4 To Do's Before Investing in Real Estate

Before purchasing real estate investments be sure to have these bases covered

September 08, 2025 • Estimated Reading Time: 9 minutes

🏠 Doing your real estate investment homework

1. Preparing your down payment funds

In most cases, if you want to buy a rental property, you're going to need down payment funds. Most lenders are going to require that for an investment property, you put 15% to 20% of your own money down in order to get approved for a loan for a rental property. Sounds like a lot of money. This is the largest financial barrier to enter real estate investing. For this reason, real estate investing tends to be a better option for people who have a decent amount of money already saved. If you're not in this category yet, you might want to consider building up your savings first before getting into rental real estate. Things can and will go wrong when you're jumping into a business without a lot of capital.

But if you're ready to get started and you don't have a whole lot of money for a down payment there's still a few other ways that you can consider investing in real estate. For example, it's possible to get an FHA loan for a rental property for only 3.5% down. The major caveat here is that you will have to live in the property for at least one year.

A lot of aspiring real estate investors who are trying to get started but are short on cash will go the FHA route, buy a multifamily property, live in one unit and rent out the others. Then they move out after a year and rent out the entire unit. This allows them to go ahead and start earning cash flow even if they were strapped for cash to begin with.

Keep in mind though that if you guys go this route, you'll also have to pay mortgage insurance, which can add on to your total cost.

2. Build your credit

If you're planning to get a mortgage loan to finance a rental property, then your credit is going to be extremely relevant. The higher your credit score is, the lower the interest rate you will most likely obtain from a bank. Of course, we want a lower interest rate on our mortgage because it means we'll have to pay less interest, which can lower your monthly payments. This will lead to more cash flow, and more wealth building. So if you're someone who currently has a low credit score, or if there's some other serious issues with your credit that haven't been addressed, then you may want to fix these before you dive into real estate. Get your credit score as high as possible especially before you go through the underwriting process. Ideally, you want to get your credit score above 700 and even above 730 if possible before you even start an application.

This will make things a lot easier for you when it comes to mortgages, and you can improve your credit score by using less of your available credit and keeping up with your payments or just making sure you resolve any errors on your credit report.

3. Speak to lenders

In my opinion, this is the most important step. Note that here I'm saying speak with lenders, not apply for a mortgage loan. Speaking to lenders does not hurt your credit, whereas applying for a loan can. You see, at this stage, the goal is to just get an idea of what mortgage you would be able to qualify for given your credit score and income. Don't give the mortgage company permission to run your credit yet, because that will most likely cause your credit score to drop a little bit. Just talk to them and ask them questions.

How much money could you get approved for based on your income, based on your credit? Yes, you can tell them your credit score.

A lot of lenders will give you an estimate for the amount of mortgage you could expect to be approved for based on the data that you provide them. They may ask you questions around your job and your business and your tax returns and if you're self-employed and for how many years. Just answer them and get projected quotes for mortgages you could expect to be approved for. This will go a long way towards helping you understand what kind of funds you could be working with to build your wealth in real estate.

This is crucial for allowing you to understand what types of properties that you actually can buy. Make sure that you don't skip over this step and make sure to converse, not apply.

4. Decide what property you can buy

There's so many different types of rental properties that you can buy.

For example, you can go the single family home route. Or you can go with duplexes, triplexes, fourplexes, condos, or apartments. There are a couple of key factors that you need to consider when you're making your choice. The 1st and the obvious is your budget. Obviously on average fourplexes are going to cost a lot more than duplexes. If you're just getting started and don't have a lot of money to invest, you may want to start out with an apartment or a duplex or a single family home. Also, I typically recommend that you avoid condos. This is because they tend to have large HOA fees that will diminish your profits. They also have very strict rules, which means that you could be severely limited in terms of the renovations or additions that you get to make to your property to help improve rents.

It also could be a good idea to just speak with some realtors in your area who have a solid understanding of the local market so you can get a recommendation for which type of properties to buy in that area. Local realtors often have a solid understanding of the local market. They may be able to give you some good insight as to which types of properties have the best values in your area overtime based off of historical information. This could end up helping you make a better financial decision.

🔥 Why Real Estate Investments Are A Triple Threat

Real estate is one of the only investments that has the following 3 benefits:

Appreciation: The value of real estate that you buy historically goes up over time. In fact the average appreciation of real estate in the US since 1967 is 4.27%.
Depreciation: As a real estate investor, you get the benefit of writing off any depreciation in your business for federal and state tax benefits. If you own a couple of duplexes that all have washers, dryers, ovens and other capital that depreciates, you can write off these business expenses.
Principle paydown: your tenants are paying down the mortgage on a piece of real estate. This means that over time you will own more and more of your real estate from a bank or a lender at the expense of a paying tenant.

👉Small business owners - how do you keep track of all your contacts and follow-ups?

Below is a set of unsponsored recommendations that are budget friendly to small business owners. Feel free to research each solution on your own and use your own guidance in deciding what would help most.

1. The Basics (Free)

Spreadsheet (Excel/Google Sheets): Create columns for name, company, email, phone, notes, last contact date, and next follow-up date.
Calendar Reminders: Use Google Calendar or Outlook to set follow-up alerts so nothing slips through.

2. Apps

Todoist - has a free version for a limited amount of personal projects
Asana - has a free version and sets clients and tasks
Trello - has a free version and distinguishes projects into boards
Smartsheets - a simpler excel that is easy to update mobile device friendly

3. CRM Systems (Customer Relationship Management)

These are designed exactly for contact management + follow-ups. Some good ones for small businesses:

HubSpot CRM (free starter version, user-friendly)
Zoho CRM (affordable and customizable)
Pipedrive (great for sales pipelines)
Insightly or Copper (integrates with Gmail/Google Workspace)

With CRMs, you can:

Store all contact info in one place.
Log calls, emails, and meetings.
Get automatic reminders for follow-ups.
Track deals and opportunities.

4. Specialized Tools (if you want automation)

LinkedIn + Sales Navigator: For networking and lead tracking.
Calendly + CRM: Automates scheduling follow-ups.
Zapier or Make (Integromat): Automates tasks like “when a new lead fills out a form, add them to CRM + set a follow-up reminder.”

Till next time,

Tax Hacks

^{The content provided in this newsletter is for informational purposes only and is not intended to be, and should not be construed as, professional tax, legal, or financial advice. While we strive to ensure accuracy, tax laws are complex and subject to change. Always consult with a qualified tax professional or financial advisor regarding your specific situation before making any decisions based on the information provided herein.}

4 To Do's Before Investing in Real Estate

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