How to Buy Investment Property: An Expert Shares 6 Tips
Learn how to buy investment property in 6 practical steps — from setting goals to managing costs — with expert tips from a 74-home rental investor.
Theodore Roosevelt once said that every person who invests in well-selected real estate “adopts the surest and safest method of becoming independent.” Experienced investors will agree that a well-selected property is key, but few would label the process as “sure or safe.”
However, with the right plan, patience, and determination, many ordinary Americans have found financial independence or helpful passive income through real estate investing. If you’ve decided to start such a journey, this guide provides six basic steps on how to buy investment property.
To help you avoid common pitfalls and set yourself up for success, we spoke with Drake Johnson, who, along with his wife Shelby, has purchased 74 rental properties. Johnson shares practical tips and what he and his wife wish they had known before buying their first one.
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1. Set clear investment goals
Before buying an investment property, it’s important to clarify what you’re hoping to achieve. Are you looking for immediate monthly cash flow, long-term appreciation, or a mix of both? Are you investing for retirement, your children’s future, or to eventually replace your income?
Johnson is the co-owner of Five Pillars Offers in Lexington, Kentucky, a real estate solutions team that purchases investment properties. He and his wife hold some of their units as long-term rentals; others are repaired and resold or “flipped.”
When someone is buying their first investment property, Johnson says the biggest mistake he sees beginners make is overestimating monthly cash flow.
“Rent minus the mortgage payment does not equal cash flow,” he explains. “You must plan for maintenance and repairs with 10%-20% of your rental income.”
Your strategy influences every decision you make — from the neighborhood you buy in and how you finance it, to what you need to hold back from rent payments. If you don’t have a clear end goal and realistic expectations, you’re more likely to get stuck with a property that doesn’t perform the way you hoped.
