Buying multiple rental properties requires the same steps as buying one—you’re still going to research the best spots and figure out how to manage your place effectively. However, you’re doing it on a larger scale, so you’ll need to be more organized and proficient to maximize your ROI. If you’re wondering how to buy multiple rental properties, the trick is to ensure your current properties are solid and well-established. You’ll also want to know about different property types, how to read local markets, and do some math on potential income and expenses. Let’s break it down into six easy steps.

1. Stabilize & Season Your Current Rental Property

If you plan to finance multiple rental properties, start by stabilizing your current one. Ensure you’re charging the proper rents, filling vacancies, minimizing tenant turnover, and considering any upgrades you might need. Lenders prefer to see fully stabilized properties when you’re looking for home equity loans or lines of credit. 

Also, be aware that some lenders have a “seasoning period,” essentially how long you’ve owned or financed the property. Investor-friendly lenders might only ask for a three- to six-month period, while more cautious ones could want you to wait about 12 months. Financing might be tougher than expected if you don’t meet this seasoning requirement.

2. Consider a Mix of Property Types

Different wooden houses representing different property types.

A diversified portfolio lowers risk and smooths returns by spreading investments across various asset classes, supporting long-term financial goals. Therefore, when investing in different rental properties, account for what types you want to buy, whether you plan to fix and flip, have short versus long-term rentals (or both), or manage an entire apartment complex. Also, consider how much positive cash flow you aim for. This helps determine which property type will give you a steady income, good appreciation over time, tax benefits, and solid returns based on the risks involved.

Different types of properties to consider:

RESIDENTIAL
Single-family residential
Preforeclosure homes
Apartment complex
Vacation rental property
Duplex, triplex, or fourplex multifamily buildings
Turnkey properties
COMMERCIAL
Offices
Leisure buildings
Retail stores
Healthcare
Warehouses and factories
Hospitality buildings
Residential with five or more units
Industrial complexes
LAND
Raw land without buildings
Raw land with subdivision plans or other blueprints and plans, perc tests, or utilities at site

3. Find New Rental Property Locations

Once you know what kinds of properties you’re interested in and how many you want to own and manage, start checking out listings on Realtor.com, Zillow, and Trulia. Partnering with a real estate agent is essential if you’re interested in buying multiple rental properties. They provide access to multiple listing service (MLS) notifications directly to your inbox with new listings based on your criteria. Non-agents don’t have access to the MLS, so working with an agent helps you stay informed and make better decisions.

Screenshot of Realtor.com property listings in Phoenix Arizona
Realtor.com property listings (Source: Realtor.com)

Realtor.com is a valuable resource from the National Association of Realtors (NAR), featuring 99% of properties listed through MLS from around 580 regional databases. It offers a free mobile app for buyers and sellers that allows users to search for homes, view photos and videos, compare neighborhood noise levels, draw search areas on maps, contact realtors, and use financial calculators.

Screenshot of Zillow Agent listings in New York
Zillow’s properties for sale (Source: Zillow)

Zillow offers a property listing database with over 135 million listings. Zillow pulls its listing info from both MLS and other sources. This platform makes it easy to sort through many criteria, find links to get prequalified for financing, and check out loads of how-to guides on buying and selling homes. It has many mobile apps, so you can research anytime and anywhere.

Screenshot of Trulia real estate listings
Trulia’s properties for sale by state (Source: Trulia)

Trulia is a convenient app for finding real estate, whether for buying or renting. It offers millions of listings, including apartments and condos, and features useful filters for narrowing searches by property type, size, and keywords. You can save searches, track favorites, share with others, and set up alerts for new listings. Additionally, Trulia provides personalized recommendations and mortgage tools like a mortgage calculator.

4. Evaluate Financial Projections of Your Rental Properties

If you’re thinking about how to purchase multiple rental properties, take the time to check out the rental market first, and don’t rush into any decisions. It’s super important to look at the financial projections, as this will help you and your business navigate any changes in the expected demand for rental properties.

Rental Property Cash Flow Projections

Cash flow projections are essential for tracking your finances, managing spending, and ensuring your plans are profitable. When considering multiple rental properties, prioritize positive cash flow over equity and appreciation since those can change significantly. The goal is to build a money-making business, so if your expenses exceed income, assess ways to increase earnings or reduce costs. Spend more on things like advertising for empty units or sprucing up the place, which can lead to higher rents and better profits.

Pro Tip: Investing for equity and appreciation is a viable strategy, but requires some expertise and money in the bank, so you don’t get in over your head with expenses exceeding income with no plan on how to cover them.

Critical Metrics for Evaluating Rental Properties

There’s no universal trick for determining if a rental property is a solid investment, so looking at different factors is smart. Many investors focus on three main things: the cap rate, cash-on-cash return, and return on investment (ROI).

Here are the three key metrics in evaluating rental properties:

  • Cap rate: It is the expected rate of return on real estate. It uses net operating income and doesn’t include mortgage debt.
  • Cash-on-cash return: The annual rate of return in relation to the amount of financing paid during the same year.
  • Return on investment (ROI): Profit made on the investment is a percentage of the cost of the investment.

Pro Tip: Using metrics to determine the performance of an investment property can help you avoid costly mistakes and stay on track with the goals you set in your cash flow projections.

5. Decide How to Finance Multiple Properties & Prepare Paperwork

Financing is a big deal when it comes to buying multiple rental properties. It can get tricky, especially if you want to own more than four. But don’t stress too much! Getting a little creative with your options can help. Many loans for investment properties are out there to help you build your rental portfolio. The best financing for rental properties depends on your finances and what you need. Check out the different financing types below for more info:

Financing Type
Best For
What It Is
Hard Money LoansFast, short-term financingShort-term (typically up to 12 months), interest-only mortgages. These loans can have rates from 12% to 18% but can be funded in 15 days. Shop around, as some may have lower starting rates.
Investment Property Line of CreditAt least 40% equity in a primary residenceA revolving line of credit collateralized by real estate. The maximum limit for a LOC is based on the property's available equity and typically won’t exceed 75% of the property's appraised value.
Conventional FinancingCredit scores above 660, 20%-30% down payment, fixed interest rateLoans that conform to guidelines set by Fannie Mae and Freddie Mac and are backed by the federal government. For investment property, lenders require 25% down.
Portfolio LoanLess stringent credit or fewer property requirementsUsed by investors who don't qualify for traditional financing due to owning too many rental properties or having low credit scores.
Owner FinancingCreative, short-term financingEasier terms than a traditional mortgage with monthly income for sellers. Sellers offering owner financing may want to hold the primary lien or charge a higher interest rate.
Retirement AccountBorrowing against retirement funds for a down payment or purchaseIf you're self-employed, use a self-directed solo 401(k) to buy investment property or an employee-sponsored individual retirement account (IRA). There may be restrictions and penalties.
1031 ExchangeReinvesting rental property profits into additional propertiesAllows investors to reinvest profits from selling a non-owner-occupied property into up to three other investment properties and avoid paying capital gains and depreciation recapture.
Blanket MortgagesBuying multiple properties and later refinancing or selling themA single loan that covers multiple investment properties. A blanket loan can have a 30-year term, but it’s common to find a short-term loan of up to five years that is amortized for 30 years.
Cash-out RefinanceInvestment properties with 40%-50% equityCash-out loans are a type of long-term financing with fixed monthly payments that are used to replace short-term interim funding.

When considering how to purchase multiple rental properties, the paperwork you’ll need to hand in can change depending on your lender and the type of loan you choose. But you’ll be submitting the same stuff as you would for a regular home loan. Regardless of loan type, be prepared to provide the following—in addition to any lender-required forms and applications—upon your lender’s request:

  • Personal and business tax returns: At least the two most recent years
  • Pay stubs: At least the three most recent pay periods
  • Bank statements: At least the three most recent statements
  • Explanation of prior experience: While some lenders are open to first-time investors, most will require that you have prior real estate investment experience.

Benefits & Challenges of Financing Multiple Rental Properties

Financing several rental properties might seem stressful, and there are undoubtedly more hurdles to get through than with a single mortgage. However, with so many options available, investors with good financial histories will find a way that works for them. If you’re wondering how to purchase multiple rental properties, exploring various financing options, understanding the market, and effectively managing your risks is essential. Check out the table below for a rundown of the benefits and challenges.

Benefits
Challenges
  • It can generate a steady monthly stream of income and build long-term wealth
  • Higher down payment requirements and interest rates
  • Tax benefits include deducting operating expenses, mortgage interest, and owner expenses. Investors can also pursue depreciation to reduce taxable net income
  • A higher cash reserve is required
  • It provides access to more cash to reinvest, for a down payment for additional properties, or to pay down a mortgage to increase equity
  • A credit score of at least 720 is required

6. Create a Plan on How to Manage Multiple Properties

As you discover how to buy multiple rental properties, decide whether to self-manage the properties or hire a property manager or company. If you hire a management company, you’ll likely pay between 4% and 10% of the gross rental income in property management fees. But if you manage multiple properties by yourself, it’s wise to set up a separate limited liability company (LLC) and sign up for online rent payment services and property management software.

Whether you or someone else manages your rentals, you will handle the finances, maintenance, and tenants. Management companies or property management software can help manage tenant-related issues, tenant screening, property maintenance, banking and finances, escrow deposits, and paying bills, as well as provide additional liability protection.

Screenshot of some Baselane’s feature
A look at Baselane’s features (Source: Baselane)

Dealing with rent collection can be a hassle for independent landlords. That’s where online rent collection software like Baselane comes in handy. It makes it easy for tenants to pay their rent, which helps landlords keep track of payments and manage their properties. Baselane offers many useful tools—like automatic late fees and quick payment options—that cater to different landlord styles and tenant needs, making life simpler for those handling rentals.

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FAQs

Bringing It All Together

When buying and financing multiple rental properties, it’s important to check out the house’s condition and potential ROI. The steps I covered will help you consider diving into property investments next time. Remember to be thorough and strategic at every step of the buying process—that’s how you’ll reach your goals and succeed in the rental property game.

If you have any thoughts or experiences on buying multiple rental properties, how to qualify for an investment property loan, or are well-knowledgeable about the different requirements for a rental property loan, feel free to comment below!