Want to split the costs of buying your first rental? Good call—partnering can make more deals affordable, plus it lets you combine different strengths (capital, yes, but also credit, time, skills).
Still, even with two people (whether you’re romantic or business partners), funding a first rental can be complicated: there are sometimes mismatched goals, often uneven credit, and it’s not uncommon for role-turn deals to turn sour. To avoid these issues, here is a practical how-to guide that walks you through the money and the mechanics so you get to closing with fewer unpleasant surprises.
Align Goals Before You Look At Listings
Start here: agree on horizon (buy-and-hold five years? Maybe 10? Or longer?), target returns, acceptable leverage, and exit plans. Whatever you decide, make sure you put it in writing. If one of you is after steady cash flow and the other wants appreciation, you’ll need a property and financing plan that balances both (or agree on who yields on which point).
Check Credit And Capital Honestly
Pull your credit scores and current debt-to-income numbers. Lenders still use personal credit for many loan types, and better scores get lower rates and higher LTVs. Compare liquid capital: down payment, reserves, rehab funds, and who will cover what. Make a simple ownership table (equity %) tied to cash-in and responsibilities.
Map A Budget And Model Cash Flow
Create a 12-month profit and loan statement: projected rent, realistic vacancy (use local data), taxes, insurance, maintenance, management, and a contingency. And run best/worst/most-likely cases. Use conservative rent assumptions because national reports show rent growth cooling and vacancy rates higher than the post-pandemic lows. So, when in doubt, assume softness.
Choose Your Market With Data
This is a serious investment, so don’t guess or eyeball anything. Look at all the important factors: vacancy, rent trends, employment growth, and new supply. National and regional reports (HUD, NMHC) will flag markets where demand outpaces new units; those tend to support steadier rents. A quick local rent comp check is mandatory before you write an offer.
Compare Financing Paths (Conventional, Helocs, DSCR)
Pick financing to match your goals.
- Conventional mortgages (with both partners on the loan): lower rates if both qualify; standard underwriting, debt-to-income, and credit matter. Good when you want the cheapest long-term carry.
- HELOCs or home equity loans (using one partner’s primary home): flexible and fast for down payment or rehab, but you’re using your personal residence as collateral. Higher risk and typically variable rates.
- DSCR loans (income-based): underwrite to property cash flow rather than borrower income. Lenders calculate a debt service coverage ratio (DSCR); usually NOI divided by annual debt service (or monthly rent divided by PITIA). A DSCR above 1.0 indicates income covers debt but lenders often look for 1.15–1.25 or higher. For example, if the expected annual rental income (after vacancy) is $50,000 and annual debt service is $40,000, DSCR = 50,000 / 40,000 = 1.25, the lender sees a 25% cushion. This is how many non-QM investor products underwrite, including offerings you’ll find discussed under Griffin Funding DSCR loans and similar programs.
Assign Roles And Responsibilities
Divide tasks by comparative advantage. Typical split:
- Capital provider(s): funds, reserves.
- Deal manager: sourcing and negotiating.
- Property lead: managing rehab and vendors.
- Ops lead: tenant screening, day-to-day management (or hiring a property manager if you lack time).
You should have a basic operating agreement, written down: ownership percentage, capital calls, profit distribution, decision thresholds, and an exit clause. Even simple partnerships benefit from clarity.
A Simple Closing Timeline
- LOI/offer accepted = earnest money (3–7 days).
- Inspection/repair negotiations = 7–14 days.
- Loan application & underwriting = 15–45 days (varies with loan type).
- Clear-to-close and final walk = 3–7 days.
- Closing day.
Keep contingencies aligned with financing timelines, so longer for DSCR or commercial terms, shorter for conventional when both qualify.
And keep reserves equal to at least 3–6 months of operating expenses, just in case. It’s also important to be flexible in terms of who brings what to the table: if one partner brings cash and the other brings labor/skills, reflect that in equity or preferred returns.
Finally, use conservative rent and vacancy assumptions. Market conditions vary, and national data show slowing rent growth, so don’t build returns on optimistic peaks. Be as realistic as possible.
