How to Buy Your First Rental Property, Step by Step

Real estate is one of the most talked-about ways to build wealth, and it's a dream a lot of us grow up with: "bumili ng lupa," "magpatayo ng apartment," "magkaroon ng pangalawang bahay na paparentahan." But between rising property prices, loan requirements, and simply not knowing where to start, that dream can feel out of reach.

To help make sense of it, I want to share this excellent video from Graham Stephan, "How To Buy Your First Rental Property (Step by Step)." I've embedded it below so you can watch the full breakdown yourself.

A quick word on who he is: Graham is a real estate investor and personal finance YouTuber who started working as a licensed real estate agent in Los Angeles at just 18 years old. Over the years he's been involved in more than $120 million in residential real estate sales, built his own rental property portfolio, and grown his YouTube channel to millions of subscribers teaching people about investing, credit, and money management. He's also been featured in outlets like Forbes, CNBC, and Business Insider, so this isn't advice from a random influencer. It's coming from someone who has actually done the deals, over and over again.

https://youtu.be/bJx7_1rWC6U

The video is based on the U.S. market, so some specifics (credit scoring systems, loan terms, mortgage calculators) won't map exactly to the Philippines. But the underlying process he walks through, step by step, is genuinely useful for any Filipino family thinking about their first rental property. Here's the full breakdown, translated for us, plus a few of my own thoughts along the way.

A personal thought before we dive in: a lot of Filipino families dream of owning a second home or an apartment to rent out, and that's a good instinct. The problem is many end up selling it a few years in, not because the property lost value, but because the cash flow simply can't be managed month to month. This is exactly why Step 6 below (running the numbers before buying) matters so much. It's the difference between a property that quietly builds your family's wealth and one that quietly drains your savings.

Step 0: Save Up Your Down Payment First

Before anything else, you need capital. For an investment property, lenders typically want a bigger down payment than they would for a home you'll actually live in, usually 15–20% abroad. Here in the Philippines, banks often ask for 20–30% down on a second property or rental unit. The rule of thumb: don't expect to buy something big right away if you're just starting to save. Build the habit first, learn the process, and be ready to move once you have the funds.

Step 1: Get Your Credit in Order

Unless you're paying cash, you'll need a loan, and your credit standing determines both whether you qualify and how much interest you'll pay. In the Philippines, this means making sure your existing credit cards and loans have no late payments or items in collections. If you don't have a credit history yet, start building one responsibly through a starter credit card or a small loan you pay on time. The same logic applies here as abroad: clean credit gets you better rates, and messy credit either gets you rejected or costs you more every month.

Step 2: Have Your Income Documents in Order

Lenders don't just want to see that you make money, they want proof, usually an average of the past two years. If you're self-employed or run a small business, this means your Income Tax Returns (ITR), bank statements, and proof of assets or other liabilities need to be complete and consistent. Worth noting: here in the Philippines, banks will sometimes weigh your bank statements even more heavily than your ITR when assessing your actual cash flow, but that doesn't make the ITR any less important. It's still a core requirement, and having both in order (and matching each other) makes your application much stronger. One important tip that applies just as much here: if you're planning to apply for a loan soon, don't over-declare deductions just to lower your tax bill. A lower reported income means a lower loan amount you'll qualify for. It's a trade-off worth thinking through in advance.

Step 3: Talk to a Bank Before You Start House-Hunting

This is one of the most practical tips in the whole video. Don't fall in love with a property first and then find out you can't afford it. Talk to a bank or lender first, get a realistic idea of your loan eligibility, and then start looking. This saves you heartbreak, saves everyone's time, and means you can move fast the moment you find the right property, which matters a lot in competitive markets where good deals get snapped up quickly.

Step 4: See As Many Properties As You Can

Don't judge a deal in isolation. Look at everything within your budget, then bump your search up by about 15% just to see what slightly pricier properties look like for comparison. The more you see, the better. The goal is to view somewhere around 20 to 25+ properties (some investors go through 50 or more) so you start to genuinely understand why something is priced the way it is: what upgrades are worth it, what's overpriced, and what a well-priced, well-maintained property actually looks like versus one that isn't.

Without that comparison, you could walk right past a great deal and not even recognize it. Sites like Lamudi, DotProperty, MyProperty.ph, and local Facebook Marketplace groups make it easy to browse dozens of listings from home before you schedule a single viewing.

This also raises a question worth thinking through: should you invest close to home, or somewhere else entirely? There's a real case for buying in an area you actually know well, a neighborhood or province where you can see day-to-day what's happening: which areas are growing, where people are moving, where new developments or infrastructure projects are going in.

That kind of on-the-ground knowledge is hard to replace. For Filipino families, this could mean your home province, or an area you visit regularly. Buying somewhere unfamiliar, including a common situation for OFWs purchasing property without being able to physically visit, isn't a dealbreaker, but it does mean leaning much more heavily on a broker or relative you genuinely trust, since you won't catch the subtle local signals yourself.

Both approaches can work; just go in aware of the trade-off.

One more thing worth keeping in mind when narrowing down a price range: it's often smarter to target the median, or even slightly below the median, price point for the area rather than the very cheapest or most expensive properties.

Going too low-end usually means a harder-to-manage property and a smaller, riskier tenant pool. Going too high-end narrows your pool of renters, too. Sitting just under the area's average price tends to open up the widest range of potential tenants, keep the rent affordable enough to fill vacancies quickly, and still leave room to renovate and increase value over time.

Step 5: Pick a Property Type With Room to Grow

A useful local translation here: condos come with high monthly association dues (HOA-equivalent) that eat directly into your rental profit, and you have limited room to add value since you can't expand the unit.

Single-detached homes, duplexes, or small multi-unit rowhouses tend to offer more upside: more room to renovate, more flexibility, and often easier resale later on, whether to another investor or to a family who wants to live in it themselves.

Step 6: Do the Math. Cash Flow Is Everything

This is the heart of the whole process, and it's where most beginners go wrong. Before buying anything, calculate:

• Your monthly amortization (loan payment)

• Real property tax (amilyar), typically a percentage of assessed value depending on your city or municipality

• Insurance

• A maintenance buffer for repairs

• A vacancy allowance, assuming the unit won't be rented 100% of the time, especially in year one

  
  

Add all of that up, then compare it to realistic rental income for the area (check actual listings, not wishful thinking).

If the numbers don't work, if rent barely covers costs with nothing left over, it's not a good deal, no matter how much you like the property. And importantly: almost every property can cash flow, just not always at the asking price. Don't be afraid to offer lower if that's what the numbers require.

A benchmark worth knowing: Robert Kiyosaki has talked about a simple rule of thumb for a property you own outright (no mortgage): it should ideally generate around a 12% annual return in rental income. In practical terms, that means a fully paid-off ₱1,000,000 property should reasonably rent for close to ₱10,000 a month. Realistically, hitting that exact number is getting harder in today's market, especially in areas where property prices have climbed faster than rents. But it's still a useful gut-check number to keep in mind: the further your target rental income falls from that range, the more carefully you should re-run your numbers before committing.

Step 7: Look for "Ugly But Solid" Properties

The best opportunities are often properties where the important structural things (roof, foundation, plumbing, electrical) are fine, but the finishes are simply outdated: old kitchens, old flooring, dated paint.

These are relatively cheap and fast to fix, and the upgrade can meaningfully boost both the rent you can charge and the property's resale value. When choosing finishes for a rental, go durable over fancy: tile floors instead of carpet (which gets destroyed fast and needs replacing after every tenant), and sturdy countertops instead of anything that chips or stains easily. Tenants, fairly or not, are hard on a place. Build for durability, not showroom looks.

Step 8: Location Details That Are Easy to Miss

A few things you can't change once you buy: proximity to busy or noisy roads, or a lot that backs directly onto a commercial building or a large parking area. These tend to lower both livability and long-term resale value. Locally, it's also worth factoring in flood-prone areas, drainage issues, and proximity to schools, markets, hospitals, or transport terminals, all of which affect how easily (and for how much) you'll be able to rent the place out.

A personal add-on here: this is actually something I'm weighing myself right now while looking at rental properties. I've started prioritizing homes inside subdivisions or communities with 24/7 security, even if it costs a bit more. A rental unit isn't always occupied. There can be stretches between tenants, or times when there's no caretaker on-site, and an unsecured property just sitting empty is a real risk here. A guarded community adds a layer of protection you don't have to actively manage yourself, which matters a lot if you're not able to check on the property often.

Step 9: Make an Offer Without Getting Emotional

Work with a PRC-licensed real estate broker or agent you trust. A good one will help you negotiate, handle paperwork, and move quickly when needed; a bad one can genuinely cost you the deal. Keep in mind that a broker typically charges around 5–6% on top of the property cost, so it's a real expense to factor into your budget.

That said, it's often worth it: brokers usually have a wider network and access to sellers or off-market properties that never get listed online, deals you simply wouldn't find on your own.

They also save you a significant amount of time, which matters a lot when good properties move fast.

When it's time to make an offer, stick to the number the math supports. It's easy to get caught up in competition with other buyers and end up overpaying, but it's just as important not to lose a genuinely good deal over a small, reasonable gap in price.

Peace of mind and a solid property are often worth paying slightly more for.

Step 10: Inspect Before You Finalize

Once your offer is accepted, get the property properly inspected: structure, roofing, plumbing, electrical, and anything else relevant.

If possible, bring someone who actually knows what to look for, an engineer, electrician, or contractor, rather than relying on a walkthrough alone. Have them check things like whether the wiring and electrical panel are still safe and up to code, if there are any leaks or water damage, and whether the roof and foundation are in good shape. These are the kinds of issues that aren't always obvious just by looking, but can be costly to fix later.

Every property, even a great one, will turn up something. Use whatever you find to negotiate, either a price reduction or for the seller to fix the issue before closing. The worst they can say is no, and asking costs you nothing.

Step 11: Budget for Closing Costs

Closing a property involves fees beyond the purchase price itself. Here in the Philippines this includes things like transfer tax, registration fees, notarial fees, and depending on the transaction, documentary stamp tax or capital gains tax. These can add up to a meaningful percentage of the property's price, so factor them into your total budget from the start, not as a surprise at the finish line.

Step 12: If You're Renovating, Be Present

If the property needs work, expect it to cost more and take longer than any contractor initially quotes. Budget an extra buffer for both. And be on-site as often as you can, especially in the early days. Projects that aren't actively supervised tend to slow down or get deprioritized in favor of jobs where the owner is checking in. It's not about micromanaging, it's about making sure the work actually happens on schedule.

A personal note on contractors: where possible, I try to work with a contractor who's open to a "build now, pay later" arrangement, releasing payment based on completed milestones rather than paying everything upfront. It protects you from spending way over your agreed budget if something goes wrong midway. I also always get at least 3 contractors to bid on the same scope of work, and I ask each one to put their proposal in writing. From there, a helpful extra step is feeding all three written proposals into an AI tool like ChatGPT or Claude and asking it to compare them: which one offers the best value, what's missing from each, what questions you should be asking. It's just an added layer of due diligence, not a replacement for reading each proposal thoroughly yourself.

Step 13: Rent It Out the Right Way

Once it's ready, take genuinely good photos. This alone makes a huge difference in how fast and for how much you can rent it out. List it in multiple places (Facebook Marketplace, Lamudi, local community groups) rather than just one, and respond to inquiries quickly. Interested renters are usually looking right now, and a slow reply often means losing them to another listing. Screen tenants carefully before signing anything; this protects your cash flow far more than any renovation ever will.

Step 14: Rinse and Repeat

Give your first property some time, about a year or so, to get comfortable with owning and managing it before jumping into the next one. From there, it really is about repeating the process: save, buy, rent out, repeat. Each deal teaches you something the last one didn't, and over years, the small, steady wins compound into something substantial: extra income now, and an asset to pass on to your kids later.

Final Thoughts on How to Buy Your First Rental Property

What makes this video worth watching isn't a secret formula. It's the discipline behind each step: know your numbers before you fall in love with a property, run the math honestly, and don't skip the boring parts like inspections and closing costs.

Whether you're buying in Metro Manila, a provincial capital, or financing from abroad as an OFW, that discipline is what actually determines whether a rental property becomes a source of stress or a source of steady income for your family.

Watch the full video above for all the details in his own words, and adapt each step to your local market, your bank, and your family's goals.