Chapter 15: The playbook: your first deal in 12 months
Fourteen chapters of math compress into one year of work: underwrite 50 properties, tour 10, offer on 3, close 1. The funnel sounds like a lot until you spread it over months 5 through 9, at which point it is two underwrites a week with a spreadsheet you already have. This chapter is the whole guide turned into a schedule, a one-page deal analysis, a first-90-days checklist, the vocabulary, and every number we have used in one reference table. Nothing here is new; everything here is in order.
A pace note before the calendar. Twelve months is a deliberate speed, slow enough to build reserves and judgment, fast enough to keep momentum. If your finances were ready before page one, you can compress the front half. If they were not, the front half is the work, and rushing it is how people end up owning a rental and a credit card balance at the same time.
The shape of the year
Months 1–2: get ready
The Personal Finance Guide's order of operations comes first, and it is a gate, not a suggestion: emergency fund full, employer match captured, high-interest debt gone (chapter 3 of this guide walks the rental-specific version). Then three decisions that everything downstream depends on.
Foundation
☐ Confirm the PF order of operations is done: reserve, match, no high-interest debt.
☐ Total your real entry price per chapter 3: down payment, closing at 2–5%, lender reserves, day-one capex, and your own 3–6 months of PITIA per door. (Marcus and Tina's $240,000 house took $87,200 all-in.)
☐ Pick your strategy from Part III: house hack, long-term rental, MTR/STR, or small multifamily, and write one paragraph on why it fits your money, time, and temperament.
☐ Pick one metro using data: job growth, population trend, rent-to-price ratios, taxes, insurance costs, and landlord law. One market, not three.
☐ Open a separate savings account for the property fund and automate the gap between what you have and the entry price.
☐ Pull your credit; investor conventional pricing wants roughly 680 or better, and fixing errors takes months, not days.
Months 3–4: build the machine
Deals are found by machines made of people and criteria, then merely confirmed by you. Two months is enough to build one if you treat each hire like the interview it is.
Team, financing, buy box
☐ Find an agent who personally owns rentals; ask for the addresses and the numbers, politely.
☐ Interview two or three property managers before you offer on anything (chapter 9). Their vacancy estimates and rent opinions are underwriting inputs, free.
☐ Line up an inspector and an insurance broker who works investor policies (DP-3 quotes, chapter 14).
☐ Get pre-approved with two lenders: one conventional investor quote (15% down on 1-unit, 25% on 2–4) and, if you are scaling or self-employed, one DSCR quote (chapter 6).
☐ Write your buy box (chapter 9): metro, neighborhoods, price band, property type, beds/baths, year built, condition floor, and your minimum cash-on-cash after honest expenses.
☐ Set up the spreadsheet or the chapter 4 deal widget with your saved defaults: 6% vacancy, 12% maintenance and capex, 8–10% management, real taxes and insurance.
Months 5–9: the funnel
The funnel is the discipline that replaces luck. Underwrite 50 listings with the chapter 4 numbers and the chapter 5 expenses, every line, every time, about 15 minutes each once your defaults are saved. Most will fail your buy box, and each failure calibrates you: by number 30 you will know your market's prices and rents better than most agents in it. Tour the 10 best survivors, because floors slope and photographs lie. Offer on the 3 that survive touring, at the price where your numbers work rather than the price the listing asks. Expect two rejections; the discipline is in not chasing.
Search discipline
☐ Underwrite 2–3 listings per week against the buy box; log every one, including the rejects.
☐ Re-check rents independently for anything that passes: comparable listings and a property manager's opinion, never the listing's claim.
☐ Tour the top 10 with your capex eyes on: roof age, HVAC age, water heater, panel, sewer era (chapter 5's replacement schedule).
☐ Write offers on 3 with inspection and financing contingencies intact; waiving them on a first rental is how tuition gets paid.
☐ When an offer is rejected, return to the funnel. The market supplies new listings weekly; your numbers are not negotiable, the price is.
If month 7 arrives and nothing passes your buy box, the answer is patience or a different submarket, never looser expense assumptions. A deal that only works with 0% vacancy and free maintenance is not a deal; it is a listing with your name on the mistake.
Months 10–12: close and stand it up
An accepted offer hands you to the Home Buying Guide for mechanics: inspection, appraisal, title, and closing run the same for a rental as for a home, with the wrinkles from chapter 6 (investor reserves, rent credit) layered on. Your job in these months is to keep the underwriting honest while everyone around the table wants the deal to close, and then to stand the business up properly.
Contract to keys
☐ Inspect thoroughly and reprice or exit on findings; the inspection contingency is your last cheap exit (HB guide owns the play-by-play).
☐ Re-run the full chapter 4 analysis with final numbers: actual taxes, the broker's real insurance quote, the manager's rent opinion. If it no longer pencils, it no longer pencils.
☐ Bind the landlord policy (DP-3) effective at closing; add the property to your umbrella.
☐ Open the property's dedicated bank account; every dollar in and out flows through it from day one (chapter 11, and your Schedule E will thank you).
☐ If tenants are inherited: estoppel letters before closing, leases and deposit accounting transferred at the table (chapter 11).
☐ If vacant: photograph everything, then run the chapter 9 screening pipeline with your chapter 14 criteria sheet.
The deal one-pager
Every property that reaches a tour gets this page, with no line left blank. It is chapters 4 and 5 in fill-in-the-blank form, and the blanks are where money disappears.
Deal analysis, every line
☐ Address, price, and the rent you verified (not the rent the listing claims)
☐ Financing: down payment, rate, term, monthly principal and interest
☐ Gross annual rent, minus vacancy at 5–8%
☐ Maintenance at 5–8% and capex reserve at 5–7% (roof, HVAC, water heater ages noted)
☐ Management at 8–10% even if self-managing, plus turnover reserve
☐ Actual property taxes (post-sale reassessment, not the seller's bill) and a real insurance quote
☐ NOI, then cap rate: NOI ÷ price
☐ Cash flow: NOI minus debt service
☐ Cash-on-cash: annual cash flow ÷ total cash in
☐ DSCR: NOI ÷ annual debt service (1.25 is lender comfort)
☐ All-in cash: down, closing, day-one capex, reserves
☐ The 50% rule sanity check, and a sentence on the exit
The first 90 days of ownership
Standing up the business
☐ Re-key or re-code every lock; test every smoke and CO detector the same day.
☐ Walk the property with your maintenance triage list (chapter 9): fix water, heat, and safety items now, schedule the rest.
☐ Put deposits in the account structure your state requires; calendar the itemization deadline rules (chapter 14).
☐ Photograph and document unit condition with dates, whether inherited or vacant.
☐ Introduce yourself or your manager to tenants in writing: where rent goes, how repairs get requested, who to call at 2 a.m.
☐ Fund the operating reserve to 3–6 months of PITIA and stop touching it (chapter 3).
☐ Start the depreciation file: closing statement, land/building split from the assessor, and a folder for every receipt (chapter 13 pays you back here every April).
☐ Calendar the year: lease renewal dates, insurance renewal, property tax dates, a quarterly walk-through.
Every number in the guide, one table
| Number | Value | Where it came from |
|---|---|---|
| Investor conventional down payment | 15% (1-unit), 25% (2–4 units) | Fannie Mae eligibility matrix |
| Investor rate premium | ~0.5–1.0% over primary rates | Chapter 6; Finvest Home Buying Guide |
| DSCR loans | 20–25% down, ratio 1.0–1.25, +0.75–2.0% rate | Chapter 6 lender norms |
| House-hack financing | FHA 3.5% down; conventional 5%; 1-year occupancy | HUD; chapter 6 |
| FHA self-sufficiency test (3–4 units) | 75% of market rents must cover PITIA | HUD; chapter 6 |
| Rental income credit when qualifying | ~75% of rents | Fannie Mae; chapter 6 |
| Vacancy budget | 5–8% of rent | Chapter 5 underwriting norm |
| Maintenance + capex budget | 10–15% of rent combined | Chapter 5 underwriting norm |
| Property management | 8–10% of collected rent, plus placement | Chapter 9 |
| Closing costs | 2–5% of price | Finvest Home Buying Guide |
| Selling round trip | ~8–10% of value | Finvest Home Buying Guide |
| Appreciation assumption | ~3%/yr (FHFA: 3.26%, Q3 2024 to Q3 2025) | FHFA house price index |
| Operating reserve | 3–6 months PITIA per door | Chapter 3 |
| Depreciation period | 27.5 years, building only | IRS Pub 527 / Pub 946 |
| Shared example deduction | $192,000 ÷ 27.5 = $6,982/yr | Chapter 13 |
| Recapture rate | Up to 25% of depreciation taken | IRS; chapter 13 |
| Passive-loss allowance | $25,000, phasing out at $100,000–$150,000 MAGI | IRS Topic 425 |
| REP status | 750 hours + more than half of working time | IRS; chapter 13 |
| STR loophole | ≤7-day average stay + material participation | IRS Topic 415; chapter 13 |
| 1031 deadlines | 45 days to identify, 180 to close, QI required | IRS like-kind exchange rules |
| QBI on rentals | 20% deduction; 250-hour safe harbor | Finvest Tax Playbook |
| REIT payout rule | ~90% of taxable income distributed | Nareit; SEC |
The vocabulary, all in one place
| Term | Plain meaning |
|---|---|
| 1% rule | Old screen: monthly rent ≥ 1% of price; a 2012 artifact, treat with suspicion |
| 1031 exchange | Sell a rental, buy like-kind property, defer the tax; 45/180-day deadlines |
| 50% rule | Sanity check: operating expenses run near 50% of rent, before the mortgage |
| ADU | Accessory dwelling unit: a backyard cottage or converted garage you can rent |
| BRRRR | Buy, rehab, rent, refinance, repeat: recycling capital, with failure points |
| Buy box | Your written purchase criteria, set before shopping so it can reject deals |
| Cap rate | NOI ÷ price: the speedometer for comparing buildings |
| Capex | Big-ticket replacements (roof, HVAC); reserved for monthly, spent rarely |
| Cash flow | NOI minus debt service: what actually lands in the account |
| Cash-on-cash | Annual cash flow ÷ cash invested: what your money earns |
| Cost segregation | Study splitting a building into faster-depreciating parts |
| Depreciation | Annual deduction for building wear: 27.5-year straight line |
| Disparate impact | A neutral-sounding rule that lands harder on a protected class |
| DP-3 | The standard landlord insurance policy form |
| DSCR | NOI ÷ debt service: the lender's coverage number |
| DST | Delaware statutory trust: passive fractional real estate, 1031-eligible |
| Due-on-sale clause | Lender's right to call the loan when title transfers (LLC wrinkle) |
| Estoppel letter | Tenant's signed confirmation of lease terms, rent, and deposit |
| Fair housing | Federal and state law banning discrimination in renting |
| House hack | Live in one unit, rent the rest, use owner-occupied financing |
| MAGI | Modified adjusted gross income: the passive-loss phase-out yardstick |
| Mid-term rental | Furnished 30+ day rental: nurses, relocations, insurance stays |
| NOI | Rent minus operating expenses, before the mortgage |
| Passive loss | Rental tax loss walled off from wages, subject to the $25,000 allowance |
| PITIA | Principal, interest, taxes, insurance, association dues: the full payment |
| Pro forma | The seller's optimistic projection; verify every line |
| Qualified intermediary | The required neutral party holding 1031 proceeds |
| Recapture | Tax of up to 25% on depreciation taken, due at sale |
| REIT | A company owning income real estate; pays out ~90% of taxable income |
| Rent roll | The list of units, tenants, rents, and lease dates |
| REP status | Real estate professional: 750 hours + majority of working time |
| Schedule E | The tax form where rental income and expenses live |
| Self-sufficiency test | FHA 3–4 unit rule: 75% of market rents must cover PITIA |
| Syndication | Pooled private deal: a sponsor invests your money, illiquid for years |
| T12 | Trailing 12 months of actual income and expenses |
| Turnover | The cost of a tenant leaving: vacancy, paint, leasing fee |
| Umbrella policy | Cheap extra liability coverage stacked over your other policies |
| Vacancy factor | Rent you budget to lose to empty months: 5–8% |
Buy the boring house
Every persona in this guide ends the same way the math does. Alana's duplex cut her housing bill by $1,020 a month and became a rental at 3.5% down. Marcus and Tina's $240,000 house earns its keep four ways at once, none of them dramatic. Sofia runs four doors like the business they are. Ray, who has seen every cycle since the nineties, keeps reserves that look excessive until the year they look prophetic.
Dev started this guide as the skeptic with $60,000 and a spreadsheet, and the spreadsheet won twice. In chapter 2 it told him REITs were the right vehicle while his career was moving fast, so that is where his money went. Eighteen months later, settled in one city, he started this chapter's calendar: criteria written in month 2, pre-approved in month 4, 50 underwrites logged by month 8. His accepted offer was his third: a plain 1980s duplex two miles from work that 46 of his 50 underwrites had quietly taught him was fairly priced. He will live in one unit, rent the other, and his all-in cash held back six months of reserves. Nothing about the deal would make a good screenshot, which he has come to regard as the best sign a deal can give.
The best deal is the one you can hold through the bad year, because chapter 5's bad year visits everyone eventually. Buy the boring house that pencils with honest expenses. Keep the reserves that make the furnace a line item instead of a crisis. Then let the four returns from chapter 1 do their slow, simultaneous work: the thin cash flow, the tenant paying your principal, the 3% that compounds on the whole price, and the depreciation sheltering it all until you decide what the exit looks like. None of the four is exciting in any single month, and together, over a decade, they are why the patient landlord quietly outruns the spectacular one.
Key takeaways
- The year has four phases: get the money and market right (months 1–2), build the team, loan, and buy box (3–4), run the 50-10-3 funnel (5–9), and close and stand up the business (10–12).
- The funnel is the discipline: 50 honest underwrites build the judgment, 10 tours check the stories, 3 offers at your price find the one seller who meets it.
- Never loosen expense assumptions to make a deal pass. Vacancy, maintenance, capex, and management are not negotiable; the purchase price is.
- The first 90 days set the next 10 years: locks, safety, reserves, the deposit rules, the dedicated account, and the depreciation file.
- Buy the boring house, keep the reserves, and let the four returns compound. Holding through the bad year is the entire strategy.
Sources: IRS Publication 527: Residential Rental Property · IRS Topic 425: Passive Activities · IRS: Like-Kind Exchanges, Real Estate Tax Tips · HUD: Fair Housing and Equal Opportunity · Fannie Mae Eligibility Matrix · Nareit: What's a REIT? · Finvest Home Buying Guide · Finvest Personal Finance Guide · Finvest Tax Playbook