The Best Types of Rental Properties for Beginners to Buy in 2026 (Rookie Reply)

Ashley:If you ever thought, I want to invest in real estate, but I have no idea where to start, this episode is for you.

Tony:Because today we’re not interviewing an investor with 200 units. Instead, we’re answering questions from real rookies who are in the messy middle, trying to figure out financing markets and what type of properties even make sense.

Ashley:This is The Real Estate Rookie Podcast. I’m Ashley Kehr.

Tony:And I’m Tony J. Robinson. And with that, let’s get into our first question. And today’s first question says, beginner investing questions. Where do we start to get our foot in the door of real estate investing? What is the first step? Is it financing? Is it finding a property? What should I be doing right now if I’m brand new?

Ashley:I love this question. What comes first? The chicken or the egg? Chicken

Tony:Or the egg, right? What does come first? The actual question is that a larva comes first. No, I’m kidding. I don’t know what the actual answer to that question is. But in real estate investing, in real estate investing, for me, what comes first is I guess I would break it down into a few different buckets. The first bucket for me is just general education. You’ve got to get familiar enough with the concepts, the key terms, the ideas. And you build that knowledge through things like listening to more podcasts, reading more books, watching YouTube videos, consuming the right content on social media, going to different events and meeting with people and talking with people. Just building your general knowledge, I think is the first step. As you’re doing that, the second step is, I guess, what I would call the mental bucket. And that’s really just doing maybe the inner work or the reflection of identifying why is real estate investing even important to me to begin with?What is it that I’m actually trying to accomplish? What tools, resources, skills, abilities, et cetera, do I have at my disposal? So just doing a self-assessment and understanding what is driving you to do this, what are your motivations? What do you want to get out of it? Because as you answer those questions, the general education that you’re doing, you’ll be able to start identifying which strategies, tactics, niches, asset classes actually align with what it is you’re trying to accomplish. So just that inner kind of self-reflection would be the second bucket. And then I think the third bucket is getting yourself financially ready. You, in most scenarios, need some level of capital, whether it’s yours or someone else’s, doesn’t matter. And usually you need some level of capital to make most deals work. So understanding how much cash do you have available to cover things like down payment, closing costs, renovations, setup costs, if you’re doing short-term and mid-term rentals, what kind of loan approval can you get?Can you get approved for $10 million worth of mortgages or can you get approved for $500 in mortgages?That’s a very big spectrum, so knowing where you land. But for me, those are probably the first big three. The general knowledge, self-assessment, and then your financial readiness.

Ashley:Yeah. And I think to his question, should you find the property first or find the financing? I think definitely the financing. It’s going to make it so much easier to actually get the property under contract if you already know where you’re going to finance the deal and to take yourself to closing. There have been a lot of times where I’ve found the property and then I scramble to figure out how I’m actually going to pay for it. And trust me, it is so much easier to have your financing lined up. And it’s really going to stink when you think you can get approved for something or you think you can finance something and then you already have it under contract and you find out that you actually can’t get that done. So I would say start with what Tony mentioned, those three things and the financing being the piece before you look for deals.But I would also start to look at what market you’re going to invest in and what strategy you’re going to choose based on your research and based on your self-assessment.

Tony:Yeah. I think the last thing that I’ll say is that the common mistake that we see with rookies is getting stuck in that dreaded analysis paralysis. At a certain point, you’ve got to commit to actually taking action. And the usual kind of line that I draw on the sand is that as you start to continue with your general education, at some point, a lot of the information that you’ll hear will start to sound redundant. And you’ll start to hear people say things and you’re like, “Oh, I know that. ” Or, “Yeah, I actually knew that already as well.” Or, “Yeah, I knew that too.” And when you get to that point, that’s generally a sign that it’s time to take some form of action. I think the last thing I’ll leave you with in this question is that a lot of people confuse the terms confidence and comfort.I can be confident in something while still being very uncomfortable with taking that step. But if we wait for the comfort to appear, then usually we never do the things that actually allow us to move forward in life. Said another way, it is physically impossible to be growing, to be doing something of substance that’s new, that’s pushing you toward growth, and to be comfortable at the same time, because by definition, growth means stepping outside of your comfort zone. So if you are one of those people who is constantly waiting on comfort to appear before you take that next big step, you’ll never move from where you are right now. So just from a mindset perspective, an important point for you guys to recognize as well.

Ashley:Before we jump into the next question, let’s take a quick break. And if you’re listening on your favorite podcast platform, make sure to leave us a review. We’ll be right back. Okay. Welcome back. Our next question today says, “I’m a first time investor looking to buy out of state. How do I choose the right market and where can I find data that shows positive cash flow? Are there tools or strategies to find the right remote investing markets as a beginner?” So actually one of my favorite things is if you are a BiggerPockets Pro member, you can actually use their market finder. And so basically it’ll give you a lot of data on different markets to see what actually fits your strategy and your criteria to see what might be a good fit for you. If you’re not a BP Pro member, we have a discount code for you so you can get 20% off, but you can use Ashley or Tony and she get 20% off if you’re interested in being a pro member to get access to that.But there are lots of other ways to try and identify a market. I think one of the first steps is to look where other people are buying that are doing the strategy that you want to do and you can use those as starting points. Read blog posts, read articles of like, here’s the top 10 cities to invest in for short-term rentals, but you’re going to take all of this information with a grain of salt. This is a starting point for you. You’re going to build that list of those markets. Then you’re also going to build another list of areas that you have an advantage in. So this is places maybe you’ve lived before where you know the streets, you know the area. This is where maybe markets where you have a cousin that lives there, that could be your boots on the ground. Maybe there’s another market where you have a real estate agent that you know and you trust and that you would use in that market.And you’re going to build that list of those cities too. And then you’re going to go through each of these cities and see which one fits your criteria. So which one is a price point that you can actually afford a property. So if you’re thinking, “Oh, well, I have a friend that lives in LA, they’d be great to help me with my property.” I also know an agent there, but you’re only pre-approved for a $200,000 house, you’re probably not going to be able to find a property in LA to buy. So that’s going to cancel out that market. So then you’re going to go list by list and go down from each city and you’re going to list out your criteria. You know you want a single family home. So you want to look at the price points of the single family home and what’s the median income of there.So if it’s very low income, but you know you need X amount of rent that the people living, most of the people living in that area can’t afford that rent, then you’re going to X out that city. So you’re going to look at what’s the rent that you can get for a property in that market. You’re going to look at the crime data and make sure it’s not like high crime and not an unsafe area. If you’re trying to buy single family homes with four bedrooms for families to live in, you’re going to want to identify a lot of your own criteria and build your buy box, and then you’re going to kind of go into the markets and dig deeper as to which one actually has potential for you to get a successful deal based on the information you know and how you want to run your deal.

Tony:Ash, that was a great tactical breakdown on the steps that someone should take to identify a market. I just want to add at more of a strategic thinking level or maybe just like a theoretical level, like how do you actually approach this from a mental perspective? The mistake that I see a lot of rookies make is that they treat market selection like, I don’t know, what’s a good metaphor here, like Cinderella’s glass slipper where it’s got to fit just perfectly or like Goldilocks and her porch where you got to find the one that’s just right. There are over 20,000 cities in the United States and there are I think over 30,000 plus if you include like all of the unincorporated cities and towns and villages, whatever it may be. Point is, there are a lot of potential options for an inspiring investor to potentially choose between.And because of that, there are probably hundreds, if not thousands of potential places that Ashley could go invest into, that Tony could go invest into, that you could go invest into where you would actually be successful. So the question isn’t, is there a market out there that’s the best? The question is, how can I identify the markets that actually check the boxes of what’s important to me? Some people value appreciation more than cashflow. Some people value more landlord-friendly states versus tenant-friendly states. Some people really want to make sure that there’s strong economic diversity. Whatever the criteria is that’s important to you, start with that. Start with what you want out of your investment, and then just find cities that actually match with what it is that’s important to you. And then the goal isn’t to find all of the cities or the absolute best city.The goal is just to find enough cities that match your criteria so then you can go start analyzing deals, becoming an expert in that market and submitting offers. So I think if we turn the equation around to first focus on you, your criteria, what’s important, and then we go to find cities that match, it becomes an easier process to identify the right market. All right, we’re going to take a quick break, but while we’re gone, if you have not yet subscribed to the Real Estate Rookie YouTube channel, give us a visit and subscribe @realestaterookie that way in addition to hearing mine and Ashley’s voices, you can see our lovely faces, but we’ll be right back after we’re from today’s show sponsors. All right, we are back with our last and final question for the day. Now, this question comes from the BiggerPockets Forums and it says, “How do you choose between a condo, townhome, single family, or multifamily for a first investment property?Are there pros/cons I should be aware of in general and/or especially in my market?” It’s a great question. Condos, townhomes, single family, multifamily. I think the first thing that I’ll say is that we have interviewed people across every single one of those asset classes who have done incredibly well. And whether it’s buying for rentals, we know people who flip condos, who flip town homes, who flip single family, who flip multifamily, who hold them long term, who wholesale them. You can take any of those asset classes and do well. So I honestly don’t even think the question of which one is better versus which one is worse. It’s which one makes the most sense for your specific situation. Maybe you’re in a market where there are just a lot of affordable condos and very unaffordable single family homes. And for you, the entry price on a condo makes more sense than the entry price on a single family home.Okay, cool. Then let’s go focus on the condos and figure out how to make that strategy work. Maybe you live in a market where there is a ton of small multifamily, and if you want a house act, that maybe makes the most sense for your specific strategy. Okay, cool. Then let’s go up to small multifamily. So I think the right question to be asking is, what is your strategy? What are you trying to focus on? What is their ample inventory of in your area and where do the numbers make the most sense? And if you answer those questions, I think picking between those becomes a little bit easier.

Ashley:Yeah. One thing I’ll point out is a couple pros and cons of, okay, a condo, you have a HOA, a homeowner’s association, you own your unit, but you don’t have any control over the actual building that is decided on by the HOA. The HOA can at any time decide that you can’t have any rentals in the condo. They could decide that everyone needs to put in 10 grand because they need a new roof. The same could go for a town home, single family, multifamily if they are in an HOA. So I would just make it look for an HOA that already has very clear guidelines, not even guidelines, but rules and regulations around whatever your strategy is going to be. I remember during COVID, there was this one investor that I followed on Instagram that had a condo in Florida, and the HOA decided that during COVID, they were not going to allow short-term rentals anymore, and that was it.They just decided one day, and the next day it was implemented. So we had to cancel short-term rentals. And I think I remember him trying to sue the HOA because the way they went about it and things like that, and he ended up having that unit sitting vacant, and I don’t know if he had to sell or what ended up happening, but just be aware of different things that can happen based on the property type. Another thing is insurance. How does the insurance coverage and cost vary from each of these things? I’ve had a single family home that was considered a townhome, but really it was a row home where the walls weren’t exactly touching, but they were close enough that it was labeled a townhome, but the insurance saw it as a row house. So it was very, very expensive for insurance because the way that it was or whatever.So there can be tons of nuances no matter which strategy you decide on, and it’s really just making sure you do your due diligence when looking. A property type that I really, really like is doing single family, and this has changed for me over the years. I used to religiously love small multifamily, but the reason I like single family is because of the resale value, is the exit strategy. So I can rent it out. And then when I go and sell the property, I am selling to families. I am selling to non-investors. I am selling to the masses. If I’m selling to a multifamily property, I have a very smaller buyer pool. Yes, it could be somebody house hacking, but most of the time you are selling to investors where with a single family, you have a bigger buyer pool. With multifamily, you also can reduce your risk of vacancy.And instead of just having a house vacant and no money coming in, if you have a four unit, you could have one vacant and still have three providing income. So there are definitely different pros and cons that come to it. So I think about your goals and what’s important to you and just do your due diligence of what’s the worst case scenario that can happen, and are there any things that I can do today to be proactive or to actually prevent those things from happening? Well, thank you guys so much for joining us on today’s Rookie Reply. If you have questions, you can head over to the BiggerPockets Forums and put them there. And most likely an investor will already answer your question, but we’ll be happy to bring it on the show too. I’m Ashley. He’s Tony. And we’ll see you guys next time.