumber and do a lot of work. So like sometimes things are like ridiculously cheap because they're already at another property or something like that. But I would say to add that like probably around $500,$600.

13:47It was reasonable. Okay. So we'll put another$500. I did skip the drywall. all new drywall i'm trying to think of what i did a property recently that we did like a bunch of drywall like uh we had to rip it all out because we did some structural improvements to the property but it wasn't like a full house that we did at all but i don't know what do you think for the the drywall i don't have a good sense of that because anytime that we've done drywall it's within the context of a larger rehab. So I don't even have a good context if I just wanted to replace a drywall in a property. Okay. We're going to put for drywall, mudding, we're going to assume every single wall, every single ceiling.

14:35We're going to put 10 grand. And then electrical up to code. So this can vary. Are you like a breaker box to replace the panel? that can be about a thousand bucks. I was going to say like two grand maybe in my market, you know. Yeah, but yeah, but you're updating the electric too. So it's not just the panel most likely that you're going to be doing. So let's do two grand. Full kitchen. So full kitchen, cabinets, countertops. It's small kitchen. It's a 900 square foot house. I was going to say 900 square feet. It can't be that large. so some cabinets the a new sink um assuming not new appliances like i'm doing i'm throwing in 20 000 for the kitchen yeah even that feels like a heavy amount you know but yeah i guess 20 grand you know for being a little bit more optimistic or not optimistic but giving a little bit more room here yeah and i mean i guess it depends on like the quality too like i i'm done with lowe's cabinets.

15:41I actually go to a cabinet place now, have them do the design, order from them. So a better quality that's going to last longer cabinet. I mean, appliances, you're looking at $5 ,000 just for appliances in a property, really. Because this is a flip, we have to remember. It's not a rental. And then the bathroom remodel. And he said it's one bathroom as well. Yeah, one bathroom. Okay. So let's say like a small bathroom, five grand. So what total does that get us to right now, Ash? That gives us 5, 10, 20, 40, 45, 46, 46, 50. 46, 50. And correction on my math earlier, 900 square feet at 4.5 is actually just over 4 ,000, not 5 ,000.

16:38So we can knock that down to call it 45 grand. We'll say 45 ,000. 45. Significantly less than the, what did he get quoted, you said 90K. But I think even before we go on, just the thought process that Ash and I just went through, you can do that even if you're remote. Even if you don't step foot into the market that you're flipping in, you can still look at the pictures, get an idea of the changes and improvements you want to make, call around to subcontractors or companies that specialize in installing kitchen cabinets like Ash just talked about, and you can get a ballpark quote on what that total renovation would be without even having to walk into the property.

17:21But I think, Ash, and let me know if you disagree here, I think the absolute best way to know if 90K in that market is reasonable is to go talk to three other contractors and see what the ranges are in those bids. And if everyone comes back at 90 grand, either they've all colluded to try and make sure that you spend as much money as possible on this rehab, or maybe for whatever reason, just the cost of labor in Charleston, South Carolina is higher. The most recent flip that I did was$30 ,000 just for the labor. It was bigger. It was a three bed, one bath, but we also finished off the basement too and added a bathroom into the basement also.

18:03And that rehab altogether was, I think, 80 ,000 with materials and labor, but it was way bigger than this two one. And we did really nice tile all throughout the kitchen, on the backsplash, on the floor. We did tile surround in the bathroom, tile on the floor. We did really nice finishes in this property too. And that was still less than that$90 ,000. And there's a lot of things that aren't even included that he didn't write out because you can get even more niche. So maybe it is closer to 90. I mean, you still got trim work. You still have paint, like light fixtures. Like maybe it could get there depending on how rough of shape this property is in.

18:53Our last flip that we did, it was just over 1 ,000 square feet. And we spent about$65 ,000 on the rehab. So we were at about$60 a square foot on this renovation. That included fully redoing the kitchen, new flooring all the way throughout. We didn't do any electrical work. We redid the bathrooms. We redid a lot of the decking. And yeah, we were all in for about$60 a square foot on that property. And that's in California, right? One of the more expensive, higher cost living areas to rehab in. So I think my gut is telling me that 90K is a little high. What's your take, Ash? Yeah, I think you can go back to the basics of like estimating out the rehab materials at first.

19:42So like make a list of every single thing that you would need as a material, a toilet, a vanity, a tub, a surround, everything you need, go room by room and then go on lows. This is going to take forever. It's super time consuming. But if you really want to learn your numbers and learn estimating and learn what prices are in your market, you can at least get really, really close to the materials and knowing how much the materials are. So if this contractor is saying 90K, but you go and see the materials are only 30 ,000, okay, That's a lot of labor costs that you have. And just go down your spreadsheet and put in, okay, at Lowe's, a toilet is this cost.

20:23A vanity is this cost. And even if you don't even know what toilet to pick, like you want an oval one, do you want a round one? Do you want one this low, that one said high, once that's heated? Just pick the average price of them and put that in there. So that's one thing that I did for a very long time. And that's how I learned the cost of materials. Now I have somebody that runs all of this for me, that rehab stuff. So it's not as familiar with me. But at first, every apartment turnover, rehab, that's how I was doing it. I was building out a spreadsheet of materials. And then I was buying the materials and hiring someone just to do the labor.

21:07So you've got a few options here, I think, to identify what should the correct price be. But even more so for all the Rickys that are listening, hopefully now you've got a framework on how you guys can validate prices for rehab work in whatever market it is that you guys land in. So we're going to take a quick break before we hit our last question. But while we're gone, be sure to subscribe to the Real Estate Ricky YouTube channel. If you guys are listening to this on audio, you can find us at Real Estate Ricky. And we'll be back with more right after this. Your rentals are insured. Your business may not be.

21:36Because once you're running deals through an LLC, managing properties, hiring contractors, or working with clients, you're not just owning property anymore. You're running a business. And businesses come with opinions, paperwork, and the occasional lawsuit-shaped surprise. Landlord insurance handles the building. It doesn't handle professional mistakes, workers' comp claims, or cyber fraud. That's where Next comes in. General liability, errors and emissions, workers' comp, cyber insurance. Coverage built for real estate investors, not just property owners. Protect your real estate business at biggerpockets.com slash next.

22:06When I bought my first rental, I thought collecting rent would be the hard part. Nope. The admin crushed me. Every night was receipts, tax forms, and checking who was late on rent. I kept thinking, if this is one unit, how do people run 10? Baselane changed that. It's BiggerPockets' official banking platform that handles expense tracking, financial reporting, rent collection, and even tenant screening all in one place. It's the system I wish I had from day one. Sign up today at Baselane.com slash BiggerPockets and get a$100 bonus. Baselane is a financial technology company and is not an FDIC-insured Bank.

22:34Banking services provided by ThreadBank. Member FDIC. Here's the truth about passive investing. If the strategy isn't right on day one, the returns won't save it. Multifamily real estate offers structural advantages many investors are overlooking, including depreciation that can help offset taxable income while cash flow continues. BAM Capital builds its investment with that reality in mind. They are focused on solid operators, tax efficiency, and long-term performance. For investors who want real estate exposure without being landlords and who care about consistency over hype, this is a smarter way to allocate capital.

23:07Learn more at biggerpockets.com slash BAM. Passive income sounds amazing until it involves 17 apps and active maintenance. That's where the Gemini credit card comes in. It earns you Bitcoin back on everyday purchases automatically. You use it like a normal credit card for lunch or gas or groceries. And every time you swipe, you earn up to 4 % back instantly in Bitcoin or one of over 50 other cryptos sent straight to your Gemini account. No points to track, no categories to activate, no waiting to redeem rewards. It just shows up and there's no annual fee, which is great because paying money to earn rewards has really never made much sense.

23:45So if you've been curious about building your Bitcoin stack without constantly thinking about it, this is one of the simplest ways to start. Go to Gemini.com slash card to learn more. Terms apply. See the link in the description for more information regarding rates and fees. Issued by WebBank. Some exclusions to instant rewards apply. This is not investment advice and trading crypto involves risk. Check Gemini's website for more details on rates and fees. You just realized your business needed to hire someone yesterday. How can you find amazing candidates fast, easy? Just use Indeed. When it comes to hiring, Indeed is all you need.

24:16That means you can stop struggling to get your job notice on other job sites. Indeed's sponsored job posts help you stand out and hire the right people quickly. Your job post jumps straight to the top of the page where your ideal candidates are looking. And it works. Sponsored jobs on Indeed get 45 % more applications than non-sponsored posts. The best part, no monthly subscriptions or long-term contracts. You only pay for results. And speaking of results, in the minute I've been talking to you, 23 people just got hired through Indeed Worldwide. There's no need to wait any longer. Speed up your hiring right now with Indeed.

24:50And listeners of the show will get a$75 sponsored job credit to get your jobs more visibility at Indeed.com slash rookie. Just go to Indeed.com slash rookie right now and support our show by saying you heard about Indeed on this podcast. That's Indeed.com slash rookie. Terms and conditions apply. Hiring Indeed is all you need. All right, we're back with our last question, and this one comes from Chris. Chris says, I managed properties for my father for 20 years. It's a long time, and I'm prepared to do what it takes to renovate, manage, and maintain my own portfolio. I have$100 ,000 in cash saved up to begin investing.

25:29I found a property. This is the opportunity. It's a 10-unit. Each unit is one bedroom, and the purchase price is$550 ,000. The exterior needs a lot of work, but the interior is finished and ready to go with less than a week's worth of renovation. Each unit has historically rented for$800 to$950 and is in a desirable area. There are no active tenants, but this appears to be the opportunity I've been waiting a long time for. I promised my wife I would not purchase any rentals with a personal guarantee to protect our house and our livelihood, but I cannot see a path toward getting a loan for this property that gives me a couple of months to get it renovated and occupied.

26:08My personal credit is over 800, but the LLC is only a few months old and I have no collateral beyond the 100K. I do have experience managing and renting for others, but this would be my first personal company-owned acquisition. What is the smart? Yeah. I like this question. It's one we really haven't gotten before. This is a new one, refreshing. And pretty much on every loan that I've done, whether the property is owned by me personally or an LLC, I still have been a personal guarantor on the loan. Even if the LLC is on the mortgage, you're getting a way better interest rate and it's a lot easier to actually get the mortgage too on the property.