Real Estate Pros · July 29, 2026 · 19 min listen

How to Buy Your First Rental Property With Limited Capital and Avoid Costly Mistake

Show summary

In this episode, Tim McNabb from St. Louis shares his journey in real estate investing, strategies for portfolio growth, and insights into managing rental properties effectively. Discover practical tips on property evaluation, team management, and market opportunities.

Key takeaways

Budget rehab costs using a 2.5x materials rule: a $500 materials job will cost about $1,500 once labor is paid, plus roughly 10% overage for surprises.
To buy a first rental with limited capital, secure 20% down for a commercial loan and finance the remaining 80%; Tim's first deal was a $40k roach-infested fixer-upper with about $25,000 in rehab funded partly by savings and partly by credit card.
Target three-bedroom, one-and-a-half-bath houses with a basement; the third bedroom commands a substantial rent premium while a fourth adds little, and slab (no basement) homes sell at a discount in his market.
At tenant turnover, reset everything to zero: fix what's broken and what's been noted rather than deferring maintenance, which reduces future call-ins and keeps the home safe and comfortable for tenants.
Use low-cost sourcing like Facebook Marketplace for used cabinets, dirt, and junk hauling, and pawn shops for power tools, to control rehab costs when acting as your own contractor.
A cash-out refinance can preserve capital on a profitable rental as long as the mortgage can still be carried; selling a property can also fund paying off other properties and saving for new acquisitions.
Spousal decision-making alignment matters: requiring agreement before pulling the trigger on upgrades or deals may cause you to miss some good opportunities but avoids far more bad ones.

In this episode

About the guest

Tim McNabb is a buy-and-hold rental property investor based in St. Louis, Missouri, who started investing around 2014 after trying securities, bonds, and precious metals. He co-owns three properties with his wife, acting as his own contractor on most projects, and works overnights as a security officer alongside his real estate activities.

Listen to the audio

“A job will cost two and a half times materials. That's just a starting point. So if you have a five hundred dollars worth of materials, that job's gonna cost fifteen hundred bucks by the time you pay somebody to do it.”
Tim McNabb

“If we're not in agreement, I might miss a good deal, but I'm gonna miss a lot more bad deals.”
Tim McNabb

“My stock portfolio never gave me a call at three in the morning telling me that the pipes have burst.”
Tim McNabb

buy and hold rentalsSt. Louis, MOrehab budgetinghusband and wife investing teamproperty managementtenant relationsregulatory riskcommercial financingcash-out refinancefixer-upper

Questions answered in this episode

How much should I budget for a rehab beyond materials cost?

Tim McNabb uses a rule of thumb that a job will cost two and a half times the cost of materials once you pay someone to do it. So $500 of materials turns into about $1,500 total. He also budgets roughly 1% of the property's purchase price for materials, then applies the 2.5x multiplier, plus about a 10% overage.

How do I buy my first rental property with limited capital?

Tim says you need 20% down to get a commercial loan in his jurisdiction (St. Louis), so whatever capital you have, you can leverage with 80% financing. His first deal was a roach-infested fixer-upper he bought for $40k after refusing to pay $5,000 more than his offer, then put about $25,000 into remodeling using savings and a credit card. He rented it for the mortgage plus 30%, and the cash-on-cash numbers still worked even after the extra rehab cost.

What property type gets the best return in Tim McNabb's market?

He targets three-bedroom, one-and-a-half-bath houses with a basement, calling it the 'butter zone.' He says there's a substantial rent premium for a third bedroom compared to a second, but not much additional premium for a fourth bedroom. A slab (no basement) house sells and rents at a substantial discount in his market.

How does a husband-and-wife team divide roles in managing rental properties?

Tim describes himself as the 'dreamer' who wants to add upgrades like new kitchens and dishwashers, while his wife is more grounded and reality-focused, often holding back unnecessary spending. He says after 39 years of marriage, if they're not in agreement on a deal, he might miss a good deal, but he avoids a lot of bad deals by requiring consensus.

What financing options exist for scaling a rental portfolio beyond a first down payment?

Tim mentions using proceeds from selling a house to pay off two properties and save capital for new purchases. He also discusses a cash-out refinance as a way to preserve and recover capital from a profitable rental while still being able to carry the mortgage, and references (without naming) a loan type that qualifies based on projected rental income rather than personal income.

What are the biggest external risks to small-scale landlords right now?

Tim points to the regulatory environment and anti-landlord sentiment, citing anti-landlord signs he saw in St. Louis during COVID. He also gives the example of a friend in central Pennsylvania where taxes are so high that rental income can't cover the mortgage, taxes, and insurance, meaning profit can only come from equity appreciation, not cash flow.

Resources and links

Full transcript

Tim McNabb (00:00)

if you’re a small investor and you’re handy and you want to get into this, just bear in mind that whatever you think you’re going to do, budget twice as much time as you think it’s going to be. And so, rule of thumb,

A job will cost two and a half times materials. That’s just a starting point. So if you have a five hundred dollars worth of materials, that job’s gonna cost fifteen hundred bucks by the time you pay somebody to do it, assuming you can get it for that.

Scott Bursey (01:55)

Welcome back to the Real Estate Pros Podcast, powered by Investor Fuel. I’m your host, Scott Bursey. And pros, today we are sitting down with Tim McNabb from St. Louis, Missouri. Tim and his wife have successfully pivoted from short-term rentals to their current investment strategy. They co-own three properties and manage them as a unified team. We’re going to discuss how they navigate portfolio strategy and daily operations together while scaling their business. Tim, welcome to the show.

Tim McNabb (02:29)

Thanks for having me, Scott.

Scott Bursey (02:35)

It is just wonderful having you here. And Tim, to help our pros get up to speed. Please give us the ninety-second highlight reel, if you will, of how your career ignited and where you and your wife are pouring your fuel now.

Tim McNabb (02:51)

Well, it kind of got started some years ago when looking for ways to invest capital. I’ve done securities, I’ve done bonds, I’ve even done precious metals. But far and away, rental properties—but I’m a buyer and holder—have outperformed everything by orders of magnitude. The only problem I have is that my stock portfolio never gave me a call at three in the morning telling me that the pipes have burst.

So there is always that. That’s something you need to take into account. We started that probably about 2014.

Scott Bursey (03:35)

Okay, well thank you for highlighting that, Tim. What really caught my attention about you was the way you’ve been able to transition your career strategy alongside your wife, proving that a partnership in life can be a competitive advantage in real estate. Speaking of which, curious to know, what is the greatest strength of your current husband and wife management strategy?

Tim McNabb (04:02)

Probably the greatest strength is that I’m the dreamer, and she’s the—I don’t want to say anchor because it sounds bad—but she’s more grounded in reality. So for instance, on our current property that we have, I said, you know what? If we put in a dishwasher and put in a new kitchen, even—and she said, No, we can’t really afford to do that. Let’s just get it rented. It’s like, but honey, we’ll rent it faster if it’s blah, blah, blah. No, you’ll take months to get this done.

But sweetheart, how about if I get these, look, I got used cabinets I can use here really? And she’s like, no, don’t do it. And then finally, I because she was so resistant to it, I went and did some research. And a new kitchen dishwasher wouldn’t have done jack squat. And so she was right all along. I was not wrong, but having her being grounded, if we were two people the same way, one of us would be non-necessary.

Scott Bursey (04:58)

I’ve gotta ask, how do you handle decision making when you both have different perspectives on a deal?

Tim McNabb (05:53)

This month I have been married 39 years and I have learned over that time that if we’re not in agreement, I might miss a good deal, but I’m gonna miss a lot more bad deals. And so I’m not trying to maximize my wins. I’m trying to find peace between us because she’s very smart and she’s very savvy, and I ignore her at my peril.

Scott Bursey (06:23)

We’re interested to hear what do you receive or perceive actually as the biggest hurdle in maintaining your current momentum while juggling life and property management, Tim?

Tim McNabb (06:38)

Probably finding the time to

If you take care of your properties, you don’t have to do a lot of maintenance. So if you just shove the cheapest possible thing in or ignore things that should be taken care of, especially at tenant turnover. At tenant turnover, I try to reset everything to zero as much as I can. I fix what’s broken. I fix things that I’ve noted. So for instance, with the current property, the temperature and pressure valve is leaking. Now I’m going to replace that valve, but that may not fix it. So now I’m looking

You know what? Let me see if I can find a scratch and dent water heater and I’ll park it there. And when it fails, because it’s gonna fail, at least it’s right there. And I can just swap it out. And being able to have not overextending your capital, not overextending your time, being willing to think ahead, being willing to think differently. I mean, most people would not look at Facebook Marketplace for used cabinets that are perfectly serviceable and are a huge upgrade.

For these tenants, not every tenant is they most of the tenants I’ve dealt with, they have made life decisions that made them not able to buy a house. And they’re actually paying more for that rent than they would if they were buying a mortgage. And so, what was I getting at? I want them to have a safe, comfortable home.

And I don’t want to treat them like, well, you don’t matter because you’re just, you know, you’re just a tenant. This is their home. And I want them to feel at home, which means I gotta keep the property up, which actually turns out I get less call-ins.

Scott Bursey (08:19)

It would be great to understand, Tim. Where do you see the most untapped potential in the St. Louis rental market for someone at your stage?

Tim McNabb (08:29)

I would say, I’m at a certain age where I do have some saved capital that I’m putting to work. We sold a house for a pretty good profit and we’ve taken that profit and we paid off two of our properties and we saved some of it to buy new properties. And so one of the things you can do is if you’ve got a lot of equity in your house, maybe you can find another place a little further out, a little bit different, and then or do a refi.

And you can have some capital and that would allow you to get your first property if you’re going to start out. I could probably what’s the name of the loan where they will secure it using the rent you’re gonna get out of it. It’s got a funny name to it. The name is escaping me because I haven’t needed it yet. But that’s another possibility. But again, they want to see a track record. And so, you know, if you have a couple of properties like I do, then you might be able to explore that.

If you want to preserve your capital, a cash-out refinance is also a possibility. So if you got a very if you got a really profitable rental and you can still carry the mortgage with the cash-out refi, that’s a way of recovering recovering your capital back out. But don’t let yourself get extended. My wife and I looked at our bank account said, you know what? We need to slow the spending down.

You know, we need to we’re gonna defer some maintenance that’s nice but not necessary. But always make sure you prioritize the real maintenance.

Scott Bursey (10:32)

Is there a specific property type you and your wife are focusing on right now, Tim?

Tim McNabb (10:37)

Three-bedroom, one or more bath, because that’s kind of like the butter zone. You get quite a you get quite a bump in rent for a third bedroom, but not much for a fourth. And it’s a pretty substantial there’s a substantial premium for that third bedroom. So the two-bedroom, one-bedroom, or even a one-bedroom house, even if it’s a lot cheaper, it still has a kitchen sink, a bathroom sink, a water heater.

All these things, they’re not that much cheaper, you know, to replace or repair. And so if you’re looking to maximize your profit in my jurisdiction, that three—that three-bedroom, one-and-a-half-bath with a basement. I have a slab house and there’s a substantial discount in the market for not having a basement. Did that answer your question?

Scott Bursey (11:30)

Absolutely. And looking at the horizon, what do you see as the primary external threat to small-scale rental operations in the current economy, specifically in the St. Louis market?

Tim McNabb (11:43)

Communists. I mean, in all seriousness, I’m really not kidding. During COVID, everywhere I went downtown, up and down like Grand Street, there’s people like anti-landlord signs and posters. And our properties, I have one property in the city, two in the county. And the reality is that the regulatory environment matters.

And it’s not just that. So for instance, a friend of mine wanted to get into real estate investing in Pennsylvania, central Pennsylvania. And every time I try to run the numbers, it’s like, dude, you’re only going to make money on equity. You cannot rent this enough to cover the mortgage and taxes and insurance. And the taxes are insane in central Pennsylvania compared to St. Louis. So that’s again, I’m a Cold War veteran. I make no apologies for disliking communism. But

The reality is a lot of these policies make it harder for people to find a nice place to live because they by artificially controlling by artificially controlling the the profit of a landlord, you tell the landlord, well, there’s no money here to be made, because I gotta take care of my family, I gotta leave a legacy for my family. And I’m not a slumlord, my properties look nice and they’re in good repair.

And I treat my tenants right. But if we are getting swept up in that kind of, well, everybody who does this must be bad because I’ve had one bad experience with a landlord. Well, that’s a problem.

Scott Bursey (13:18)

Tim, we’d love to know what is your most strategic move for scaling your holdings over the next 12 months?

Tim McNabb (13:26)

I’m going to try to take the capital that I have available and use it for a down payment for another property. And then I’m probably going to take a break until a real killer opportunity comes along.

So as an example, again, if you’re a small investor and you’re handy and you want to get into this, just bear in mind that whatever you think you’re going to do, budget twice as much time as you think it’s going to be. And so, rule of thumb,

So at least budget for that, and then about a ten percent overage. So with that in mind, I bought the property. I put the down payment on it. That’s money, that’s a sunk cost. And then I’ve got about another, probably about

one percent of the property value that at the time I bought it is what I’m gonna have to put into what I have put into it materials. And so then when you multiply—you apply that multiplier, I’m right there at that formula of two and a half times materials. Does that make sense? I hope I’ve made some helpful pointers there.

Scott Bursey (14:44)

You certainly did. And kind of along those lines, Tim, if you were building your portfolio from scratch today with a very limited budget, what is the first thing you would do to get that first deal under contract?

Tim McNabb (15:38)

The first thing I would do is you gotta have twenty percent down to get a commercial loan in my jurisdiction. All right. And so whatever money you’ve got saved up, you can have that plus eighty percent is that’s what you’re looking for. And so that means it probably—like for me—it meant buying a roach-infested fixer-upper. And I put a ton of work into it. So I bought it for 40k.

And I had to be able to walk away. The guy tried to get twenty—tried to get five thousand dollars out of me more. And I said, Nope, you can have 40k or nothing, or somebody else can buy it. And I got it for 40k. I overpaid, but at least I didn’t overpay by an additional five thousand bucks. Probably put twenty-five thousand dollars worth of remodeling into it. A lot of that went on one of that, some of that came out of savings, some of it went on a credit card. But once I got it rented, I was renting it for the mortgage plus 30%. And so it was the cash-on-value, even with the additional investments, still worked. So whatever capital you have, add 80%. All right. And then understand one percent of your purchase price is going to be more, at least that’s what’s going to go into it. Pay for the inspections, pay careful attention to what has to be done, what would be nice to be done, and what can be deferred to the future. And

Go to pawn shops and buy good power tools.

Scott Bursey (17:06)

What does your professional network look like right now, Tim?

Tim McNabb (17:10)

It’s all family. I have people who are interested in asking me for information, but I don’t really have people to reach out to for information. Like my professional network is my mortgage lender. They’re great guys. I really like it.

Bo is my contact. So I’ve got a good lender. They’re very accommodating. A lot of stuff is online. So I work overnights as a security officer. So I can just, when I get home, if I’m still awake, I can just send paperwork up. I don’t have to.

Jabber, jabber, jabber with people. Because all they’re doing is looking at paperwork anyway. AI are scanning it. So why do we need to talk to a human? Could you reiterate your question? I want to make sure I answer it correctly.

Scott Bursey (17:48)

Yes, we’re kind of curious about your relationships primarily with your contractors now. What type of experience have you had with them in your market?

Tim McNabb (17:58)

For my part, I don’t really have contractors like that. I am the contractor. I will—so for junk hauling, I’ll go on Facebook Marketplace. If I need a load of dirt, I’ll go to Facebook Marketplace. I’m a kind of—I’m high in extroversion, so I don’t mind dealing with new people. I have a group of guys that I’ve worked with before.

There were Bosnians who came to St. Louis area and they all started construction businesses or HVAC. So I do have a list of Bosnians that I reach out to. They will—they’re great for rough carpentry. They’re not great for trim carpentry, at least my little group. I’m not saying no—okay, I don’t need a bunch of Bosnians to show up on my it beat me up because they probably would. But my plumber’s a Bosnian. And so if I have something big like that, that’s beyond what I can do.

That’s who I reach out to. Maybe we can church that up.

Scott Bursey (18:56)

And Tim, for those of our listeners that want to keep this conversation moving, stay in your lane or perhaps you know, collaborate with you down the road, what’s the best way for them to reach you?

Tim McNabb (19:07)

They can reach me by email. That way I can put them in the spam if they’re just looking to. Anyway, it’s Tim, T-I-M, dot McNabb, M-C-N-A-B-B, at gmail.com.

Scott Bursey (19:24)

Tim, thank you for joining us here today.

Tim McNabb (19:27)

It was fun.

Scott Bursey (19:29)

And to our listeners, we appreciate you. If you receive value from today’s episode, please subscribe. We’ll be filling your tanks with a lineup of elite guests just like Tim McNabb, who are accelerating and setting the pace for the rest of the industry. Until next time, keep your standards high and your vision clear. We’ll see you on the next episode, everyone.