Real Estate Rookie Podcast: Episode Summary Title: How to Fund Your First Rental (Rental Property Loans 101) (Rookie Reply)
Hosts: Ashley Kehr & Tony J. Robinson
Release Date: June 20, 2025
Podcast Description:
Real Estate Rookie by BiggerPockets is your go-to resource for building your real estate empire from the ground up. Hosted by Ashley Kehr and Tony J. Robinson, the podcast offers detailed breakdowns of real-world deals, one-on-one coaching sessions, and a supportive community tailored for beginners aiming to acquire their first few rental properties.

1. Introduction

The episode kicks off with Ashley Kehr and Tony J. Robinson welcoming listeners and setting the stage for the discussion on funding the first rental property. They share personal anecdotes about their own journeys from novices to successful real estate investors, emphasizing the transformative power of that initial investment.

Notable Quotes:

• Ashley Kehr [00:22]: "Now we've built rental portfolios, quit our jobs, and hit financial freedom. And it all started with that first deal."
• Tony J. Robinson [00:49]: "Every week on the Real Estate Rookie Podcast, we bring on rookies who are doing it right now and they'll show you exactly how they got started and their strategies and the steps to repeat their success."

2. Financing Your First Real Estate Deal

a. Assessing Your Finances

Ashley and Tony begin by advising listeners to thoroughly evaluate their current financial situation. This includes determining available liquid assets for investment and ensuring sufficient reserves to cover unexpected expenses.

Notable Quotes:

• Ashley Kehr [02:40]: "The first thing I'm going to recommend is what cash do you have? What do you already have that's liquid that you can deploy into your first real estate investment?"

b. Conventional Financing

They discuss traditional bank loans as the most common financing method, typically requiring a 20-25% down payment with the bank covering the remaining 75-80%.

Notable Quotes:

• Tony J. Robinson [03:24]: "You go out to a bank, you plop down 20 to 25%, and then they give you the other 75 to 80% of that mortgage."

c. Mortgage Brokers

Ashley introduces mortgage brokers as intermediaries who shop around for the best loan products tailored to the investor's needs, akin to insurance brokers.

Notable Quotes:

• Ashley Kehr [05:22]: "They go and find what loan product would fit you, which one is going to give you the best rate, which one has the cheapest closing cost."

d. Alternative Financing Options

Tony outlines various lending sources beyond traditional banks, including:

• Local and Regional Banks/Credit Unions: Often offer competitive rates and personalized services.
• Hard Money Lenders: Typically more expensive but provide faster access to funds.
• Private Money Lenders: Individual investors looking to earn returns by lending their capital.

Notable Quotes:

• Tony J. Robinson [05:50]: "You can go to a traditional bank, local regional banks or credit unions, hard money lenders, and private money lenders."

e. Creative Financing: Seller Financing

Ashley delves into seller financing, where the property seller acts as the lender, allowing the buyer to make monthly payments directly to them. This method offers flexibility in terms and can be tailored to benefit both parties.

Notable Quotes:

• Ashley Kehr [09:04]: "In seller financing, the person is not getting that lump sum of money. They say, instead of you going out and getting a loan, are you giving me cash of a lump sum for whatever the purchase price is, you're going to make monthly payments to me."

Example Scenario: Ashley shares her experience with seller financing:

• Down Payment: $20,000
• Mortgage: $100,000 amortized over 15 years with a 12-month balloon payment.
• Interest Payments: 7% interest-only for the first 12 months, allowing time to refinance with a traditional bank.

Notable Quotes:

• Ashley Kehr [10:15]: "So my payment was pretty low because I wasn't paying principal and interest. It was just interest. And that gave me time to fix up the property over those 12 months."

3. Do You Need a Real Estate License?

a. Pros and Cons

The hosts explore whether obtaining a real estate license is necessary for investors. They conclude that while it offers certain advantages, it's not essential for successful investing.

Pros:

• Access to MLS Data: Better and more timely information compared to public platforms.
• Potential Savings on Commissions: Investors can act as their own agents, saving on fees.
• Enhanced Knowledge of Transactions: Deeper understanding of the real estate process.

Cons:

• Costs and Time: Significant investment in obtaining and maintaining the license, including ongoing education.
• Additional Responsibilities: Handling paperwork, listings, and client interactions, which may detract from investment activities.

Notable Quotes:

• Ashley Kehr [16:21]: "We do not have our license. So let's kind of go through the pros and cons because there's definitely advantages to having your real estate license. But I would say that no, you do definitely do not need your license to invest in real estate."
• Tony J. Robinson [20:11]: "Unless you want to be a top producing agent and a real estate investor, don't get your license. Right. If you just want to have it, just to have it, it's probably not worth it."

b. Additional Insights

They compare obtaining a real estate license to other professions, highlighting that mastery of a tool isn't always necessary for effective use. They also mention alternative roles like general contractor licenses that might offer cost-saving benefits without the drawbacks of a real estate license.

Notable Quotes:

• Tony J. Robinson [16:45]: "As a real estate investor, knowing how to use the tool is sometimes enough, and you don't necessarily need to know the inner workings of the tool itself."

4. Understanding Cap Rates

a. Definition and Importance

Cap rate, short for capitalization rate, is explained as a key metric in commercial real estate that measures the rate of return on an investment property based on its Net Operating Income (NOI).

Notable Quotes:

• Ashley Kehr [26:38]: "Cap rates are often talked about a lot in small, multifamily, large, multifamily commercial properties. And you oftentimes don't see it mentioned much for residential deals."

b. Calculation

Cap rate is calculated by dividing the property's NOI (income minus expenses) by its purchase price or current market value. This metric excludes debt servicing and capital improvements.

Formula: [ \text{Cap Rate} = \frac{\text{Net Operating Income}}{\text{Purchase Price}} \times 100 ]

Notable Quotes:

• Ashley Kehr [28:34]: "The cap rate is calculated by what your net operating income is. So your income minus your expenses."

c. Application and Limitations

While cap rates are crucial for valuing commercial properties and comparing investment opportunities, they shouldn't be the sole basis for investment decisions. Other factors like appreciation potential, financing methods, and future capital improvements must also be considered.

Notable Quotes:

• Tony J. Robinson [29:38]: "But you've got to go back to like, what is your true motivation for investing in the first place."
• Ashley Kehr [30:46]: "This shouldn't be what you base your decision on. Oh, this is a great deal. This is a bad deal."

d. Practical Tools

Ashley highlights resources like BiggerPockets' Bigger Deals tool, which computes cap rates for listed properties, aiding investors in making informed comparisons.

Notable Quotes:

• Ashley Kehr [31:25]: "Just like any other metric or statistic, this is shouldn't be what you base your decision on. Oh, this is a great deal. This is a bad deal."

5. Conclusion and Resources

The episode wraps up with Ashley and Tony encouraging listeners to continue their educational journey. They offer a free tenant screening guide and remind listeners to subscribe, leave reviews, and share the podcast. Additionally, they reiterate the benefits of their sponsor, Baselane, for managing rental property administration.

Notable Quotes:

• Tony J. Robinson [31:36]: "The more you ask, the faster you grow."
• Ashley Kehr [31:52]: "Don't stress about getting a license. And make sure you're learning how to run your numbers."

Key Takeaways:

• Assess Your Finances: Understand your liquid assets and reserves before seeking financing.
• Explore Multiple Financing Options: Don't rely solely on traditional banks; consider mortgage brokers, hard money lenders, private money lenders, and creative financing methods like seller financing.
• Real Estate License Not Essential: While beneficial in certain aspects, a real estate license is not a prerequisite for successful investing.
• Understand Cap Rates: Use cap rates as one of several metrics to evaluate investment properties, acknowledging their limitations and the importance of other factors.
• Utilize Available Resources: Leverage tools like BiggerPockets' Bigger Deals and guides to enhance your investment strategies.

Resources Mentioned:

• Baselane: baselane.com/BP – Rental property management platform.
• Tenant Screening Guide: biggerpockets.com/tenantscreening
• Bigger Deals Tool: biggerpockets.com/biggerdeals
• Cap Rate Calculation: biggerpockets.com/glossary

Whether you're embarking on your first rental investment or looking to refine your financing strategies, this episode provides a comprehensive roadmap to navigate the complexities of real estate funding. Ashley and Tony's expert insights equip rookies with the knowledge to make informed financial decisions and set the foundation for a successful real estate portfolio.