Mike Swenson - How to Find Your First Investment Property
Are you ready to buy your first investment property but don’t know where to start? We break down a step-by-step guide for beginner real estate investors to find, analyze, and secure their first rental property. You’ll learn how to define your investing goals, pick the right market, secure financing, and discover deals using MLS, off-market listings, and local networking. We cover essential tips for evaluating properties, performing due diligence, making competitive offers, and setting up your first rental for maximum cash flow and long-term passive income. If you’re interested in house hacking, buy-and-hold rentals, fix-and-flips, or short-term rentals, this episode gives you the roadmap to start building wealth through real estate.
In this episode, you will be able to:
- Discover how to build a solid foundation in real estate investing that makes your first property purchase feel easy and confident.
- Uncover the secrets to pinpointing the perfect investment property that aligns with your financial goals and risk comfort.
- Explore smart partnership strategies that can multiply your investment power and reduce your entry barriers.
- Learn to analyze real estate deals like a pro, so you can spot winners before anyone else does.
- Navigate through financing options to find the best way to fund your investment without overextending yourself.
The key moments in this episode are:
00:00:00 - Starting Your Real Estate Journey with Self-Assessment
00:03:34 - Setting Realistic Goals and Managing Risk in Real Estate
00:07:48 - Choosing the Right Market for Your First Investment Property
00:11:13 - Overcoming Overwhelm: Passive Investment Opportunities
00:15:33 - Finding and Analyzing Real Estate Deals Effectively
00:21:00 - Due Diligence and Inspection Importance in Property Investment
00:22:24 - Completing the Investment Process and Building Experience
00:24:32 - Building Deal Flow and Closing Real Estate Investments
00:25:07 - Inspiring Success Stories and Taking Action
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Full Transcript:
00:00:00
But once I start to punch in some more numbers, then I start to see the picture as it becomes clearer, and then I can decide, yeah, this is something that I want to move forward. And that's how we found our first apartment property. We were analyzing multifamily deals for months, months, and we're helping investors buy properties. And all sudden, one came across our desk and we said, whoa, these numbers look better than anything we've seen before. What do we do?
00:00:25
Welcome to the Real Freedom show where we inspire you to pursue your passion to gain time and financial freedom through opportunities in real. I'm your host, Mike Swenson. Let's get some real freedom together.
00:00:44
Hello, everybody. This is Mike Swenson, the host of Real Freedom. If you want to get started on your real estate investing journey, check out our website, Freedom through Real Estate Dot com. That's Freedom through realestate dot com. We've got lots of great information for you, articles, all of our past episodes, content for you to be able to dig in, read and figure out as you go and build your investing journey.
00:01:08
And for today's episode, what I want to cover is for a lot of people, you know, we, we have a lot of very experienced investors on and a lot of times we want to go back to the beginning, right? If you're listening to this podcast you haven't started, you're trying to figure out, how do I get started? What are the baby steps that are out there? And today we're going to cover some step by step guide for beginners in real estate, how to find your first investment property, or how to get started investing in real estate. If it looks like partnering with somebody else, we'll get to that in a second.
00:01:38
So, you know, at the end of the day, you don't need to be rich, you don't need to have years of experience to get started in real estate investing. You just have to start. And so having done over 300 podcast episodes, been in real estate, now invested in real estate for running on over 15 years, there's a lot that I've seen and a lot that I've learned. And so I want to be able to help you guys with that journey. And so the way that I like to start is, you know, number one, start with a self assessment.
00:02:07
Think about what do I have that I can offer in terms of value. So I've called this, I've seen this before in some other real estate investing platforms. And so this isn't my idea, but I've seen kind of this value triangle and so if you picture three sides of a triangle, you've got on one side, time, on the other side you've got money. And then the last side you've got expertise. And so you're looking at those three areas.
00:02:33
What do I have, what can I bring to the table? Now if you're new, we know that you don't necessarily have expertise. And so you're looking at time and you're looking at money. So the money may have come from somebody else, but maybe you have a relative, maybe you have a business partner, a friend, somebody that wants to help you and stick some money in. If you don't have any expertise, they might not have done that for you right away in terms of investing in you.
00:03:00
So maybe you do have your own money. A lot of people do start with finding an investor partner, a family member, something like that. So that's certainly okay. So then the other side of that triangle is time. And so that's probably where you're gonna start here is, is putting in a lot of time.
00:03:14
But I look at this as when you're looking to grow, when you're looking to figure your next steps are you are going to leverage others. And so it's good to kind of know what do I have and what do I bring to the table so that I can figure out what do I need help with and how can I grow faster. So start with that self assessment. Start with what you think you can provide as you continue to grow. So that's step one.
00:03:34
Next we're going to talk about goals. So I would start by saying you don't have to overthink this right away. I think in some ways when we set real estate goals we then have to feel like we have to wait, we have to wait for the perfect opportunity come along to be able to move forward. You're essentially stretching your risk taking muscle here. So if I go to the gym, I haven't lifted weights in a long time, I'm not going to go bench 225 pounds, 250 pounds.
00:04:04
Right. I'm going to start with the 10 pound dumbbell or the 25 pound dumbbell. Wherever you are getting started. And so you are flexing your risk taking muscle over time. And so you're really looking at how do I go from nothing to something with a reasonable amount of risk.
00:04:22
And so for me, our first property, we got into investing because we had to. We bought at the top of the market, our townhouse tanked in value and either our option was to live there for the next 10 years, short sale, foreclosure or turn it into rental. So we did end up living there for a couple of years and, and we turned it into rental. And for us the risk was my wife had a coworker who wanted a townhouse to rent because they were planning on moving back home. They lived in a different state and they only wanted something for a year.
00:04:52
So now I've got somebody looking for a property, I have a renter lined up before we're willing to make that move. So that was a way for me to mitigate risk. The second property that we had was a flip project. I only started looking at those flip projects because I had a relative who was looking for a different rental situation and wanted to get out of the rental situation they were in. So I looked at the numbers and I said, how much is this person looking to spend on a rental?
00:05:20
I figured, okay, that's going to cover about half of what I need. As I started to look at properties and I started to look at what potential rents would be. So I said, I just go have to go find another rental. So I kind of mitigated my risk by 50% by already knowing who was planning on renting that property. Then they just stayed month to month until we found the property.
00:05:39
They gave their notice, moved into our property and then I posted, found the other rental. So I had mitigated half my risk. So today I'm taking larger risks, but I'm doing it because I kind of built off of the back of those smaller risks right off the bat. So as you're doing this self assessment, as you're starting to look at your goals, think about what is a risk that I'm willing to take here. I would worry a little bit less about the strategy right away.
00:06:06
I would look at how do I find a way to get started. So whether that is, you know, a buy and hold, some sort of house hack, fix and flip, short term rentals, whatever that might be, think about how can I start and be comfortable with taking a risk now buy and hold, like I said, for me, I had a renter lined up, I had somebody that I knew and so I started to figure out what their criteria were to find a rental that fit for me. If you choose to go house hacking, the mitigated risk there is, you have other tenants I would shoot for if you could afford to and make it work financially. Something like a triplex or a fourplex so you have more than just one person paying your rent. You could also just live in a House, right, and rent out bedrooms, depending on where you're at in life and depending on what, what your situation is.
00:06:52
So that's another way to minimize risk. Fix and flip. You've got to be comfortable in your numbers. However, by fixing it up, you're adding value. And so in their lies some kind of risk mitigation strategy.
00:07:05
If you do fix it up and hold it, you're maybe getting it at a lower price, maybe you're putting some sweat equity into it. So that's a way to minimize your risk. So as you're looking at those goals, assess what your risk level is and what's a risk you're willing to take. And therein go choose something that's going to be acceptable for you in terms of risk. So you may want to get into apartment investing or self storage, something like that.
00:07:29
And maybe you realize off the bat that's a bigger risk than what you want to do. So just get comfortable with something. Do something. I am a person who tries to overanalyze things. And more and more, the longer I'm in this, I like to tell people, you just got to do something to get started.
00:07:44
So find a calculatable risk that you're willing to take and move forward on that. All right? After I've decided what I want to do now I'm going to choose. Where am I going to do this? When analyzing a market, once again, I'm trying to figure out where, what's a risk that I'm willing to take.
00:07:58
You could look at other cities, you could look at other states, you could Google the most attractive rental market in the United States and go find something there. What I tend to lean on, right? And going back to what's a risk I'm willing to take is choose what you know, something close to home, something close to you. So going back to me getting started, we rented out the townhouse we lived in for a couple of years, right? I knew the market, I knew how the numbers were.
00:08:25
I was comfortable with it. I had lived in the home. So if somebody had questions about the home, it was easy to answer. It was in a townhouse. There was an association.
00:08:34
They covered a lot of the stuff that I didn't have to cover as a landlord. All the exterior maintenance, different things like that. When it came to the house that we fixed up, I chose a property that was literally between my job and my house. And at that time, the house that I lived in was the townhouse that we were renting. So we kind of were doing both of these at the time, Same, same time.
00:08:55
And so I was constantly driving past. So sometimes after work I would drive past her on the way home. I'd have my tools in the car, work on something. Obviously on the weekend it was a little more inconvenient, but then if something came out throughout, throughout the day, maybe the tenant had a concern, pop by and take a look at even just to check on the house, make sure everything's going okay. I had more than enough reason Monday through Friday, morning and night to drive past that house.
00:09:20
It was two blocks out of my way. So I would lean more towards. Choose something you know and something you're comfortable with first. Once again, to build that flexible muscle. You can choose something out of state down the road.
00:09:32
You can choose the most attractive market in the world for whatever your strategy is down the road. But start with something you know, you're flexing your muscle. So if I get past that, as I'm looking at markets, right, you're looking for something that's growing, you're looking for some great job growth, some population trends, hopefully going upwards. As I start to analyze deals in different cities, we look primarily in Minnesota. We've also looked at some of the other cities in other states.
00:09:57
One of the first things I do is I just Google city name and population. And then when you Google that it pops up like a 20 or 30 year trend. You can see over the last 30 years, has it gone up, has it gone down, has it stayed the same? If it stayed the same, I look into it a little further. If it's gone up, I like it to a little bit further.
00:10:15
If it's gone down, I typically don't because it means when I'm trying to sell supply and demand over time there's probably going to be more supply and less demand. And so I would consider something neutral in terms of population if I had other great reasons why I decided on that. Otherwise you're looking for something with a positive population growth and then you can get into the nitty gritty of you know, what jobs, what employers, you know, so and so just put in a new factory or a new plant here. So now I want to invest in here so you can do that. So analyzing the market's important.
00:10:49
There's a ton of great data out there. Chat GPT has a ton of great stuff. I would still verify information in Chat gbt. You can Google best places to rent, how to find rental markets, things like that. So step one, analyze yourself, analyze your situation, analyze what you're willing to take risks on steps Step two Choosing a Good Market Are you looking to get started or scale in real estate investing but don't know your next step?
00:11:13
Are you overwhelmed thinking about finding deals, analyzing deals, doing due diligence and managing properties on top of it? Go ahead and push the easy button and invest with us. Real estate investing is what we do full time. We've done dozens of deals with hundreds of doors. We have the knowledge and experience to hand pick the best deals that most investors can't find.
00:11:32
Fine. We've at large off market deals all the time where you can hopefully find returns and economies of scale that you just can't find on your own. The best thing is it's 100% passive to you for less capital than you put down trying to acquire a property on your own. Don't let this year go by where you don't make the leap, add to your portfolio or you just sit in analysis by paralysis. To find out more, visit freedomthroughrealestate.com and click on Invest.
00:11:57
You can book a call and learn more there. So get to scaling your portfolio now with us by your side. Number three, financing. So that goes back to the time money expertise, right? So going back to the money side of that, I'm moving forward with something I have a handle of about how much money I need.
00:12:15
Take a look. And what do you have for money? Do you have enough to cover that or are you willing to bring in a partner and so talk to somebody, figure something out or go talk to a bank. One of the best pieces of advice I give people, go talk to a bank and say, hey, here's what I'm looking to do. I want to invest in real estate down the road.
00:12:33
What would my financial situation need to look like or what would you be looking for to approve a project like this? I love smaller local banks because they're more willing to work with you, they're more willing to educate you. If you go to a large bank, it's a little bit more cookie cutter. Hey, you don't fit this buy box, but here's the buy box. So that's a good place to start.
00:12:53
Oddly enough, one of the banks that we use for our rental properties is a bank that I went to probably 15 years ago looking for a construction loan. So I had driven around to local banks, said, hey, we're considering putting an addition on our house. What would that look like? What would the terms be if you were to offer on something like that? And it was a bank that I had already talked with and Now I found out that they like investing in real estate, so I came back to them.
00:13:19
Smaller banks love good relationships. And so you don't have to feel like an idiot, I ask banks tons of questions all the time of what would you do here? What do you think of this? And so it's totally okay. That's why a bank is there.
00:13:33
They're there to be a resource for you. So go into a bank, hey, I don't know you. Here's what I'm trying to do. What do you think? What would I need to have happen?
00:13:41
And they can guide you through. If you were to find a partner, then what would be some of those parameters? If you were to find income or down payment, how much would you need? And then now you've got a blueprint to go figure out to talk to friends or family or other potential investors to find. Fill that money side of the bucket for you.
00:13:59
So once you get the financing figured out, that also helps you. Then as you start to analyze deals in terms of what are the terms of the loans? Interest rate is just a number. So then if it's higher, right? If you're new, if you're doing something that you haven't done before, the bank might say, hey, I'm willing to finance this and here's the rate.
00:14:17
Okay, great. So then you've got to go find something that makes that work and fits within those numbers. And so it could be conventional loan. If you are doing a house hack, you know, you'd have fha, which is amazing. Low down payment.
00:14:29
Maybe you're using a hard money loan. They're less worried about your personal finances. They're more concerned about the finances of the property. You can find private money. Maybe you have a relative who might essentially issue the mortgage and you just pay them an interest rate back.
00:14:42
And then as you get more experience, you can figure that out. With banks, they want to see experience over time. Because you don't have any experience. It kind of goes back to my original point. Find a way to get some experience, right?
00:14:54
So when I went from having no rental history with anybody to having one rental, right now I can go to the bank the second time and say, oh, yeah, I've got this rental property. We've had this rental for however many years, or hey, we have this rental property, we had this fix and flip. Now we're looking to do X. So you are looking to build your, your resume on your bank with the experience that you have, which is why finding that beginner experience is so important and so Partnering with somebody might help to boost your resume. So think of it as resume building.
00:15:23
So financing, you've got the terms, you've talked to banks, you've kind of figured out how to do that. So then you can start to run your numbers and you can start to look at deals after that. Next step, we are going to try to find some deals. How do we go find deals through the mls. I continue to say, at least here in Minnesota there are deals to be had on the mls.
00:15:43
What I like about the MLS is it's public. Everybody knows you want to see that property. People are actively willing to sell that property. When you do stuff off market, there's red flags, there's secrets that kind of get buried under the table. It's harder to get information.
00:15:58
You might be trying to buy a property that the tenants may not know that it's being sold. And so you have to go through and be sneaky about it. And so the MLS is fine. And even as it starts with analyzing deals, the MLS has all the information public so you can start to run numbers on figuring out what a good deal looks like. I always say the same example in terms of flexing your risk taking muscle.
00:16:25
You need to flex your deal analyzing muscle. Same thing. Not going to go into a gym and start lifting £250. I'm going to start with 25. And so analyzing deals.
00:16:35
The best way to figure out what is a good deal look like is by starting to analyze deals. What you might find on the MLS might not be a good fit for you, but at least gets you started looking at price potential, rents, renovation budgets, plugging in taxes, utilities, starting to see some of the calculations. So if you are looking for a deal analyzer tool, we have one on our Real Freedom website. Feel free to check it out but you're building that source so start with the mls. You can do that.
00:17:05
Reach out to agents that you know, newer agents are super excited to take on new clients. To help you find deals, reach out to them. You can go to a lot of the online platforms, join Facebooks, Facebook groups in terms of XYZ City, investment properties, off market, rentals, rentals, anything like that, join Facebook groups. There's a lot of stuff that people post in there. You can post your email address, hey, I'm interested in this deal.
00:17:31
Send me the information. So Facebook groups is a great way to find off market deals or at least get that pipeline started in addition to what you're finding on market, joining networking groups and then you can just drive around, drive around and find properties. If you see a property that looks like a dump, you could write a letter to the seller, you could reach out to an agent, figure out if the seller actually lives there or not. Find a way to contact them. They have skip tracing tools where you can try to reach out, but it's worth starting that way.
00:17:57
You're going to get better as you go and it's okay to fail. So start with something. Start to flex that muscle in terms of finding deals. So you're looking for lots of different areas where deals can come to you. That's going to help you with an analysis piece.
00:18:11
So after you start to find some deals, they're coming in now. We're going to look at analyzing properties. Depending on your strategy, you're going to have some sort of calculator. Like I said, we've got deal calculators on the Real Freedom website. So you can just go freedom through realestate.com we've got a deal calculator tool on there.
00:18:27
And just start plugging numbers in. You're not going to know what the numbers mean until you start to put numbers in. So rent, purchase, price, expenses, estimate of expenses, taxes, utilities. You may not know how to estimate utilities, but you can go find taxes. The tax number because it's in the MLS and it's in the property taxes.
00:18:44
If you go to the county, you can look up the property tax number. So you know that number. And so I always explain analyzing a deal is like a bullseye, right? So if I'm throwing darts, I've got the target there. You've got the big outer ring, then you've got smaller rings inside, smaller ring inside, smallering inside until you get the bullseye.
00:19:02
When I first start analyzing deals, I'm thinking the outer ring here. I don't have all the information. I'm looking to hone in the information. I don't know if it's a good deal. I could probably tell if it might work or if it's at least close.
00:19:16
If it's not, then move on to something else. If I can't find numbers that I think are going to be a fit, I'll go find a different property. But once I start to punch in some more numbers, then I start to see the picture as it becomes clearer. And then I can decide, yeah, this is something that I want to move forward. And that's how we found our first apartment property.
00:19:32
We were analyzing multifamily deals for months, months. And we're helping investors buy properties. And all sudden one came across our desk and we said, whoa, these numbers look better than anything we've seen before. What do we do? And so I talked to somebody who was helping me at the time, who was.
00:19:49
It was kind of a mentor role. And they said, you got to go get this under contract. And we said, well, we don't know how. We don't have investors. She said, well, just get it under contract first, then you can go find investors.
00:19:59
And so that's how we got started flexing our muscles, buying an apartment building. So it's the same way. But we didn't know what a good deal looked like until we started putting numbers in and analyzing those deals. So that's why the analysis is so important after that. Make offers.
00:20:13
There's a couple different strategies out there. You know, a lot of people like to just throw out a bunch of low ball offers. If I make X amount of offers a day, then it's just a number game from there. I personally think that wastes a lot of time throwing out a lot of offers versus just going to the one that you might like and, and figuring out what might it take to get an offer accepted. So I tend to put a little bit more time into that.
00:20:34
But you certainly can throw out a bunch of offers. A low ball. See what a, you know, see what a motivated seller is willing to accept as, as some people do. But that's a little less my strategy. It's certainly okay.
00:20:45
Once again, it gets back to flexing that muscle again. So you're getting used to writing offers and putting a number out there that you're comfortable with. So I think there's a lot of value there. But for me, I would just go to a property that I really like and figure out what would it take to get the deal done. So due diligence after that.
00:21:00
So if you've got a property, you've got it under contract, then you're doing the due diligence. I can't say this is important enough. You're buying a property that costs a lot of money. It's worth a couple of hundred bucks to spend some time in the due diligence to do an inspection. So property inspection, sewer inspection, sewer systems can cost a few grand if they're bad.
00:21:27
A sewer scope might cost you 200 bucks. Is it worth 200 bucks to know I might be able to save $8,000 or $10,000 in the future? Probably worth it. So put that into your budget. Know that I'm going to spend a little bit of money to be able to find a Good deal.
00:21:41
And it's just a process, right? So I might have to spend, might, might have a couple deals where it falls through during that inspection period. But I've got to be willing to take that risk if it's a good enough deal. So don't skimp on the due diligence. So figuring all that out, verifying your numbers, you're going to have some sort of inspection contingency period where if you don't feel comfortable, you can back out and you'll most likely get your earnest money back.
00:22:05
But take the time to do it right, make sure you understand the process. This is also a good learning experience. So take that time, find a good property, and then after that you go through the process, you get it closed. Now if you are doing a house hack, if you are doing a fix and flip after closing, then obviously the work has just begun. You've got to put the work into the property and we can talk about that.
00:22:27
But that goes into your numbers analysis. So from there it's, you know, finding the contractors, executing on the work and you know, kind of finishing off that strategy. And from there you've gotten from beginning to end through an investment property. And now as you start to look up, you can see, hey, is this something that I want to do again? Or I realized I didn't like that process, which with whatever that strategy is.
00:22:51
So if you did decide to do a fix and flip, you might decide, I don't really like fix and flips, I want to try something else. Or you might decide it's fine, I might see if there's something that's better out there for me. But now you've done something once and so whether you do it from A to Z yourself or whether you go A to Z with a partner, somebody who can share that workload now you've gotten through it. And so to me, what's the most important out of that is putting a plan in place, figuring out how to exercise that risk taking muscle. Figure out how to exercise the problem solving muscle.
00:23:23
Right? We can't be good problem solvers unless we have had problems to solve. If everything just goes perfectly, then I'm not executing on any problem solving, which is fine. But as you grow and get bigger, you're going to have more challenges, you're going to have more problems. So that's why I like the, the idea of exercising your problem solving muscle.
00:23:41
So that's what I've got for today. As we start out, just to kind of recap, like I said first, you know, Analyze what you have to offer, what can you bring to the table in terms of time, money, expertise. Maybe you go find a partner right out of the gate that can kind of fill in some of those areas for you. Go through, define your goals, define what kind of properties you like, select the market, select the area you're going to focus on, figure out the financing piece. Don't be afraid to talk to a bank and feel silly.
00:24:08
Ask them good questions. That's what you're there for. You could even go to a bank that you're not really interested in, ask them the questions. So then when you go into a bank that you are interested in, you've had a dry run at it, right? You've had a rehearsal.
00:24:21
And so go to a bank you don't want to utilize, drive to the city next door, talk to their bank, and then get all your silly questions out of the way. So then we talk to the bank of the person of the loan you want. Then you've got that figured out. So financing, finding deals, building a deal flow pipeline is next. Analyzing the properties, making the offers, doing the due diligence, and then closing.
00:24:40
So hopefully that was a good step for you. Hopefully that's a good start. If you want to get started investing in real estate, feel free to reach out to us at Real Freedom. We're always here to help you guys. I love seeing entrepreneurs succeed.
00:24:51
I love people figuring out ways to escape their W2 or adding a side hustle or doing something to build wealth through real estate outside of already what's going on. So check out our website, reach out to us. We're here to help. And go get that first property. We're excited to see what story you have to tell in the future.
