Buying Your First Investment Property
October 18, 2025
I'm in west Texas this week working on a commercial real estate/business listing. It got me to thinking about some of the past articles I've written on investing in properties. Below is an article that I published a year and a half ago. Since most subscribers came after that time, and since most have not seen this article I thought this would be a good time to revisit the topic. So, from May 2024, here is "Buying Your First Investment Property". If you are someone who is interested in real estate investing and aren't sure where to start, this article will give you some insight. Enjoy!
Buying Your First Investment Property
Let’s talk about acquiring your first investment property. Here are a few things to consider.
Why do you want to invest in real estate?
What type of property should you buy?
Where is the best place (city or state) to invest?
These are just a few of the legitimate questions you should have somewhat of an answer to when starting out.
Why Invest In Real Estate?
Maybe you want or need extra income to pay bills. Or maybe you want a safety net in case your job disappears for some reason. Maybe you would like to fire your boss! Wouldn’t that be fun to go into work one day and walk into the boss’s office, put your hands on his/her desk and lean in and say “You’re FIRED!”.
Real estate investing is also a very appealing retirement plan, providing monthly recurring income, increasing equity and huge tax savings. So let’s get started.
What Kind Of Property Should I Buy?
I always choose commercial over residential. Why? Less regulation, higher profit potential, longer leases ranging from 3 years to 20 years and in some cases beyond, potential for better tax savings, and better equity opportunities. Commercial properties are appraised differently than residential properties. Commercial real estate (CRE) is valued based on the income it generates. If you own a property and you increase the income on it the value goes up and so does your equity.
With a residential property (1 to 4 family property) you can raise the rents and lower the expenses all you want and it will not affect the value. Residential properties are valued based on the value of the houses in the surrounding neighborhood.
What Type Of Commercial Property?
There are 4 main types of CRE to choose from. Retail, Office, Industrial, and Multifamily(heavy on government regulation). Most investors eventually are drawn to one property type or another. That’s not a solid decision you need to make when buying your first property. It will come later.
My favorite type of property for beginners is a house that has been turned into an office. There are many out there and now that you are reading about them you will start to notice them everywhere. They are usually lower cost and attract stable long term tenants. They are easy to manage and almost always provide positive cash flow. They are excellent for any investor no matter how experienced they happen to be.
Sometimes it’s possible to find a house that has not yet been converted to a commercial property. When you are driving across town look for a busy street with heavy traffic that still has houses. Maybe the street has been widened and taken part of their front yards in the process. Or a neighborhood near an old downtown area that is surrounded by businesses. One of my favorite neighborhoods to search in is in a medical or hospital district. If it’s near a hospital there is opportunity.
Once you’ve found these areas check on the zoning for the properties. Do a search for the GIS Map for your city. That interactive map will give you all kinds of information including zoning. It’s common in some cities that a residential street is rezoned for commercial even though people are still living in the houses. Any single tenant or 2 or 3 tenant office building can be a great opportunity.
Retail can be the riskier property type for a beginner. There is a high failure rate in retail business meaning a high turnover rate in tenants. And turning over a retail space for a new tenant can be expensive.
I personally love industrial properties. Like retail they are probably not the best choice for a new investor. However I will likely write more about industrial properties in a later article.
Where Should You Invest In Real Estate?
I like to stay close to home or in a city that I am very familiar with. I have investor clients who come from California to invest in Texas. Mainly west Texas around the Midland/Odessa area. This is one of the best areas for industrial investment properties. The reason they come to Texas is to stay away from the California rules, regulations and taxes. They live in California but they avoid buying properties there. So there are legitimate reasons for going out of town and even out of state.
Advice For New Investors
My number one piece of advice when buying your first property is this: Start small. Unless you have a lot of cash, starting small is the best way to be safe, position yourself on the path to positive cash flow, and gain the experience you need to grow into larger properties. And always remember that if you own investment properties you own a business. You have to treat it like a business. Failure to do that is why so many property owners suck as landlords. They fail to realize that tenants are their customers. They have a choice to renew their lease or to move. They have a choice to take care of the space they rent. And they have the “word of mouth” power.
I have one investor client that is the best landlord I have ever seen. He treats his tenants like gold and always goes above and beyond for his tenants. And they love him for it and they stay in his properties. He is also my most successful and most wealthy investor client. So be the good landlord. Treat your investments as a business and you can become wealthy.
If you would like to read other past articles click here.