Category: Real Estate

In This Article

For most of us, the frenzied bidding wars and constant price hikes of the post-pandemic housing boom are recent memories. That’s why it might come as a surprise to find that over 60% of homebuyers bought below asking price in 2025, according to brokerage and listings portal Redfin, when analyzing MLS data.

The discounts buyers received were not pocket change, either. Redfin reports that the average under-market offer accepted resulted in a 7.9% markdown, which was the largest since 2012. On a purchase price of $399,000, which was 2025’s median list price, that amounts to $31,592, more than enough for a down payment on a smaller investment or enough to fund some upgrades on the new property. 

The average discount across all homes—not just those selling below list price—was 3.8%.

Why and Where Discounts Are Back

Nabbing a discount isn’t as easy as throwing a dart at a map, despite the vast number of homes trading under asking price. There are some basic fundamentals at play—high interest rates, insurance costs, cost-of-living issues, and sellers outnumbering buyers.

Specific markets have exacerbated these issues, particularly where insurance costs have become a major concern, such as West Palm Beach, Florida, where discounts topped 10%, according to Redfin. Elsewhere, the Midwest, notably in Detroit and Pittsburgh, saw near or above double-digit discounts.

In total, Redfin says there are a record 47% more homesellers than there are buyers, making it the most negotiable market in years. For investors looking to capitalize on the malaise, it offers a great chance to get a deal. 

Said Redin senior economist, Asad Khan, in a press release:

“Homebuyers in 2026 shouldn’t write off homes that are slightly above their budget because there’s a good chance they’ll get some sort of concession from the seller, be it a price cut, money toward closing costs, or funds for repairs. This marks a reversal from the pandemic homebuying frenzy, when house hunters were advised to search for homes below their budget because fierce bidding wars were causing properties to sell far above the asking price.”

How Investors Should Interpret the Data

Condos are where the big discount action is. Just under 70% of condo buyers paid less than the asking price, with Florida seeing some of the biggest discounts in the country, in part due to a lot of construction and insurance/affordability issues.

However, just because buyers can negotiate doesn’t mean they can secure deals for pennies on the dollar as they did after the 2008 crash. The dynamics at play now are very different, tied to the affordability of regular homeowners rather than to overleveraged buyers with bad loans who are being foreclosed upon. Home prices are unreachable for many buyers, increasing 25% since 2020, according to U.S. Census data, rising faster than most people’s incomes.

Investors should review last year’s numbers alongside 2026 projections to gauge where the market is heading and make offers accordingly.

“The bottom line for 2026 is that it will be a transitional year,” Chris Reis, a broker with Compass in Seattle, told CNBC Make It. “There won’t be a crash or a boom, just the market finding its footing after years of extraordinary disruption. Buyers will have more selection and negotiating power than at any time since the pandemic.”

Look to See Where Prices Are Falling

Buyers will have the most negotiating power in cities where prices are expected to drop, and according to Zillow, most of the 22 cities where that is expected to happen will be in the Southeast or West.

“These places, among others, saw a huge frenzy during the pandemic, so part of what we are projecting is that demand continuing to come back down to earth,” Realtor.com’s Jake Krimmel, a senior economist, told CBS News. 

Even though Zillow expects prices to rise in the 78 other largest U.S. cities, as increases are expected to be small, there may still be room for negotiation. Fewer contracts on the table from homebuyers means more opportunities for investors, as happened in 2025.

Final Thoughts: 6 Tips for Structuring a Lowball Offer That Gets Accepted

1. Structure an offer that is compelling, not insulting. 

Your goal with your offer is to start a conversation, not shut it down. Present an offer with a professional contract and a few contingencies, with a fast closing. Be a problem solver, not an antagonist—that means not pointing out everything that is wrong with the property.

2. Back up your offer with comparable sales data. 

Using comparable sales data is a standard way to justify an offer when the listing price is below market value or the asking price. Tying an offer to objective comps shows that some thought has gone into the price rather than aggressive haggling for the sake of scoring a deal, and it will be received more favorably.

3. Be flexible on the closing date. 

As a landlord, your move-in date is usually not as specific as a homebuyer’s, which might be tied to a job transfer or the start of the school year. Allowing the seller flexibility on closing makes a lower offer more palatable.

4. Have strong financing lined up. 

To have a chance of getting a lowball offer accepted, your financing needs to be rock solid—and ideally, all cash is the way to go. This eliminates any questions about whether you can actually close. 

If you cannot buy all in cash, showing that you have cash in the bank, a recent preapproval from a reputable lender, along with employment and income sources, and good credit scores, will help to put a seller’s mind at ease.

5. Focus on listings that have been on the market for a while. 

Wrongly priced listings tend to sit on the market and lose their shine. Sellers are usually hit with a crisis of confidence when no offers come in. They will be more open to being put out of their misery, relieved to receive an offer, and ready to move on with their lives.

6. Use your investor position to tailor your offer. 

Most offers only address the buyer’s needs, not the seller’s. As an investor, you can speak to a seller’s pain. 

Other offers might be inspection contingent, in which the prospective buyer will point out every flaw to negotiate a lower price. That immediately sets up an adversarial situation. It’s like criticizing someone’s child. The seller won’t be enthusiastic about doing business with that buyer. 

If you can swoop in with an all-cash offer, talk up the house, and offer a swift closing, the seller will be more inclined to cut their losses and accept your price.

Dave:
You’re not going to find cashflowing houses sitting on the MLS like it’s 2018. You need to create your own asset. You need to build your own equity. And as an investor, that’s your job. And that’s the part of real estate investing that honestly scares a lot of people away in the current housing market, but fortunately it doesn’t have to. Value add can be as easy as a new coat of paint or a bathroom makeover, so you can raise your rents and add an extra few hundred bucks to your bank account every month. Or it can mean larger renovations that supersize your equity and put you on the fast track to financial freedom. There’s actually four categories of value add investing, ranging from cosmetic updates to light renovations, heavy renovations, all the way up to new development. And today, three experienced value add investors will help you determine which exact strategy you should use to add value on your next investment.
Plus, we’ll even reveal how you may be able to add hidden value with extra square footage or even another bathroom in properties you already own.
What’s up everyone? I’m Dave Meyer, Chief Investment Officer at BiggerPockets. And I’m joined today by truly the dream team of value add investing. My co-host, Henry Washington and our friend from on the market, James Dainard. And in today’s episode, we’re going to go through the different levels of value add investing, everything from cosmetic to gut down rehabs. And we’re going to give you a really good overview that you could use in your investing. But also, if you want more hands-on instruction for how to be a great value add investor, we have a really super fun and exciting announcement. Henry James and I are going to be hosting a one-day value add conference in Seattle this March 28th. It’s the first time we’re ever doing something like this. Only 120 tickets are going to be sold. It’s going to be a somewhat intimate conference here with hands-on instruction from some of the best value add investors in the entire country.
So if you want to check that out, you can go to biggerpockets.com/seattle and get your tickets. Not a lot of tickets. So if you’re interested, go get those today. So let’s jump into our episode today. Henry, maybe you could just tell us what are sort of the big buckets or different styles of value add investing that there are?

Henry:
Yeah. Well, first and foremost, value add investing means just that, right? You are going to do something that should add value to the property. Could mean adding actual dollars to the property, but there’s also value add in terms of adding perceived value, which may increase buyer’s desire to want your property because of what you’ve done to it. So that’s how I think about value add. And the categories I lump this into on the low end of the spectrum are just cosmetic updates. When I think of a cosmetic rehab, all I think about is paint and floors. Those are the main things you’re going to be doing. You’re not moving any walls, relocating a kitchen from one side of the house to the other. This is just simply we’re refreshing what’s already there.

Dave:
This is my comfort zone. This is where I’ve lived for a decade. I’ve lived here.

Henry:
Yeah. This is the stuff that anybody should be able to do. Most people can run a cosmetic update by themselves. They don’t need to hire some general contractor to come do all those things. Now, should you, that depends on the project, but you typically aren’t even having to pull permits to do some of this work. It’s truly just refreshing what’s existing. The next bucket I think about is a light renovation. And so the difference in my opinion between a cosmetic and a light renovation is that in a light renovation, there may be some more structural things that you’re doing. Yes, you’re going to do the paint and you’re going to do the floors, but maybe you do need to remove a wall. Maybe you’re going to put new windows in the property. You’re going to spend a little more money, do some things that are a little more structural, but for the most part, it’s a cosmetic update with-

Dave:
A little spice on it.

Henry:
Yes. A little chili powder on top, right?

Dave:
This is the stuff though that doesn’t even get James out of bed in the morning.

James:
Oh, don’t get me wrong. I love a cosmetic fixture. I just can’t make very much money on them in my

Henry:
Market. Next bucket is your heavy renovations. So when I think of heavy renovations, you’re going to do everything you do in a light renovation, but you’re probably moving walls. You may be relocating kitchens. You may be adding bathrooms, whether you’re on concrete foundation or slab foundation. It may be that you’re doing foundation work, putting a new roof, you’re doing new mechanical systems, water heaters, plumbing systems, electrical. This is major systems and structure. And then the finish work, which is the paint flooring, tile work, things like that. So when they say a gut rehab, that’s what I envision when I think of the heavy renovation bucket. It may be down to the studs, maybe it’s got the walls up, but you’ve got to do everything. You might need to get an engineer involved. You might need to get somebody involved to help you draw up plans.
You’re probably going to need to pull permits for the majority of the heavy lifting that you’re doing. This is a full-blown, almost new construction project, but the walls and everything are already up.

Dave:
Which make it harder than a new construction project,

Henry:
Right? Arguably it is. It’s what I’m learning because I’m doing my first ground up development this year and I’ve done heavy renovations. And the ground up development, once you have the plans, you just kind of hire people to do the stuff. It kind of moves a little more smoothly. The heavier renovations, they’re scary.

James:
Yeah. On new construction plans, the benefit is you don’t find mold inside your walls, rot, fire damage, termites. Definitely more predictable.

Dave:
Yeah. I mean, I’ve never done ground up development, but I feel like ground up development’s like you buy a Lego kit and you know all the pieces are there, you just have to follow it. And a heavy renovations, you have that bucket of Legos where you just have a thousand from different things and you pour it out on the ground. They’re like, “Now go build a house.” You have to kind of make it up as you go

Henry:
Along. Some of the Legos are already there and you have to piece some other ones in to fit with what’s already there.

Dave:
Yeah. They’ve been super glued together and you’re like, “What the hell? How do I bring these things apart?”

Henry:
That

James:
Is probably the best analogy I’ve heard.

Henry:
Yes.

Dave:
Well, I think those buckets make a lot of sense because you’re sort of going from on the low end, lowest risk, but also lowest reward.You could get some upside, but if you do a heavy renovation, probably highest risk, highest reward at this point, ground up development, I think depending on that. But that’s just a way for everyone listening to sort of think about the different categories here. As we talk about this, you should be thinking about which type of value add investing makes sense to you. And before we go any further, I just want to caveat this and say that although a lot of times value add investing is associated with flipping, you can and probably should be doing this stuff for rental property investing too. I think that’s kind of the epiphany I had two or three years ago when the interest rate environment changed.
It’s like, I don’t necessarily want to be a flipper, be doing a lot of flips, but if I want to be a good rental property investor in today’s day and age, I at least need to be doing light renovations and maybe doing heavy renovations to maximize my performance. And so I think everyone, regardless of strategy, to be honest, most people should be doing value add these days. I mean, James and Henry, I’m curious if you agree.

James:
Yeah, because it makes you that Swiss Army knife investor. One of the best things we ever did in our investing career was to A, find a deal. How do we find a deal and analyze it correctly, but B, how do you implement the construction plan? And by flipping, we have changed our whole investing career because everyone thinks of us as flippers, but we build homes that’s the adding value, right? That’s the same type of process. You got to create a plan, budget it, implement it. But most importantly, in Seattle, it’s really hard to get good rental properties with equity or they can break even our cashflow in Seattle, San Francisco, any of these expensive markets. So the reason we love value add is because we don’t have a choice. And so we’re able to take down multifamily properties that most people do not want to take down or they cannot make the numbers work.
And we can make the numbers work because we know how to control the cost. And that’s implementing that value add. And the money we’ve made in the wealth we’ve made on our rental portfolio has way outweighed what we’ve made on our flipping business. But the flipping business gave us the tools to be able to buy those properties, stabilize them and increase them.

Dave:
All right. Well then let’s dig into each of these topics. So easiest to hardest here. Let’s just start with cosmetic updates. So as Henry enlightened us before, this is like bathrooms, paint. I think about refinishing stuff, sprucing it up. What are some applications for cosmetic updates, Henry? And what kind of investors does this make sense for?

Henry:
This is great for beginning investors because it gives you a taste of what it’s like to work with a contractor or subcontractor to get a project done and to manage that project. It’s much easier to manage a cosmetic rehab because the timeframe is shorter. The scope of work is shorter and not as intense. The dollar values for the labor and materials are less. And so it’s a great way to get your feet wet because we’re all going to make mistakes and have made mistakes when working with contractors and managing renovations. Is it always easy to find a cosmetic update where you’re going to buy it at a price point that’s going to allow you to slap some paint on it and sell it for a whole lot more money? They’re not easy to find, but they do exist. And if you put that into your buy box and you’re specifically searching for these kinds of products and you’re being very intentional, yeah, you can probably find them, but obviously best for new investors.

Dave:
Definitely good for new investors because let’s just be honest, anyone can do this. It’s not difficult. It sometimes is going to take you getting multiple quotes. You might have to fire a contractor and hire a new one, but anyone can do this. You can figure out what floors to put in. You can figure out what paint to do. And you’d be amazed by how much that can improve maybe the value of the property if you’re selling it, but just the rentability too. You’re going to command a higher rent, you’re going to have more people who apply for your rentals. This is a great thing. So for all new investors. The other two categories of investors I would say that this works well for are out of state investors. If you’re buying something and you want to do a little bit of work to improve your properties, but you’re doing it from afar, these are kind of projects, at least in my experience, that go well out of state.
Most property managers can handle this kind of renovation on your behalf on a good timeline and on budget. This isn’t super complicated where you need to be on site every day. Get some photos, go to the property, pick a paint color, get some LVP and go do it. This is good for that. The other thing I’d say is just for busy people. If you’re not going to be spending a lot of time at your project, cosmetic updates can be great. But as Henry said, it’s maybe not, especially in today’s day and age, going to add a ton of value to the property today. If you’re flipping, this might not work, but if you buy a property and you want to hold onto it for 10 years and you’re saying like, how do I improve this so that I can command the best possible rent for the next 10 years, cosmetic updates all day?

James:
The reason it’s good, because it’s still just organizing subs and organizing implementation, but it’s a very tangible thing for you to wrap your brain around. If I’m going to install flooring and I know someone will install it for $2 a square foot, I can go shop over and over and over again to get my flooring price down. And so it’s very easy to control your cost. That’s what’s so beneficial for all new investors. But when you start going, “Hey, I got to rewire this whole house.” It’s going, “Okay, well, how much does this cost?” Yikes. “What do I got to do? ” But cosmetic updates, they can make a huge impact in the value too. It always comes down to how much dollars are you spending? Does that increase value? All

Dave:
Right. Well, let’s take a quick break, but when we come back, we’re going to talk about some of the bigger impact type of value add investing, light rentos, heavy renos, and ground up development. Stick with us, we’ll be right back.

Henry:
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Dave:
Welcome back to the BiggerPockets Podcast. I’m here with Henry and James Dainer talking about the value add playbook for 2026. We talked about cosmetic updates and how it’s really just a strategy. If you can find the right deal, it can work for pretty much anyone. There’s just no reason not to do it if you find a deal that it works for. Let’s move on to what Henry described as light renovations. James, what’s the division between a cosmetic update, light renovation, and when do you want to move from sort of the easier projects to a light renovation?

James:
When I look at a light renovation, you can do windows, you can do roof, but you’re not really adding spaces where you got to add a bathroom or reconfigure the layout. That’s where you start going into a heavier renovation when you have to twist a house around. And so a lot of times when you’re leaving things where they are, you can control the cost a lot more. I might be able to open up my kitchen, but if all my appliances are all staying in the same spot, it keeps the cost way down. Or if you can just take everything out of a bathroom, even if you’re fixing the plumbing and doing all those things, but everything stays inside that shell, you’re replacing light for like. And when you’re doing that, there’s way less domino effect that happens in construction because when I buy a house and we’re starting to add bathrooms and bedrooms, costs can domino very quickly.
But when you’re doing light for like, you can price it and price it and price it and really stay on top of that.

Dave:
So what do you look for when you’re looking for a deal? If you want to do a light renovation, what are some of the characteristics of a property that you think make it a good candidate? Henry’s bouncing. I got to throw it to you after this. You have something to say.

Henry:
Yeah. This is a sweet spot for me because I feel like a lot of people want to do these projects and have no idea what to go look for. So when I want to do a light renovation, obviously I’m looking for homes that are in livable condition. So as you’re perusing whatever MLS or Zillow or realtor, you don’t want the things that are down to the studs. So it needs to be in livable condition. But a couple of indicators I’m looking for that let me know that I can probably add real value in a light renovation is I’m looking for covered square footage that’s not accounted for in the heated and cooled square footage. In other words, if there is a sunroom that isn’t heated and cooled, it’s already under roof. And because it’s under roof, I don’t have to do anything structural. All I need to do is figure out a way to heat and cool that space to add it to heated and cooled square footage, which technically makes your home bigger.
The bigger the home, the more square footage, the higher the value of the home. So I’m looking for things like sunrooms, additions maybe that were done that aren’t heated and cooled, right?

Dave:
Basements.

Henry:
Basements. Yeah. You have to have keen eye to see some of those things. And another indicator I look for to help me find some of these are bedroom and bathroom counts where square footage doesn’t seem to match. If I see a two bed, one bath, 2,000 square foot house, that lets me know there’s a lot of opportunity for me to do a light renovation to add bedrooms and bathrooms under the current footprint.

Dave:
Aren’t you always wondering what people are doing with that? There’s like, do you just have like a 900 square foot bedroom? What are you doing in that

Henry:
House? It’s usually the older homes that were built, like the mid-century style homes, they have like a living room and a formal living room and a den, and they have all these living spaces. Those indicators for me scream, “Hey, this could be a light renovation where you can add a lot of value.”

James:
One of the most important things about cosmetic versus heavy is do you have the right spaces already that just need minor tweaking? Because that’s where people get in trouble with value add is they see a four bed, three bath house and they go, “Oh, I got a four bed, three bath house and I can cosmetically update it, but they don’t have the same spaces.” The primary might be way smaller, smaller shower, smaller closet. The kitchen could be half the size and that requires a lot more reconfiguring. I love a cosmetic fixer that is packed full of garbage and it is gross because I call it cosmetic because I don’t have to move walls. And again, I can get that property deeper than grandma’s house because it just smells bad. And so I’d rather spend more on trash and just getting it out. And then I’m working with the same footprint as grandma’s house.
It’s just a little bit maybe moldier, crunchier and smellier.

Dave:
Something I’ve done in the past that’s been really good is like making a formal primary. Sometimes when there’s a small bathroom-

Henry:
All the time.

Dave:
Yeah. It just feels like three kind of mid bedrooms and you make one into a primary, that can really add a lot of space. And maybe you’re only moving one wall or two there. To me, that’s a manageable thing that you could do, still falls under the light renovation category. But I think this is where you sort of get into the true building equity. Cosmetics, maybe you can build some equity, but to me this is where you can actually make a delta in the value of your home.

Henry:
Bro, like a pro tip is usually when there’s a half bath, like I’d say 60 to 70% of the time there’s a closet somewhere close to it or on the other side of that half bath. And a lot of the times I’m able to steal that closet and add a shower. And all of a sudden you have a full bath, especially when they’re in half baths or in primary bedrooms. I’ve stolen space from the closet on the bedroom on the other side to add a shower space. And so you’re not really changing the layout and adding a whole new bathroom. You’re just expanding an existing bathroom, which makes things less expensive because the plumbing’s already there. You’re just reconfiguring some of the existing square footage. You’re doing what James said, which is like for like, you’re just adding an additional piece of that bathroom. Man, it’s so important to just have an eye for those things.
So as you’re looking for properties, pay attention to where the closets are in relation to where the bathrooms are. Pay attention to what rooms back up to each other. I love homes that have the two living rooms, like a formal living room and a regular living room, because no one really uses formal living rooms anymore. It’s not a desirable feature like it was. And most buyers would much prefer to see a house with an additional bedroom than to have that same square footage include one less bedroom and be a formal living space. And so that’s another way I look at adding value.

James:
Yeah. Or in the basements, I love taking, because basements have two beams running down them essentially. You can create a bedroom, but a flex space every time. So every time we do a bedroom in a basement, we always put in big French doors because if the buyer wants a bedroom, they can get that or they can make a bigger bonus room. So it just gives them that option and it’s a non-structural move. We just frame it straight down.

Dave:
James, this can seem intimidating. I think cosmetic most people can wrap their head around, but then starting to move walls, you need some more skills. So what are the skills people need and how do you recommend people get comfortable scaling up from a cosmetic to this kind of rehab?

James:
You don’t have to jump right in. I didn’t start flipping massive projects right out the gate because I did take my first step and I bought my first big fixer and it went terrible. We went way over budget, way over timeframe, and I didn’t know what I didn’t know. And I lost a ton of money on this house. And it was my first big swing on a big fixer. I had to take a step back and go, okay, well, I bought that really cheap. We sold it high. It was what happened in the middle that went sideways. I paid like 275, I sold it for 500, and yet I still lost money. That’s what I had to learn how to control. And so after that house, I was like, “Well, I don’t want to do any more of those, but I want to start learning and kind of partnering people.
” And so back then I was doing a lot of wholesaling and I was also helping investors find deals. And that’s where I learned the most because I started selling them to more experienced investors and I would participate in their project with them.
And on one deal, I even threw my whole assignment fee into the deal and the guy gave me some ownership in it and he just let me go through the process. But I got to learn what are the steps because that’s where people get in trouble. They see a vision, they see the math, they don’t know the steps that it takes. So when you want to get into value, you got to build your core team. And your core team is going to be an architect, an engineer, a general contractor, and you should have three and start just getting the facilitators for you together.
You have to have yourself with the right pieces around you. That’s the key. It’s all about the team. Everyone wants to chase the deal. And I always tell, chase the resources and the team because the team will help you get through that deal. And so if you’re new and you want to get into it, start working out networking, meeting with people, building that team, but then start participating with other people. You can partner with other value add investors and learn that process, see what they’re doing. You get to see the timeframes and all the little hiccups and bumps that go through it. It’s better to give away more upfront and learn to prevent losses down the road.

Dave:
That’s great advice. And it’s something that I’ve been doing with James. He’s been teaching me slowly how to flip, getting a little bit more involved in each deal and it’s been super helpful. The other thing I’ll say for if you want to learn light rehabs, if you listen to the show, you’ve heard my favorite strategy these days is something I call the slow bur. It’s basically you buy a property, it’s doing all right, it’s got tenants, and then you opportunistically renovate it when people move out. Slow bur can be a great strategy for this if you’re new, because number one, if you’re buying something where there’s already tenants, you’re not using hard money like you would in a flip. And so if you’re paying six and a half percent on your mortgage instead of 12% on your mortgage, it takes a little bit of pressure off you to nail it the first time.
If you go two weeks longer, you don’t hate your timeframe exactly, the penalty on that is a little bit less. And the other thing is if you buy something that has tenants in it, it gives you, in my experience, a couple months to make a plan, to build the team that James was just talking about, to get permits if you need to permit something. And it just takes a little bit of that time pressure off, which for me is something that I used to worry about in terms of doing this. It was something that would prevent me from being in real estate, doing these kinds of deals because I just was worried about getting it done quickly while working full-time. And so this is an approach that you can consider.

James:
Right now, I’m in Newport Beach. I just landed here. I don’t have the resources and the teams like I have in Seattle. And so we’re doing the biggest flip we’ve ever done, but I brought in a partner on it because he knew the code, he had the people, and I’m giving away a portion of my deal to him, but my overall construction costs are probably 35% less than they would be if I hired it out and I would still have the learning curve of going through some bumps in this city. And so by bringing him in, I’m really watching the pricing and it’s allowing me to build a correct budget for my next project going, okay, this is what this takes. And my annualized return is actually going to be better even though I’m giving away a big portion of the deal.

Dave:
Henry, when do you cross from light rehab to the intimidating, sounding heavy renovation?

Henry:
Yeah. For me, a heavy renovation is I am touching almost every surface, and that includes the surfaces behind the drywall.

Dave:
Surfaces you don’t want to be touching.

Henry:
Yeah, absolutely. And you’re replacing systems most or all of the systems. You might be redoing the plumbing because you’re moving a kitchen from one side of the house to the other. You may be adding bathrooms. Adding bathrooms doesn’t sound like a big deal if you’re on a crawlspace, but if you’re on a concrete foundation, it gets expensive fast depending on where that main plumbing line is. You could be jackhammering up your foundation all across the entire footprint of the home because the bathroom you want to add and where you access the main line are on completely opposite sides of the house, that is pricey.
So these are the things where it’s not easy to just make a decision on your own. You have to get someone else involved like the city may need to get involved, an engineer may need to get involved and tell you, because people think you can just walk into a house and go, “Oh, that wall’s stupid. Shigon, that’s not how it works.” Some of these walls are load bearing, which means they need to carry the load of the house. And some cities require you to get an engineer to come in and tell you what you can and can’t do or what kind of beam you need to put in to support the weight. If it’s a two-story house, you got to support the floor above it. That’s kind of a big deal. If it’s a single-story house, you don’t want the roof laying on the ground, that thing matters.
So these are the kinds of renovations where you can’t just make a decision and move forward. You’ve got to bring in professionals or city officials to help you get the approvals necessary to make sure that the work you’re doing isn’t just value add, but it’s actually not endangering somebody’s health or safety.

Dave:
That’s a good way to put it. I think that’s sort of the key thing here is you’re going out of your own comfort zone. And at least for me, it’s like you’re going out of just making decisions, being able to run the subs kind of easily yourself into something that’s much, much bigger. But the roar for this is huge, right? Because this to me is where you cross the barrier of no normal homeowner wants to buy these types of properties. You’re getting into a class of inventory that a lot of other people don’t want. Because a normal homeowner might be willing to renovate a bathroom or a kitchen or to do a cosmetic rehab. But this is where you’re sort of working with projects that need a lot of love, but those are the biggest opportunities. And James, this is basically, I mean, not all you do, you do a little bit of everything, but this is like your sweet spot, right?

James:
Yeah, I am glutton for punishment. Flipping is a very hard business to run and it’s very hard to systemize on a long-term basis at scale. I think it’s the hardest by far, but I just love the numbers.

Henry:
This is where the juice is, right? You need the juice. It needs the juice.

James:
And this is how you create value, right? And you create equity for burrs or flipping. This is how you maximize a deal because if I’m looking at a house and it’s a thousand square feet up and it’s a two bed, one bath, and I have a thousand square feet below, and let’s say that house will sell for $400 a square foot on the market, fully finished. That’s the average price. I can renovate a basement and add square footage for about $110 a square foot. That’s where I can 3X and 4X my money because I can go in and go, “I’m going to renovate this basement. I’m going to spend a hundred grand here and I just increase that value.” And so that’s the important part is what do you need to create? Now, it’s not as simple as that because many times it’s $100 a square foot for the entire house.
But in that example, if I’m spending $100 a square foot, I’m spending 200 grand, but I’m getting $400 a square foot on the backside, that’s where it makes sense and you can force that equity up. And so that’s why it’s very important to really run your right comps. What is this property worth? What do I need to create? And then it comes down to what’s the cost to create that. And a flipper’s job or a value add investor’s job is to go, how do I keep that cost at a hundred bucks a foot? Because that is a full-time job to do that. And that’s where people get tripped up because they go, “Oh, the math’s math is simple, but it’s all about controlling those costs.”

Henry:
I agree with you. And I think another differentiator between these heavy renovations and the cosmetic and light that we have been talking about is the amount of subject matter expertise that not only you need to have, but who you hire needs to have in this situation because yes, you have to hire licensed plumbing professionals, licensed electrical professionals, licensed contractors to do a lot of the major work. That goes without saying. But the decisions on what they’re doing, where they’re moving things to, what kind of value that creates, what kind of product that creates, that’s on you as the investor. And you could spend a lot of money on a heavy renovation and not produce a product that your customer wants in the neighborhood that that house is in or doesn’t have the amenities that they have. In lighter cosmetic, we’re leaving things where they are.
The house has what it has. We all already saw that and we want to leave it where it is. But now we’re trying to add value by adding the right spaces or amenities that your buyer wants and you have to have some market expertise to understand that and you have to hire experts to do the work in the right way that you’ll actually get it approved and it won’t sit waiting for permits or you’re going back and forth with the city because they keep denying your permit because you’re not doing things the right way. So it is a much more knowledge specific value add strategy.

Dave:
I think that’s kind of the fun part though too, Hannah.

Henry:
I was going to say, I think this is why Dave likes it because it’s math and Solving problems.

Dave:
It’s like resource allocation, which is my favorite thing. It’s like, okay, I got this budget. How am I going to spend it to maximize the value of this home? James has totally converted me to the dark side now. It’s fun to me to doing this, but it is higher stakes for sure. You can absolutely screw it up. You can overdevelop it, you can under develop it, you can do all these different things. But I was curious, what is the increase in return potential when you go from a light value add to a heavy value add? I don’t know if you know in absolute dollars or your ROI, James, do you have a sense of how much more juice there is?

James:
What I have seen in Seattle is on a six-month project with a heavy value add versus more of a cosmetic where you’re doing Windows roof and everything else. The return is going to be about 30 to 35% cash on cash on a cosmetic. On a value add, we’re looking about 50%.

Dave:
Wow.

James:
And so you get an extra 10 to 15% more for that project and the work you have to do.

Dave:
We got to take one more quick break. Stick with us. We’ll be right back. Welcome back to the BiggerPockets Podcast. Henry and I are here with James Daynerd talking about value add investing. So I’ve been curious about flipping but never done it, but I just want to explain sort of the progression I did to get comfortable with it if other people are interested in this, but don’t want to dive in head first. Basically, I’ve done three flips now. The first one, James, basically I was a passive partner. I just put money into it, just got to sort of observe from a distance, underwrite the deal, but I had no real involvement day-to-day. That one turned out great, thanks to James and his team doing a great job. The second one we did together, but James was basically like, “You could come and look at the property.
We’ll tell you about some of the decisions, but I’m still making all of the decisions.” And that was a really cool experience for me because I got to go to the property. I really learned the order of operations, which is super important to me, when to hire different subs, when to go to the city, just how all the pieces kind of fit together. But I wasn’t on the hook for sort of big decisions about where to allocate money, how we were going to reconfigure the house. But I got to see James and his team sort of think through those things in real time. Then the third one, me and my brother-in-law bought together, we partnered on it and we made the decisions and we actually figured out where we were going to spend money. We hired the GC, we ran the subs. And by that third time we felt comfortable.
We did sell that and made some money. So I just wanted to share that with people that you don’t have to jump right into this. I’m lucky and know James, but there are great flippers and great operators in pretty much any market. And if you want to try and find, like James said, partners where you can be a part of these deals, it’s a really good way, at least for me, it was a really good way to start getting into heavier value add without having to take this all on, both from a financial perspective and a time perspective right away, because I just didn’t feel comfortable with that. You did that too, Henry?

Henry:
I still, to this day, meet some of my best friends and contacts at real estate events. So I’m partnering on a purchase that will close on next week of a flip. And this flip is in the heavy renovation bucket. It was down to the studs. Now, the story on this one was it had a fire five years ago and the lady’s been trying to put it back together and work with the city and she’s just run out of money and she’s failed her inspections. And so she’s got a lot of things to go fix and not a lot of money. So she’s just like, “Somebody please come buy this thing from me. ” So I walked into that deal and I’ve done hundreds of flips, right? I walked into that deal and I said, “I don’t have the comfort level to know how to fix all the problems that the city’s identified.” Because essentially it’s like a ground up development that’s gotten to the point where you’re about to close in the walls and you have to pass your inspection.
That’s what the property is like. And I am just now doing my first grindup development. And so I didn’t want to leave the money on the table, so I brought in my builder who’s helping me build the ground up development. He walked the property with me. We looked at the entire list from the city. We made a plan for every single item that they’ve identified. We called the city, told them about our plan, got them to give us a light, “Yeah, this will work.” And then now we’re buying the property. We’ll fifty fifty on that deal because I brought the deal. I’m even bringing the financing, but he’s going to manage the renovation. He’s going to be responsible for the work, and that’s going to help us do this heavy renovation. And that’s a partner that I met at a real estate event.

Dave:
See, exactly. This is a perfect example. Thank you for Henry.This is an experienced operator who’s taken on partners. This happens all the time. I think honestly, people think that partnering is for beginner investors. Every investor I know partners all the time, every single one. So it’s just get out there and put yourself out there and you can meet these people.

James:
I’ve found a lot of partners at BPON over the years.

Dave:
Yeah, that’s awesome. Good reason to come. And maybe you’ll just come to the Seattle conference and you’ll start meeting some people to partner with March 28th in Seattle, biggerpockets.com.seattle.

James:
I’m so excited for this. We are going under the hood. By the time they’re done, they’re going to be ready to go.

Dave:
I’m excited. This is going to be a super fun event. I think this is one of those topics where you really need to have hands-on coaching. And James and Henry are going to be there coaching. I’m going to be there attending. I just want to learn more. But also one of the cool things is we’re also doing sort of like a premium VIP kind of thing the second day, and we’re renting a bus and we’re going to drive around and James is going to take us to three of his projects that he’s working on. So you’re actually going to go get literal hands-on experience and we’re going to go out to a nice dinner. It’s going to be a lot of fun. So you should definitely come check it out. I will be just making sure everyone is well-fed and is having fun. And James and Henry are going to teach you how to do value add investing.
All right. So that’s heavy value add, a great place to be. But let’s just talk quickly here before we get out of here about new construction, heavy development. James, you do a little bit of both. You prefer flipping from what I hear, but when is a good time to do new construction? Who’s it right for?

James:
It’s just probably some best use. What can you buy it for? How much can you build it for itself? Or I have a partner, Will, and he runs our new construction side. And so it’s still running a performa. What can I buy it for? What’s my cost? What can I sell it for? What’s going to give us the highest profit? And so every deal we look at in Seattle, we look at it both ways. Does it make more sense? How much time does it take? But when you want to get into building, I think it’s really important that you understand what you’re buying. There’s a couple hard rules I have in flipping and development. I don’t buy in hills. I don’t buy wetlands. I don’t buy environmental. It’s a nightmare
And it takes forever. But usually what I see, and I have a partner, so we split this way. It’s after people flip about 20, 30 homes, they start going volume. They switch to building because it’s a lot more systemizable. You can buy it, you get plans, you can get quotes. And I think it really just comes down to what’s the opportunity. I’ll build or flip, but it’s what’s given me the highest profit. What I do is I don’t build a lot right now, but I flip lots off. So that’s how I create value on a property. We buy it, we renovate it kind of more cosmetically, and then we sell off the daddy lot in the back. You don’t always have to build to actually create value. You just have to create the value, which might be a lot or building a house. Absolutely.

Henry:
I’ve been doing this for years. I’ve been buying properties with additional lots, collecting the lot by selling the house and keeping the lot, and then that gives me options. I can either build on it if I want to, if the finances make sense or I can sell it off if the finances make sense. We’re doing one right now. So anytime I have a house that’s on any kind of double lot, I usually make a call to the city right after we close and see, will they allow me to split the lot? And if they will, then I will definitely split it. I’m literally doubling my profit on one of my flips because I sectioned off an acre lot that I’ll sell for 75 grand and I’ll make about 75 grand profit on the flip itself.

Dave:
All right. Well, we’re not going to get too much into new construction today, but it’s just a reminder that it is there. It’s another way to add value if you have a vacant lot. But for most investors, I think right now, think about what level of investing is right for you today. Or if you’re an experienced investor, you could be doing all of them. But if you’re sort of just doing one deal at a time, figure out which one’s right for you because there’s no right answer. If you’re busy, you’re doing it out of state, you’re new, cosmetic works. You just have to find the right deal. Light renovations, you can find these deals. In my experience, you can find these deals right now pretty well where you can add to the value of the home, but also really driving up rents. I think that to me is sort of what I’ve been looking for a lot recently, or you can get into heavy value add because that’s where all the juice is.
It’s really just a question of your strategy, the amount of time, the amount of capital, the amount of experience you have. But I highly recommend for everyone thinking about how you can add value in your portfolio today because it’s just working in 2026. It really just does work. All right. Henry, James, any last thoughts before we get out of here?

James:
Dave, I am excited for our value add conference and for everybody listening, you’re going to get a lot of my internal documents and tip sheets and budget sheets. So if anybody buys a ticket and there’s only 120, you guys, this will be blown out in no time, I will give away my free scope of work checklist. When I’m walking a property, all my team, this is what we fill out to create our scope of work. And that’s what we start with when we’re creating

Dave:
Value. Honestly, that’s worth the price of the ticket alone, so you should definitely check that out. Again, it’s March 28th. You’re going to learn a lot, but it will also be a lot of fun. So definitely join us. James, thanks so much for being here.

Henry:
I will come on anytime.

Dave:
And Henry, as always, thank you.

Henry:
Glad to be here, buddy. I love, love talking value ad.

Dave:
Also, if you like this episode, go listen to episode 1088. It’s one of Henry’s crowning achievements as a podcast host. He gave us 10 ways to add value for under $10,000. It’s an awesome episode. It’s really relatable strategies that anyone can use to go check that out. And of course, if you like this episode, share it with someone, give us a like, give us a review. We always appreciate it. Thanks again. We’ll see you next time.

Ashley:
Most rockies believe there’s a moment coming when they’ll finally feel ready to buy a deal. When the market makes sense, the numbers feel safer and the fear goes away.

Tony:
But the truth is that moments almost never comes. And in 2026, that belief alone is the biggest reason most rookies will stay stuck on the sidelines.

Ashley:
This is the Real Estate Rookie Podcast, and I’m Ashley Kehr.

Tony:
And I’m Tony J. Robinson, and today we’re going to break down the reasons why most rookies will not buy a deal in 2026. And as we go through these reasons, we’re also going to call out how you can be the exception. So if you hear yourself being echoed in some of these points, don’t worry, we’ll try and show you how to fix it as well. All right? So the first reason that you probably won’t buy a deal in 2026 is because you’re confusing comfort with confidence. And we’ve talked about this in the podcast before, but oftentimes rookie investors want to feel comfortable with the idea of buying their first rental. They want this comfort when they submit the offer. They want this comfort when they sign the closing docs. They want this comfort when they welcome in their first tenant or their guests or their first flip or whatever it may be.
But here’s the truth, guys. It is physically impossible to be comfortable and to be growing at the same time because by definition, growth only happens when you’re stepping outside of whatever comfort zone you currently exist in. So if you’re waiting for this moment of this comfort to appear in order to do this thing you’ve never done, you’ll get stuck in this endless loop where you never actually take action. Now, confidence on the other hand is something that you can build towards. The more deals that you underwrite, the more people that you talk to who’ve already successfully done the thing you’re trying to do, the more agents you talk with, the more property managers, the more general contractors, the more data points you have to support your decision, that’s how you build confidence. So that’s the first one for me. Stop confusing comfort with confidence. Focus on confidence, not comfort.

Ashley:
A big part of this I think people don’t look at is you go to a W2 job most likely every single day and you feel safe. You feel comfortable taking on a job and that provides you that comfort. And going into real estate and buying a property feels uncomfortable. It feels like a risk. You have to look at the differences of these because you feel comfortable in your job, but you could literally be fired at any moment, any day and lose your income. But yet people see a job as they’re comfortable with that, but somehow real estate and buying a property is a bigger risk and has greater potential to fail. But if you look at the two different scenarios, having a W2 job is really not that safe at all. Where if you’re buying an investment property, you have more control over that asset and more options as to how you can actually make it profitable, make it an opportunity for yourself than your own W2 job in most cases.
So I think having that control piece is a big difference of being able to lessen your risk and to provide an opportunity for yourself that you can control and not your boss or the owner of your company that is controlling your future.

Tony:
And what this costs you when you’re stuck in this loop of trying to feel comfortable before you take action is that you never actually get the reps in that build the confidence. The only way that you build confidence is by getting the reps in, using the data that’s in front of you to actually get the reps in. So I always tell folks, it’s like the first glass ceiling you have to break through is submitting that first offer. And I would encourage every single person who’s listening today to just go submit an offer on something and just make it an incredibly low, almost insulting offer because the goal isn’t that you actually get the offer accepted. The goal is that you stop being afraid of submitting an offer. So when you get stuck on comfort versus confidence, you lose that ability to get your reps in.
But in terms of how you can be the exception, the first thing is to take action before comfort shows up. Just walk into this knowing that it’s going to feel a little uneasy. You’re going to be second guessing yourself a little bit. You’re going to be like, “Am I doing this right?” Now, I’m not telling you to jump in ill-equipped or unprepared, right? Still do all the work you need to do to feel that you’re taking the right next step, but just know it’s going to feel a little uneasy. It’s going to feel a little maybe nauseous as you submit that first offer. And then I think the next piece is to define the one uncomfortable action that you’ll take. Already talked about submitting the offer. I think that’s a great big one to take. But even before that, simple things like picking up the phone and talking to agents.
How many agents can you talk to to help you get to your first deal is a great thing to do. How many general contractors and quotes can you get for a potential property that you’re looking at? The more action you take, the easier it becomes to take that next step. And I think if we measure our progress based on the actions that we’re taking, not necessarily whether or not the deal is done, that’s how we make sure that we’re making progress over time. So that’s the first one. Stop confusing comfort with confidence.

Ashley:
Comfort actually keeps most rookies from starting, but next we’ll break down why chasing good deals keeps them from ever finishing. We’ll be right back after a word from our show sponsors. Okay. Welcome back. So once rookies push past comfort, the next trap looks productive, but still prevents buying. So let’s get into why you won’t buy a deal. And that reason is because you’re waiting for a deal to just fall into your lap without actually going out and finding a deal. And I’ve definitely been guilty of this myself. Even over the years, I’ll just sit and think, “You know what? I’m not going to chase a deal. Maybe I’ll get one this year or something.” But I think that if I really, really want to find a deal, I have to go out and I have to put in the work. I have to put in the effort of finding the deal and not just scrolling the MLS waiting for the perfect deal to appear to me.

Tony:
Yeah. You can’t manifest a good deal into your life. You can’t positive think your way into a deal.You’ve got to actually do some work. And our good friend, James Danar from the On the Market podcast always talks about deals aren’t found, but they’re built or they’re made or he phrased them in a certain way, but it’s like basically you have to go out there and manufacture the right deal. And for him, what he talks about a lot of times is, “Okay, what does a business plan look like on this deal that would allow me to turn into a good deal?” So maybe I’m buying it as a three bedroom, but I’m converting it to a five bedroom, and that’s how I make this deal work. We’ve interviewed Laka Davetha and she’s built an incredible portfolio in the Seattle area, but what she’s focused on a lot recently are ADUs.
And for her, it’s like, “Hey, I can go out here and buy a single family home and maybe it doesn’t work that way, but if I do a detached ADU, that completely changes the economics on this deal. And now I’ve got two properties for the price of one, which allows me to go out there and generate more revenue.” The Nawsums, Shannon and Christian, who we interviewed in the podcast, they do room rentals and they’ll go out and buy a three bedroom home and convert it to a seven bedroom home and then they’re renting to students. So it works for their business model. So I think we’ve got to get out of the idea of just, I’m going to look on Redfin or Zillow and that’s where I’m going to find the perfect deal, but it’s how can I maybe get a little bit more creative?
How can I put a little bit more work? How can I view this from a slightly different angle to try and find the right approach for me that allows me to get a good deal?

Ashley:
And I think even before that, if you’re waiting for the right deal to fall into your lap, do you even know what the perfect deal is? Do you even know what deal you want to fall into your lap? Have you defined your buy box? Do you know exactly what strategy you’re going to do? And that will really help you narrow down your focus and be able to actively go after what you’re looking for instead of just waiting and looking and like, “Oh, you know what, that doesn’t look great. No, not that, not that. ” And waiting for what’s going to be perfect for you, I think really defining what is the deal that you’re looking for first and then trying to actively go and search for that. And it’ll be easier to search for it if you actually know what you’re looking for too.

Tony:
Now, Ash, you make a great point. And two things I’d add to that. Number one is that if you’re just waiting for an agent to send you good deals, it’s not that that approach won’t work at all, but it is that that approach is going to be a significantly slower route toward finding your first deal. Of all the properties in my portfolio, I think maybe my first, the very first one that I bought, I think might be the only one that an agent actually sent to me where they were like, “Hey, here’s one that kind of pops up that meets your buy box and your criteria. Here’s where I think we should submit our offer,” so on and so forth. Every other deal has been me out there searching, hunting, underwriting, analyzing, and then going back to my agent saying, “Hey, here’s my offer. Here’s what I’m thinking.
What are your thoughts? Cool, you’re on the same page. All right, let’s move forward.” So I think first you’ve got to change the role that your agent is playing to more of an advisor than your straight deal finder.

Ashley:
It’s just a bonus if you get a deal brought to you. I’ve gotten a ton of deals from word of mouth referrals. “Oh, my cousin’s selling a property. Let me give you their number. I know they want to get rid of it. “Those should just be bonuses and you shouldn’t depend on the agent bringing you deals or the word of mouth deals or referrals from other people to lock in a deal.

Tony:
And I think the second piece to your point, Ashley, of you won’t know what to look for until you start taking some of this action. One of my strong recommendations for folks is that before you even start hunting for a deal to purchase, first do the research on what’s already working well in your market. And this can apply to long-term rentals, short-term rentals, midterm rentals flipping, but let’s say that I’m a flipper. I can use Zillow, I can use Redfin. There are websites like PropStream or Privy where you can make the search a little bit easier, but I can go back and find properties that have recently been flipped in the market that I’m looking at and I can very quickly start to identify, okay, well, where are the areas where the majority of the flips are happening? So then I can go from an entire city or an entire county, maybe down to a specific zip code or certain blocks within those cities that actually work well.
Then I can start to see, okay, well, what are the bedroom counts and kind of square footage ranges that are usually moving the fastest? And then I can say, okay, well, maybe the one bedrooms don’t sell all that well. Or man, if I get below 1000 square feet, those tend to sit a bit longer. But if I’ve got a good starter home, three bedrooms, two baths, even up to four bedrooms, those tend to move pretty quickly. But man, if I start trying to sell like a five or a six bedroom, those tend to settle a bit longer as well. So you can start to engineer what your buy box looks like by simply looking at the data of what’s already been successful in your market, and then that gives you a better sense of, okay, now what do I need to go look for in this market to be successful?
So if you’re trying to find deals, one of the best places to start is by looking at what’s already sold in your market. I think an additional point to add to this too, Ash, is that as you start to do the work of actually sourcing the deals, one of the other points that you should be focused on is better understanding the seller. And I think that’s where a lot of Ricky investors also get caught up is that they see the list price for a property and they take that as gospel, right? It’s like that seller is only willing to accept that list price. And I was just talking to someone yesterday who’s looking to buy their first Airbnb and he was looking at a pretty expensive property in upstate New York. I think it was listed for like $1.69 million and the deal worked for him at like 1.3.
So there’s like a $300,000 gap, which is not a small amount of money, but the property had been listed for the better part of a year. So this guy who’s looking to sell this property has been sitting on a $1.7 million property for over a year and it’s just been sitting empty and he has been renting it during that time. So for me, it’s like, hey, there might be some motivation for this seller to actually budge off of that 1.7 purchase price. But the guy who I was talking to was like, “Man, I just don’t want to offend this seller.” And what I shared with him was I would be more concerned about locking up a property at the wrong price than I would be about offending the seller. So I said, “Man, just submit the offer, whatever number makes the most sense for you.
” So he went to the agent, his starting number was 1.2 million, and the agent came back and said, “Hey, look, it’s listed at 1.7. I know the seller will probably come down to 1.5. 1.2 might be too much of a stretch.” But even there, we went from 1.7 to 1.5 with one quick conversation. So I think the biggest thing for rookies to understand is that you’ve got to put the ball in the court of the seller to either accept, reject, or alter whatever offer you’ve submitted to them, but don’t try and get in their head and make that decision for them. So I think that’s one important point when it comes to finding the right deal.

Ashley:
I think too, if you don’t know this person personally, if you offend them, will you ever talk to them or meet them again or even think about them again? In most cases, no. Okay, you offended someone, you will never interact with them again because they’re not selling your house, you’re not buying it and you move on to the next deal. But if they negotiate with you or they bring it down, now you’ve got yourself a deal. Trust me, I’m the worst person to ask about confrontation, but even that, I am okay with

Tony:
It. But Ashley, let me even ask you, let’s say that you were selling that property for 1.7 and someone came and offered you 900K, would you even respond to that offer?

Ashley:
Yeah, I would at least counter offer. I would at least do a counter if I would say the 1.5 or whatever, I would at least counter and say that’s the lowest I’m willing to go.

Tony:
And what if they came back after you countered it at 1.5 and they’re like, “You know what, Ashley, since you countered me, I’m actually going to reduce my price to 500K.” What would you say next?

Ashley:
Then I probably would just tell my agent, either don’t respond or … So

Tony:
At that point, you might be considered insulted by their offer, right? Let’s say that same seller came back to you and they’re like, “You know what, Ashley? I have some time to reflect. I realized I was wrong for that offer of 500K. I want to now offer you a full price offer at 1.7.” Would you be okay with that? What would you say to that?

Ashley:
Yeah, especially if this is an investment property, I don’t care who I’m selling it to. Even my own house, I don’t care who’s buying it or what you’re going to do to it. Yes, someone that’s lived into their house and taken care of it and built beautiful gardens and everything, and then maybe they want to drive by once a week and make sure everything’s wonderful, wants to sell it to a family and blah, blah, blah and stuff like that. But as an investor, I do not care what you do with the property after you’ve written me a check.

Tony:
And I think that’s the scenario or that’s the mindset for a lot of people. And that’s why I went through that little thought exercise because it’s like, even if you offend a seller with your first offer, there’s usually some number where that offer is no longer offensive. You’ve just got to figure out if you can get as close to that number without going over where the deal makes sense for you.

Ashley:
And one thing too is follow up with them. So you do your low ball offer, whatever, they don’t respond or they get mad, whatever happens. Three months later, follow up and ask their agent or would they be willing to come down anymore or what’s going on with the deal? Follow up. There’s probably been two circumstances I can think off the top of my head where I’ve put offers on a property, they said no, and six months later it closed for less than what I had originally offered. But I don’t know if it’s either just them thinking I’m not interested anymore because it’s been so long or them if they really were insulted and didn’t want me to buy it because of my first offer, but yet they sold it because of that. But I think continue to follow up. Even if you do insult the person and they’re mad, continue that follow up with them or their agent at least with your agent or something like that.

Tony:
And I get why so many Ricky investors are worried about quote unquote insulting the seller, but guys, just know if you come back with a better offer, that insult, it usually goes away pretty quickly, right? So understanding the seller, trying to get a better understanding of their pain points. One other piece on that too, Ash, and we’ve interviewed a lot of folks who have talked about this. You mentioned that the seller who wants to drive by and see their garden every time. And it’s because we’ve interviewed folks who’ve gotten incredibly great deals because they offered something that seemed super insignificant to you as the buyer, but was very significant to the person who was selling it. We’ve interviewed folks who have gotten big discounts because they helped the seller move. They’re like, “Hey, I’ll get a moving truck for you so you don’t have to worry about moving everything out.
” We just interviewed someone who got a deal because they promised to take care of the garden that this little old lady had been cultivating in her backyard. So there are so many, like Ash, even you, you said one of your deals, you promised the seller that you would keep one of the tenants in place because she had been there for so long. So every seller has a different motivation and the better you can understand what’s important to them, the better offer you can craft that’s not even related to the price of the property that might allow you to actually close on that deal. So we could probably do an entire episode just in negotiating with sellers and understanding motivations, but just now high level, super important to focus on.

Ashley:
BiggerPockets also has a great book for negotiating deals written by J. Scott, and you can find that in the bigger pockets of bookstore. Last

Tony:
Piece I’ll hit on this point here is it’s also important to understand the different financing options that are available to you as you look to buy, because that can also have an impact on the offers and the deals you can actually close on. If Ashley and I are both looking at the same exact property, but Ash has just gone to Bank of America to get her debt and they’re like, “Hey, Ashley, we need 30% down on this deal.” And I go to my local credit union or I go to 20 different credit unions and they’re like, “You know what, Tony? Actually, if you get this deal and you invest another 50K into the rehab, we think it’ll be worth a lot more once it’s done. We’ll fund the whole thing You just got to go out there and find the deal.” Same exact property, but very different loan products is going to allow me to execute in a way that Ashley wouldn’t be able to execute on.
So one of the biggest mistakes that we see rookies make that gets them stuck on the sideline is going to one bank or one lender and thinking that that person has all of the potential loan products that are available to you as you look to go buy this deal. So shop around more, try and get more options in terms of loan products, focus on those small, local, regional banks who have more flexibility when it comes to financing investment properties, and then pick the right one that matches for the specific deal that you’re looking at. All right. So even knowing how deals work isn’t enough. And right after the break, we’re going to talk about why learning still isn’t translating into action. We’ll be right back after this. All right. So at this stage, the problem isn’t information, it’s execution. So the final reason why most rookies won’t buy a deal in 2026 is because you get stuck learning and you never start executing.
And this part is, it’s a sticky, kind of slippery slope because learning feels super productive. You’re listening to the Real Estate Rookie Podcast, you’re watching YouTube videos, you’re saving random little clips on social media. All of this feels important and it feels like you’re making progress, but the thing is that learning doesn’t actually carry any risk. There’s zero risk associated with listening to a podcast or watching a YouTube video or saving things on social media. Without clear deadlines or stakes, education just can kind of turn into a delay. I met someone a few days ago who had been thinking about buying an Airbnb and her and her husband had been thinking about it for over two years. And while I committed them for like, “Okay, hey, it’s great that you took your time to educate yourself.” There’s not that much. It should take you 24 months to actually jump in and take action.
So you’ve got to figure out how do you make sure that the accumulation of knowledge doesn’t lead to in action. And what I typically share with folks is that if you get to a point where you’re listening to the Real Estate Rookie podcast or whatever the podcast you listen to and you’re reading the different books and you start to realize that you already know the majority of what we’re discussing, you know the terms, the frameworks, BER, you know ARV, you know this, you know that. You’re like, “Hey, Tony, I know. I’m supposed to go talk to the local banks as well. Hey, yeah, I know I’m supposed to submit an offer that’s going to be a little bit lower than what I’m comfortable.” If you know all of those things, then that’s a really, really good sign that you’ve already absorbed enough knowledge and now it’s time to step into actually taking action.

Ashley:
If I was a doctor, I would diagnose you with analysis paralysis. And I think this is just a huge thing. You want to feel back to the beginning of this episode, you want to feel comfortable and confident and you think that the more you learn and the more knowledge you have, the better you feel. Think about it. You go to school and study for how many years just to get your first job and so you feel confident and ready. You’ve got all of this schooling, all of this studying under your belt and now you’re ready to do the job. And I think in real estate that can be detrimental to you sometimes. Yes, I’m not saying go ahead and just jump into it without knowing anything, but you don’t need to have four years of schooling to understand how to purchase a property and to operate it as a rental.
And I think that’s where most people get confused is that they need to absorb all of this knowledge. They need to know everything, but you don’t. You can think about the people who become accidental landlords. Think about the people who are going through some kind of significant life impact that is detrimental to them, but they’re still being able to buy a rental property. Think about somebody who didn’t even go to college fresh out of high school, bought their first house hack. Think about the people that are being able to do this without spending years and years doing research or thinking about it. And you are probably already ahead of most people that get started by having two years to talk about it, by having two years to absorb knowledge to learn. Think about if you bought a property two years ago, how much farther you would be ahead, how much equity that property would have accumulated, how much experience you would have already obtained.
So as you listen, especially when we have the rookies on and to some of the obstacles and the hurdles that they have overcome to do this, a lot of you listening are probably in a way better position to actually start because of maybe time, money, the knowledge you have already absorbed. And I think a big telltale sign is if you go into the BiggerPockets Forums, you can answer a question, a couple questions, because you know the answer, you’re already a lot farther ahead than other rookies too.

Tony:
And I think the first step is usually the hardest. And it’s this very common thing that we see amongst the folks that we interview and just the people that we meet in life that the first deal, like from the time you commit to actually closing that first deal, somewhere between a year to 24 months is pretty common, but that second deal never takes as long as the first deal. And that’s because once you get that first deal done, everything else becomes so much easier. So just know that the first step is usually the hardest. So if you want to be the exception here on this last reason that most rookies won’t buy a deal, here’s the one challenge. Set a goal on the number of deals that you’ll analyze in 2026 and the number of offers that you’ll submit in 2026. And if you just work really, really hard to hit those two things, chances are you’ll end up finding at least a few deals that are good enough for you to really want to move forward with.
So how many deals are you analyzing? How many offers are you submitting? And the goal is that you can use both of those actions to get you to your first deal.

Ashley:
Well, thank you guys so much for listening to this episode of Real Estate Rookie. I’m Ashley, he’s Tony, and we’ll catch you guys on the next one.

 

 

 

In This Article

When foreclosure activity reaches the REO stage, it represents the outcome of financial distress. The homeowner is no longer in the picture, the auction process has concluded, and the lender now owns the property outright. For real estate investors, this phase often marks the most visible—and actionable—point in the foreclosure cycle.

According to ATTOM Data Solutions, December 2025 delivered one of the most dramatic shifts in bank-owned inventory all year. National REO counts surged more than 53% month over month and nearly doubled year over year, confirming that the elevated foreclosure activity seen throughout 2025 is now fully materializing into lender-owned supply.

This acceleration matters. REOs don’t rise in isolation—they are the result of months of earlier distress working its way through the system. And as more properties land on bank balance sheets, investors may begin to see increased inventory, greater pricing flexibility, and expanded opportunity in certain markets.

December’s data suggests the foreclosure cycle is entering a new phase as we move into 2026.

National REO Inventory Surges Sharply

According to ATTOM Data Solutions, 5,953 REO properties were recorded nationwide in December 2025, representing:

• +53.27% month over month
• +92.72% year over year

This is one of the largest monthly increases in REO inventory in recent years. The year-over-year growth—nearly doubling from December 2024—confirms that foreclosure completions are accelerating, not slowing.

While Foreclosure Starts and Notices of Sale provide early and mid-cycle signals, REOs reflect real outcomes. These are properties that did not resolve through loan modification, reinstatement, or auction sale. Instead, they now sit squarely in lender portfolios—often awaiting disposition.

State-Level REO Trends: Where Inventory Is Building Fastest

Florida

Florida recorded one of the most significant REO surges in the country. Even as early-stage filings fluctuated in prior months, December confirms that a growing number of cases are now reaching completion.

• 427 REOs
• +37.30% MoM
• +202.84% YoY

California

California reversed earlier softness with a sharp monthly increase. While the state’s foreclosure process tends to move more slowly, December suggests stalled cases are finally resolving.

• 449 REOs
• +42.99% MoM
• +35.65% YoY

Ohio

Ohio’s REO inventory continues to trend higher, reflecting a steady conversion from auction activity earlier in the year.

• 179 REOs
• +37.69% MoM
• +62.73% YoY

North Carolina

North Carolina remains one of the fastest-moving foreclosure states. REO volume more than doubled year over year, underscoring how quickly distress advances through the pipeline.

• 152 REOs
• +24.59% MoM
• +102.67% YoY

Texas

While Texas REOs held flat month over month, the year-over-year increase remains striking. The state continues to convert distress into completed foreclosures faster than most judicial markets.

• 546 REOs
• 0.00% MoM
• +135.34% YoY

Why the REO Stage Is So Important for Investors

REOs differ meaningfully from earlier foreclosure stages and often appeal to a broader set of investors.

1. Banks become motivated sellers

Once a property becomes REO, it is no longer a loan—it’s an asset that carries maintenance costs, tax exposure, and reputational risk. Many lenders prioritize liquidation, creating opportunities for negotiation.

2. Due diligence is more accessible

Unlike auction purchases, REOs typically allow investors to:

• Conduct inspections.
• Review the title before closing.
• Obtain appraisals.
• Use financing, including non-recourse loans.

This makes REOs particularly attractive for investors seeking a more traditional acquisition process.

3. REOs reflect real market stress

Rising REO counts indicate:

• Fewer successful loan workouts.
• Auctions failing to clear inventory.
• Lenders accumulating properties.

When REOs surge, it often signals that broader housing pressure is becoming harder to absorb.

4. Retirement account investors gain flexibility

For investors using a Self-Directed IRA or Solo 401(k), REOs offer:

• More time for due diligence.
• Clearer transaction structures.
• Opportunities for long-term buy-and-hold strategies.

Compared to auctions, REOs align more comfortably with retirement account rules and timelines.

County-Level REO Insights: Where Conversions Accelerated

Looking beneath state totals, county-level data reveals where foreclosure pipelines are converting most rapidly.

Florida: Broad-based REO growth

Florida’s REO surge was geographically diverse:

• Lee County posted one of the strongest month-over-month increases, reflecting continued Gulf Coast stress.
• Orange County (Orlando) also saw meaningful growth, tied to earlier investor-heavy filings.
• Miami-Dade and Broward Counties remained elevated, contributing to statewide totals.

Investor takeaway

Florida’s REO growth is not isolated to one metro—inventory is expanding across multiple regions.

California: Inland markets drive the rebound

California’s December increase was led by:

• Riverside County, where delayed cases finally reached completion.
• San Bernardino County, continuing its role as a foreclosure pressure point.
• Los Angeles County, which posted moderate but consistent growth.

Investor takeaway

The Inland Empire remains the most reliable source of REO inventory in California.

Ohio: Central Ohio leads

Ohio’s REO growth was concentrated in:

• Franklin County (Columbus), which showed one of the strongest MoM increases.
• Cuyahoga County (Cleveland), contributing steady volume.
• Montgomery County (Dayton), adding to statewide momentum.

Investor takeaway

Central Ohio continues to offer visibility into future REO supply.

North Carolina: Rapid conversion continues

North Carolina’s YoY surge was driven by:

• Mecklenburg County (Charlotte)
• Wake County (Raleigh)

Investor takeaway

Despite a slower pace earlier in the fall, December confirmed that many cases have now reached completion.

Texas: High velocity, high volume

Texas’ REO inventory remains elevated:

• Harris County (Houston) led the state.
• Dallas and Tarrant counties contributed significantly.
• Bexar County (San Antonio) continued its upward trend.

Investor takeaway

Texas remains one of the most efficient foreclosure pipelines in the country—distress converts quickly.

How Investors May Use REO Data Strategically

REO data may help investors:

1. Identify markets where bank-owned inventory is expanding.
2. Anticipate pricing flexibility from motivated sellers.
3. Plan long-term rental or renovation strategies.
4. Align acquisitions with tax-advantaged retirement accounts.

Tracking REOs alongside Foreclosure Starts and Notices of Sale provides a full-cycle view of market stress—and opportunity.

Disclaimer

Equity Trust Company is a directed custodian and does not provide tax, legal, or investment advice. Any information communicated by Equity Trust is for educational purposes only, and should not be construed as tax, legal, or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional.

BiggerPockets/PassivePockets is not affiliated in any way with Equity Trust Company or any of Equity’s family of companies. Opinions or ideas expressed by BiggerPockets/PassivePockets are not necessarily those of Equity Trust Company, nor do they reflect their views or endorsement. The information provided by Equity Trust Company is for educational purposes only. Equity Trust Company and their affiliates, representatives, and officers do not provide legal or tax advice. Investing involves risk, including possible loss of principal. Please consult your tax and legal advisors before making investment decisions. Equity Trust and Bigger Pockets/Passive Pockets may receive referral fees for any services performed as a result of being referred opportunities.

In This Article

Every time I’ve tried to get “clever” and pick “the next hot investment,” life crammed some humble pie down my throat. I don’t do that anymore. 

In my stock investments, that means broad index funds instead of picking individual stocks. Large cap to small cap, U.S. to international, every industry: I’m in it. 

In my real estate portfolio, that means spreading small ($5,000 to $25,000) investments out across every axis you can imagine. Here are those six axes I make sure I diversify amongst.

1. Geography

I’ve invested in over 40 passive real estate investments, spread over 16 states and dozens of cities. 

I have the humility to know that I can’t repeatedly predict the next hot market. I might get lucky on the first one or two, but the law of averages will catch up with me sooner or later. 

So? I put the law of averages to work for me. Rather than parking $50,000 to $250,000 in a few real estate investments and hope I picked a hot market, I practice dollar-cost averaging. Every month, I invest $5,000 or more in a new deal. 

Some will perform great. Others may struggle. Most will perform around the middle of the bell curve. 

That’s OK. I can sleep at night knowing that the law of averages has my back. 

2. Asset Class

The same principle applies to asset class. 

My co-investing club looks at multifamily, industrial, land, mobile home parks, storage, and more. Again, we’re not trying to pick the next hot asset class. We know that by diversifying our investments, we’ll get exposure across the spectrum and insulation against unpredictable crashes.

Sometimes investors even get multiple asset types in the same property. “One of my best diversification moves was purchasing a multifamily property with 10 storage units attached,” explains active investor Austin Glanzer of 717 Home Buyers. “The storage units help offset the mortgage and require very little upkeep. Tenants rarely reach out about them, yet they significantly increase the NOI and value of the property.”

3. Debt vs. Equity

Taking that asset diversification a step further, our co-investing club also invests in secured debts, not just equity investments. 

On the debt side, that looks like private notes secured with a first-position lien against real property, with a low loan-to-value ratio (LTV). For example, last year we lent money at 15% interest to a land investor to help him expand his business. He put up his own home as collateral, with a first-position lien at 65% LTV. 

On the equity side, we invest in a mix of private partnerships, syndications, and equity funds. These don’t pay as much income up front, but we get to participate in the upside profits on the back end when they sell. They also have the potential to pay out “infinite returns.”

Debt investments pay a high-income yield, on a predictable schedule. They also mature and close out at a predictable timeline, often sooner than equity investments.

4. Timeline

I want to stagger when my money comes back to me, which means diversifying across investment timelines. 

I’ve invested in nine-month notes, for a quick turnaround. And I’ve invested in long-term investments that won’t close out for seven to 10 years—and everything in between.

First, I have to find a place to redeploy that capital, which I don’t want to have to do all at once. Dollar-cost averaging, remember?

Second, I have to pay taxes on capital gains when an equity investment sells for a profit. I don’t want all of those hitting in the same year and driving my tax bracket through the roof. (Although I do practice the lazy 1031 exchange, which certainly helps with that!) 

Finally, some people actually want to live on these returns. I’m not quite there yet, but many of my fellow members in the co-investing club want staggered repayments to cover some or all of their living expenses. Ever hear financial planners talk about bond ladders? It’s the same concept, but with passive real estate investments. 

5. The Operators

Active investors often rant at me about how they want total control over their investments and don’t want to invest with other operators. I even know a few passive investors who only stick with a couple of operators. 

I totally disagree with them. I want to diversify across many different operators, and only increase my position with one after they’ve proven they will steward my money well. 

Even if you think that you or some other operator is the most competent investor in the world—which I’d challenge—that still leaves you with key principal risk. What if you have a stroke tomorrow and become incapacitated? Or die? Or something happens to a loved one, and they put everything else in their life on pause while they deal with that? 

Then there’s the fact that you just don’t know how skilled an operator is until they’ve lived through a couple of market cycles. I can tell you firsthand that when I was buying properties actively in my 20s, I thought I was hot stuff. Then 2008 hit, and I got a splash of cold water in the face. 

I’ve invested with dozens of operators. Some had absolutely sterling reputations when I invested with them, and they later disappointed me. Others have proven to manage my invested money with skill and integrity. 

But it’s hard to know for sure until you take that leap with them. This is why I leap with $5,000 first, then maybe $20,000, then $50,000. 

Many members of my co-investing club also invest actively. But they diversify their real estate portfolio by investing passively, across all the axes outlined. 

6. Mix in Related Businesses

In some of the industrial real estate investments I’ve made, I’ve gotten direct or indirect exposure to the industrial business itself. 

For example, we invested in an industrial deal a couple of years ago where we got an ownership interest in the business in addition to the property. The deal went full cycle in late 2025, paying out an annualized return (IRR) of 27.6%. Most of that profit came from expanding the business, not improving the real estate. 

Active investor David Musser explained to me how he diversified his own real estate investments to include a local business: “We own rental properties, and we diversified by opening a nearby e-bike store. By hiring the right people, the business runs mostly passively. On top of that, we Airbnb the apartment above the shop, which creates an additional income stream.” 

There are always ways to diversify further. 

Earn Through Concentration, Keep and Grow Through Diversification

Most people earn their money through one or two active income streams: their job and/or a small business. Perhaps they even win big on an employee stock option or a crypto payout. 

That’s concentration. There’s nothing wrong with it, but it can disappear overnight. 

You keep and grow your wealth through diversification. One of my 44 passive real estate investments might get hit with a fire, a hurricane, or a lawsuit. A crash in one sector or city might bruise the few investments I have there. 

But as a whole, my portfolio will keep growing over time. This is how I went from $0 to $1 million in less than seven years. 

My investing philosophy of dollar-cost averaging with small amounts every month helps protect me from risk. It doesn’t mean nothing ever goes wrong, or that every investment pays out huge returns. But it does mean that my returns form a bell curve rather than a few isolated blips on the sonar screen, and the law of averages helps protect my money. 

Henry:
For investors, the market does not have to be perfect. It just has to make sense. The challenge is knowing which trends are actually changing the math. What’s up, everybody? I am Henry Washington, and today I’m stepping in for Dave Meyer as the host of this week’s On the Market Show. And I’m also joined by my friends, Kathy Fettke and James Dainard. And today, we’re gonna be going over the most important headlines that we found this week. We’ll be breaking down the lock-in effect and whether it’s still in play or if it’s starting to change a little bit, we’ll talk about the current state of real estate inventory and the top US cities where U-Haul says people are moving to. You’re listening to On the Market, let’s jump in with our first headline. All right, my article is from Fortune, and it is about the lock-in effect.
And we’ve talked about the lock-in effect several times on this show. When interest rates dropped to sub 3% millions of homeowners locked in two to 4% mortgage rates, and that made it challenging for them want, to want to sell their properties and transition to new homes when the interest rates rose because they would be trading a very low interest rate for a very high interest rate. So that caused inventory to dry up because people were locked into their lower mortgage rates. And what this article talks about is that as of late in 2025, more homeowners have mortgage rates above ones with sub 3%. In other words, there’s a shift from the pandemic era where m- the majority of homeowners had a sub 3% mortgage rate. Now, we’ve seen a shift where there are more homeowners that own interest rates higher than 3%. So the article also talks about because there are fewer homeowners that now hold these lower interest rates, that means the financial burden or the penalty for these people transitioning homes is now lessened, which means more people are willing to go ahead and put their homes on the market, and that should help inventory kind of unlock the inventory and we start to see more transaction volume.
I think that is the hope. I mean, I can say in my market that we are seeing people transacting faster. The last few homes that have gone on the market by either myself or some of the other people that work out of this office all went under contract in the first 24 hours with multiple offers. So in my market, we’re starting to see some of this, but what are you guys seeing in your markets, especially you, James?

James:
There is not a lot of inventory, but I will say I was pretty surprised to see that there’s more homeowners now with rates above the 3%, 3.5%, because all we talked about for like a year after rates went up was the lock-in effect- Yeah. … that no one’s moving, the rates are gonna stay here forever. Like, you just don’t know what’s gonna happen nowadays, right? Right. Like it, like everything that you anticipate to happen doesn’t happen. And then this goes over here. It’s like, I never really thought that people were gonna stay forever in the house just because people changed their minds and a lot of people bought homes on a very quick whim. And they kind of jumped in because they had FOMO, they didn’t wanna lose buying a home. But I don’t know if this is gonna really cause more inventory because we’re seeing a l- inventory shrink up and then for the last six months, all we’ve heard about is inventory rose, inventory rose- … It’s finally coming, and then it shrinks back down.
It, it’s- We don’t know which way is what going where. And what it, it’s important for everyone to do is just not overthink it too. Like, what are you trying to accomplish? What are you trying to do? And is there more inventory or not? It doesn’t matter what someone’s home, their rate is on their existing mortgage has nothing to do with what you’re doing next, right? But I do think this shows that it doesn’t matter. Americans are used to borrowing and they don’t care if their rates are 3.5% or 20%. They just want the money where they want it, and they’re gonna keep moving things forward. But this is pretty surprising that there’s more mortgages locked in above the pre-pandemic.

Henry:
I think this article also touches on something that some of us all said in previous episodes, is that people don’t just stay in a home or move because of the interest rate, right? Mm-hmm. There are life events and things that happen that cause people to either need or want to move. And most homeowners are less concerned about the financial impact and are more concerned about like, “What’s my lifestyle impact?” ‘Cause these, a lot of these homeowners aren’t investors. And so what the article says is like some of the big drivers in people breaking the lock-in effect now that it isn’t as financially challenging for them is job changes in relocations. You know, a lot of companies are limiting remote work. Like that was a thing before. It’s not as much of a thing for a lot of companies, family changes or divorces, downsizing, there’s people downsizing and they’re wanting to sell.
So normal life factors are now coming into play and it’s easier for people to make the decision to sell because the financial implication isn’t as harsh as it was before.

Kathy:
Yeah. It, it’s just a matter of time, right? Uh, you know, every year, four million, about four million homes have been trading, have, have been selling. That, that means the people buying them are probably in those 6% rates. In fact, some might be in much higher rates and so happy to be refinancing into a 6% rate from eight or something. So it just is a matter of time. 6% is not a bad rate.

Henry:
Right.

Kathy:
It’s actually a really, really good rate. The problem was that home prices soared at the same time, but they have stayed relatively flat for a few years now, and that’s given some time, again, for wages to rise and for affordability to increase. And that was kind of the headline of last month, which is for the first time, uh, housing has become a little bit more affordable. And that’s the combination of rates coming down just a bit and wages going up a bit and home prices staying flat. And in some areas, coming down quite substantially. You know, if you were ever wanting to buy a house in Austin, why, goodness, you could get a deal.

Henry:
Right?

Kathy:
Yeah, you could get a deal. And that’s, that’s not just Austin. There’s several markets like that. So that’s, that’s part of it. And, and then the other part is that it’s just there’s a lot of people sitting on massive amounts of equity. If you bought in 2020 and you’re looking at all that equity-

Henry:
I’m about to list my house and I’m locked into a sub 3%. My mortgage rate is like 2.3%, but I have a ton of equity because I literally bought right in 2020, right before the market shifted to, to where things were selling like hotcakes, and now I’ve got a ton of equity, and we’re gonna use that equity to build a home on 20 acres of land that we are closing on today.

Kathy:
Oh my gosh, so exciting. And again, lifestyle change. Yeah. So for you, if you actually look at the, the 0% return that you’re getting on that equity, um, and, and then you combine it, it, it, you know, you’re, you’re going to be making more money by putting that equity to use when you’re thinking like an investor. Now, I think a lot of people don’t think like investors. If they have to move or do something else, they might not wanna keep that older house and rent it out even though it might cash flow because that’s a foreign concept and a scary one, and maybe they need access to that equity. So yeah, it’s just, I think it’s just a matter of time. Plus, one more thing, so many people kept thinking, “I’m just gonna wait till rates come back down to 2%, 3%.” Yes. “That’s when I’ll buy.” And I think reality has set in that that’s probably not happening.

Henry:
I think you both make great points here because if you wanted to buy a deal or buy a property in a great market that’s now experiencing some downturn, like what an opportunity, right? Like, you know, we just did the Texas Cashflow Roadshow and we were in Austin and there are tons of people both in Austin and outside of Austin who love that area want to invest there, but people just kept saying, “Man, things aren’t looking good. Prices are down.” Yeah, that’s when you should buy. Austin’s cool. It’s gonna come back, right? Now you get to get in at a discount. If you’re a retail kind of buyer, this is a great time to buy in that area. And if you’re an investor and you’re looking to capitalize, you’re supposed to buy low, sell high, right? This gives you an opportunity to buy low and sell high.
And James, you’re right, there’s so many different data points. Like we can literate … I’m sure if we dig for five seconds, we can find an article saying the exact opposite,

Kathy:
Right?

Henry:
But I think you’re right. We have to focus on the fundamentals. If you’re a flipper or a value add investor, like this shouldn’t change your approach. You should still be buying undervalue. You should still be adding value, doing the best job you can in the shortest period of time, and then understanding your market, your customer, and providing them the product that they want, regardless of how many homes are on the market. Like, it’s more important now than ever to, like, be a fundamentally sound investor. What we aim to do is I wanna be the nicest home in the area at one of the middle or lowest prices so that people have no choice but to come see my house. Because if you’re shopping and you see options that look worse than mine and that are priced higher, then I know I’m gonna get those looks.
Like those fundamentals will carry you in any market.

James:
Austin is a head scratcher though. Like, because it came down fast when rates shot up, just like San Francisco, Seattle, Chicago, a lot of them did. It has had no pop back though, like none i- unless I’m just totally off on that. But I’ve seen San Francisco rebound and then, you know, it like kinda does like the EKG monitor, right, where it’s like boom, boom, boom. Austin’s just flatlined. There has to be opportunity there. And, and I think that’s what people have to change their brains on is when it doesn’t feel comfortable is when you wanna buy.

Henry:
Yeah. Like

James:
You have to keep buying and keep going. And if the, a market’s not rebounding like the rest of them, then that’s where the opportunity is. Yep. Right? It, it’s, uh … I should’ve gone out to that Austin roadshow and you have to have some properties.

Kathy:
I know, I know, right?

James:
We got some good barbecue and- Yeah. … got some good deals.

Henry:
The barbecue was amazing. Houston did have the best barbecue that we tried on this trip. I’m not saying Houston has the best barbecue in all of Texas. Don’t come at me in the comments. But put a pin in that thought, James, about Austin and about Texas. All right, well, that’s great information about the impact of the lock-in effect. We’ve got more amazing headlines for you when we come back. All right, we’re back with On the Market. Let’s dive into our next headline. I wanna move on to the next article that Kathy brought, and I think it may have something to do with real estate in Texas.

Kathy:
Mine is the U-Haul Growth Index Report. This is just, you know, go to U-Haul and they track where the trucks are going and where they’re coming, you know, where they’re coming back from. And if there’s a lot of demand for where they’re going, prices go up, if there’s not a lot of demand, prices go down. Uh, so California, once again, bottom of the list. Fewer people coming, so if you wanna rent a U-Haul to California, you’re gonna get a great deal. No surprise that the top U-Haul growth markets where the most U-Hauls were going, number one, number one, Dallas. Not a surprise, but investing there for 22 years for this reason. That’s where people are going. That’s because the job market is on fire. Uh, it has been for 20 years. Uh, second is Houston, and it’s because of their barbecue. Everybody’s just gonna get more barbecue.
Third, Austin. I think people are realizing I can go have barbecue and live for pretty cheap because they’re probably just giving away apartments at this point.

Henry:
They did overbuild. It looks like A- class apartments, especially in Austin.

Kathy:
Then, uh, Charlotte, Phoenix, Nashville, Charleston. So, you know, you could see a trend here, still the Southeast and Phoenix. It’s where people are moving despite what you hear in the news. And this is why you have to be so careful. When I talk to people about our single family rental fund, for example, where we’re focused on Dallas, they’re like, “Oh yeah, but, you know, there’s all these vacancies.” And it’s like, yeah, in, in the areas where they overbuilt, but not in the areas where we’re buying, not where the jobs are going, uh, companies are moving to the Dallas area and obviously to Houston and, and, uh, Austin because it’s much more affordable and the laws are in their favor and there’s tax credits many times for these businesses to move and that’s gonna drive workers to be there, but the employers wanna make sure that their employees can live well.
So they move to the areas that are more affordable within there. Now, if you go to downtown Dallas, not affordable, but you kinda go out into the outskirts-

Henry:
Yeah.

Kathy:
… that’s where the businesses are going and that’s where we’re investing too.

Henry:
I think recently McKinney, Texas, which is just outside of Dallas, was ranked as, like, one of the top, if not the top real estate market in terms of rent-price ratio, in terms- Yeah. … of, uh, appreciation. And that’s literally, like, just a stone’s throw outside of Dallas.

Kathy:
That’s been our focus for, for about a decade, and it’s paid off.

James:
And, you know, as we look at what’s gonna happen in real estate over the next three to five years, I think it’s really important to see what’s going on in politics in the local regions because the reason people are leaving and businesses are leaving is because of all these taxes. California has, what, that billionaire tax up in the air right now where they wanna tax more billionaires. Washington is in front of the Senate right now, it, and they’re, they’re gonna vote on it. They proposed a 9.9% income tax on anybody making more than a million dollars in, in Washington. And that, that means stock too, right? And that there’s a lot of tech that’s, that’s coming into Washington. This is where all of a sudden businesses go, wait a second.

Kathy:
Yeah. What the heck?

James:
You know, there’s a lot of San Francisco tech coming up to Washington because there’s benefits. We have lower properties. I mean, we are expensive, but it’s not, we’re not San Francisco expensive, and there’s no income tax. And then what happens is you hit that breaking point and you go, “No, you know what? This ain’t worth it anymore.”

Kathy:
Yeah.

James:
And now I gotta go elsewhere. Seattle’s proposing other taxes on businesses for income. Like, and, and these are the things that are making people go to Texas. They’re going to Florida and they’re going to more friendly states for businesses, and this is not gonna stop. This is a trend that started during the pandemic and people really started moving. If these states don’t sparten up, people are going to leave. You know, that’s something I’m watching closely in Washington because if a 9.9% income tax goes through on a millionaire, the next thing is 700 grand, then 500 grand on earnings. And the income tax is gonna be a real expense. Washington has higher expenses than a lot of other states and makes it unaffordable. That’s where property values go down. I think this is gonna continue because these states are pushing hard and, you know, I, I’m gonna be curious to see if there’s a fallout in those states.
Like, I mean, anybody who’s buying in the, these less business-friendly states, you gotta watch out. Like, I’m, I’m heavily into Seattle and I’m like, whoa, if this goes through, I’m gonna be making a shift into some other spots for sure.

Kathy:
Yeah.

Henry:
Kathy, you had mentioned Phoenix on this list. Where on the list did Phoenix fall?

Kathy:
Phoenix was number five.

Henry:
That’s cool. Again, I think that’s one of those situations similar to what we were talking about with Austin, because Phoenix real estate- Yeah. … uh, values have been flat and/or coming down over the past few years. But if it’s now on this list or it’s, data is showing that people are still moving there, businesses are still moving there. Again, that seems like a formula for an opportunity if you’re an investor, because you can get in now while prices are low, and if you hold through, you now know that businesses are moving there, which means businesses are gonna pour money into those communities, they’re gonna create jobs in those communities, and more people are gonna be living there, that creates a scenario where appreciation can happen again in the future.

Kathy:
There’s also a second part of this article that’s U-Haul Growth Cities. The, the one I just said was the metro area, because like I said, with Dallas, if you just focus on Dallas alone, not as interesting as the Dallas Metro area because so many of the businesses are moving actually outside of Dallas into areas like McKinney, like you said. But the U-Haul growth cities, the number one is, and most of these are in Florida, actually. So the, the metros are Dallas, and that’s because so much of the growth is actually in the suburbs. In Florida, the number one city is Ocala. And once again- Oh, man. … my company has been focused on Ocala for a couple of decades- Yeah.
… seeing the growth there. Um, I, I was shocked to see it’s the number one, but then it, it’s Northpoint, Florida, Myrtle Beach, South of Carolina. Remember you were looking at that, James? You like that town? Just Florida, Florida. And then McKinney is number six, so yep. Yeah. Yep. The bottom line is that Texas and Florida have gotten a lot of headline news about vacancies, but you have to dig in a little deeper. We also just did a mastermind with the teams that we work with across the country, and the Florida guys were like, every time someone, an investor calls, the first thing they said is, “Insurance, you’re, uh, we don’t wanna buy here because of insurance.” And I get it. Like, I’m in California. I know the problems with insurance, but they said, “It’s, it’s not as bad as people think. ” And I looked at our portfolio and I’m like, “Yeah, look at Rich.
Like, has our insurance gone up much?” And he goes, “Not a, a little bit, but, but also the houses have doubled, if not tripled in value. So of course the insurance has gone up.” Of course,

Henry:
Right.

Kathy:
You know? That’s the piece people are, aren’t maybe looking at. It’s not necessarily all related to storms, it’s that the values have gone up.

Henry:
No, Kathy, we want low expenses, low insurance, but we want high values. We want our cake and eat it too.

Kathy:
I agree.

Henry:
All right. Thank you, Kathy, for sharing that article. We do have to take a quick break, but when we return, we will be talking with James Dainard about inventory increases or not. We’ll be right back. All right, we’re back with On the Market. We have James Dainard and Kathy Fettke and myself. You heard me bring a story talking about the lock-in effect and how that may be shifting, and we heard from Kathy telling us about all the amazing places people are moving to, creating potential opportunities for investors and homeowners alike. And now we’re shifting to James Dainard, who has a story about inventory. James, take it away.

James:
One thing I track all the time is inventory levels. You know, as a flipper, developer, I mean, even as a landlord, right, I’m always looking at that because all 1031 exchange anything and trade out. I don’t care what my rate is, that locking effect does not matter to me. If I can buy something different and better, we’re buying it and selling. But how many doom and gloom articles have we seen come out the last 12 months about inventory’s way up? We’re going back into 2008. It’s finally … And then it’s like, oh, well, no, it’s gone up. You know, it’s more than it was. And now all of a sudden, you know, what this article talks about is active listings have increased 10% year over year nationwide, and it is very regional specific, but inventory is slowing down now, and there’s less coming on. And despite the year over year gains, total inventory is still 17.2% below pre-pandemic levels.

Kathy:
Mm-hmm. Yeah.

James:
And that’s pre-pandemic levels, right? And if we, it, what everyone forgets about is going into the pandemic, the market wasn’t doing well. It wasn’t crashing, it was puttering though. Everything was flat. We had, like, a little bit of a slow dip. I remember moving down to Newport Beach, and man, what a mistake that was not buying there, because it was declining. And so once those tariffs hit this year, everyone kind of froze for a second, and they wanted to see what was gonna happen. Then we saw that really nothing bad happened, but then the buyers didn’t resume buying like they normally would, right? Rates were lower, stock market was up, more homes for sale, and people still weren’t transacting.

Henry:
It was also wintertime during that, during that specific moment too. No,

James:
It was April is when we hit a rock wall in our market. It was April, which we usually hit that wall in June, and it was like summer came early on us, and summer’s not good in our market. And we didn’t see any kind of rebound up until December. It was just kind of flat, slow, and grinding through. I even took three homes off the market in December. I re-listed them, and we got multiple offers on all three, like a month later, right? 30 days later. And so, you know, for any home buyer that’s sitting on the sidelines going like, “I wanna get this perfected, I want the lowest price and the lowest rate, and to put it all together,” I can tell you in 20 years of buying, I’ve never perfected that box. It, like, it just goes where it goes, but inventory is really shrinking up.
And in our local market in Washington, we saw inventory starting to hit around four months of supply, even getting towards five, which gets to a balanced market. We’re at 1.7 months now.

Kathy:
Yeah. Wow. Oh my gosh.

James:
And there is nothing for sale. We’re comping houses. I’m like, “Where’s the houses? This is weird.” And we are seeing multiple offers. I just renovated my grandpa’s house, and we put that up for sale for the family. We got multiple offers on that house, and that was an expensive home in the area. Two homes that we couldn’t sell, sold. It’s like, I was anticipating this flood coming out, like everyone was waiting for the spring, and I’ve not seen the flood. Things are selling, and if you have a good product and a good house, and you’re a buyer, buy it if you can afford it. If you are selling it, it’s gonna sell. And, and so we’re, we’re seeing these kind of, like, little shifts, and I think the doom and gloom that we, everyone was talking about six months ago, you’re not gonna hear any of that in the next three months.
You’re gonna talk, hear about how people can’t find a house.

Kathy:
I wonder if it’s, like, s- some of these tech areas because of AI just being such a big new industry. Do you think that’s partly it? ‘Cause on the one hand, we talked about people wanting to leave because of this millionaire tax, but at the same time, they’re clamoring for real estate, so-

James:
Yeah, I think some of the first time home buying, like, Sunbelt areas haven’t been quite going as, up, but what I have seen is I don’t think this last six months had anything to do with economics. It’s all mental because, like, before those tariffs came out, we were getting massive amounts of showings and then they just disappeared, but nothing bad happened because of the tariffs economically.

Kathy:
Mm-hmm.

James:
That doesn’t make any sense. And so I think it’s FOMO. Like, there’s just buyers, it’s like everyone’s so afraid to make a decision that they just don’t make it. And once we see that pent up demand of not decision making, we see a rush in. Same with investing, right? Like, people are like, “I need to get my rental.” And be- people just start buying up stuff. And so don’t miss the bull rush and just keep steadily buying because I’m seeing inventories really shrinking and I’m actually … I thought we were gonna be flat for the next 12 months. I think we’re gonna get a pop in some of these markets. I

Henry:
Think a lot of it does have to do with the fact that interest rates are more reasonable now. Mm-hmm. Are they sub 5%? No. But I don’t know that I necessarily want them to be. But a 6% interest rate, if you’re a normal homeowner, is very, very reasonable, in my opinion. And I think that that’s helped people kind of be more comfortable with making a shift and buying properties. And you’re right. In, in my market, it’s, it’s very similar, James. In the past 30 days, we’ve just seen this pop in terms of people snapping up properties. Inventory on the market has shrunk, uh, from the winner. In the winter, every street you drove down, multiple for sale signs, and now you don’t see that anymore, and deals are getting snapped up. Uh, we’ve, like I said earlier in the show, the last three properties that have gone on the market in this office, all under contract within 24 hours, multiple offers.
And so that’s telling me that people are transacting and they’re eager to transact. But I will say, these buyers, they’re smarter now because they still are asking for a lot. And typically when you see homes getting snapped up with multiple offers, people are willing to waive certain things, but that’s not what’s happening. We’re getting buyers that are snapping up deals and then they’re asking for the moon.

Kathy:
Yeah.

Henry:
And I think that that’s fair. Put it on us, the seller, to make the determination on whether we want to do those things or not. But that’s why I say the fundamentals are key, because if you put out a good product, then you’re gonna have less crazy requests from people and you’ll be able to get your property sold faster. But buyers are, buyers are smarter and they’re asking for a lot.

Kathy:
Yeah, this was really the headline news story of 2025 is increased inventory and there were headlines everywhere and people were freaking out and calling it 2008 again. And, and it was true that at the beginning, like a year ago, this time a year ago, inventory levels were 33% above the year before. But by the end of the year, it, that growth rate went down to 10%. So beginning of the year last year, it was, inventory was rising quickly. I think you’re right. As soon as interest rates came down, uh, we saw a big, big shift starting around the summertime to where, again, only 10% over the year before. That’s like two-thirds less and that is amazing because interest rates didn’t move that much, right? It just needs to be enough. And, and if it just moves ever so slightly, that’s that many more people that could cross the line into homeownership.
So very, very sensitive to interest rates. That’s the big question. What’s next, right? Are they going to stay here? Are they gonna go up? They’re gonna go down? No one knows. But right now, that’s the story. The new story is not last year’s story of too much. Now it’s back to, too little.

James:
And one thing we saw, like when rates shot up and we were in the seven and a halfs, like, I mean, when I bought this house I’m in right now, my rate, they, they quote, it was 7.5%- Wow.

Henry:
… was

James:
The average rate. We still saw home selling. Like I pulled a little regional stat like inside Washington just by price point, because I really wanna break it down, but listen to this like inventory shift. August 2025, King County had almost three months of supply. Right now, 1.4 months. Wow. We have Snohomish, 2.8 month supply down to 1.6. And these are different median home prices. You got Seattle at 830, so almost 760. Then we have Skagit, which is further down. That’s at, that’s 500,000 around the median home price. Inventory in August was at 3.4 to four months of supply, now it’s below two months of supply. And so this is all different price points, all different types of buyers, tech related, not tech related. We’re seeing across the board the inventory shrinking and just like any supply and demand, if there’s nothing for sale, things go up in price, right?
It’s like that go walk through a mall and you walk through like those fancy designer stores and they got the line and they’re like, ” I gotta get in the line. I gotta get in the line. ” But no one really wants to go in the line, right? Like it’s like, it creates that, that’s that mental psyche that if you wanna pop, this is the time to put things for sale. Just really watch the data and the stats, don’t watch the news articles because when you read them, you’re like, ” Holy crap, that’s 50% of the inventory just fell off in a six month period.

Henry:
“I agree with you wholeheartedly, James, you need to track data points. And so if you’re an investor and you’re investing in certain markets, please get with investor-friendly agents or people within your market who have access to this data who can provide you these data points so that you can make the best decision for you and your market because every market is a little bit different, especially right now. These are some trends we’re seeing across the country, but as you dive into each individual market, things can be drastically different. So it’s, it’s, it’s more important than ever to be tied into the data in your local market. All right, folks, that’s all we got for the show today. Thank you so much for tuning in to On The Market. Make sure you follow on the market wherever you get your podcast and subscribe to our YouTube channel because that’s where we share exclusive content and in- depth analysis.
I’m Henry Washington. Thank you so much for listening and we’ll see you on the next episode of On The Market.

Ashley:
If you’re busy, if you work 50 hours a week and you have a lot going on, that doesn’t mean you cannot invest in real estate. And today’s guest is going to show us how he works 50 hours a week plus and still has made time to get three deals under contract.

Tony:
So today’s guest, Rashad George, is going to walk through his journey again of being a busy professional who started off buying super easy, almost turnkey properties, graduating all the way up to almost full tear down gut jobs. And you’ll hear his journey along the way and why he decided to strategically partner to help continue to build his portfolio.

Ashley:
And at the end, him and Tony let us in on a little secret of the short-term rental tax loophole and it explains why Rashad is going with a certain strategy. Welcome to the Real Estate Rookie Podcast. I’m Ashley Kerr.

Tony:
And I’m Tony J. Robinson. And with that, let’s give a big warm welcome to Rashad.

Rashad:
Yeah, it’s wonderful to be here. I’m happy to be here and I love listening to you guys.

Ashley:
Well, Rashad, before real estate, you went from debt collection to the Air Force to defense contracting. How did these career shifts shape the way that you think about money, risk, and long-term freedom?

Rashad:
Yeah, absolutely. So starting with debt collecting, it really opened my eyes to people making not necessarily the greatest financial decisions. I got to see everything from people who got down on their luck to people who just thought they needed everything and couldn’t afford it. So it really helped ground my expectations of how I should be managing my money. As far as the Air Force goes, that really helped me understand what it means to truly take control of my path in life. I learned a lot of good stuff from the Air Force. It really helped me learn, more importantly, how to manage myself and how to think of everything in terms of moving forward. As far as defense contracting, it’s pretty much the same thing I did in the Air Force and I love it so much, which is why I’m still doing it, but that’s really helped me gain the income that I need to invest and more importantly, stay connected with the military community.

Tony:
So Rashad, I’m just curious because the debt collection, there’s definitely maybe a stigma around that career path, but I also think that maybe there are some skills that translate into being a real estate investor as well. And I guess just what, aside from just the mindset around the money piece, being in that field, I would assume deals with a lot of rejection, a lot of angry people, a lot of walking the line and kind of building relationships. So I guess was there anything else aside from just the mindset around money that you built from a skillset perspective that you feel has helped you as a real estate investor?

Rashad:
Absolutely. I would say sympathy, and if I’m being honest, a little bit of empathy as well. I came across a lot of people who were just down on their luck and being able to sympathize with them while being necessarily, I don’t know, being firm, but being fair is something else that I learned from that job. And also taking a beat to just go, “Hey, I understand what you’re going through. Maybe not be so harsh.” And I think that’s been very helpful with some of the self-managing that I’ve done.

Tony:
We talk a lot or you hear a lot about debt collectors, but from the other side, the people who are having the debt collected, but we don’t necessarily hear it from the folks who were doing the debt collecting. But hey, there’s still, I think, a benefit on being on the other side as well.

Ashley:
Actually, in one of the towns near me, there was a huge debt collection agency, and that was one of the jobs a lot of people went to fresh out of high school if they didn’t go to college or they did it part-time while they were going to college, was working for this debt collection agency. So it was very interesting to hear their side of things as to how it’s different, but a lot of them made a lot of money doing that. But really, you have described yourself now as a high income tech borough, but your real estate journey started earlier than that. So take us back to that first house and you had a $100,000 gain post- COVID. So what did that moment really unlock for you mentally?

Rashad:
Yeah. Seeing that $100,000 check, just anything over six figures, it just helped me immediately understand there is something to this. Friends of mine had been telling me you should be investing in real estate, but that’s when it hit me. I know it’s an anomaly and I’m okay with that, but still, it unlocked the fact that I can move forward, maybe not with the expectation of making $100,000 each time I sell, but with the expectation of getting some sort of gain and understanding it clearly. I

Tony:
Feel like that first financial transaction as a real estate investor was always a bit of an unlock. I remember the first time I got money deposited from my first rental and because there was a lease up fee with that and I think there was some maintenance involved. It wasn’t even enough to cover the first mortgage payment because the property management company had a lease up fee. And so I was in the negative that first month, but it was still like $684. And I was like, oh my goodness. I actually made money from real estate. And it is, I think, a bit of a mindset shifting moment when you realize, hey, this actually works. But 100K is a lot. So I guess I’m just curious quickly, Rashad, if you can walk us through, how did you net 100K on your first deal?

Rashad:
Yeah. So it all started back in 2017 when I just could not find myself living in an apartment for more than three months. I was in town for maybe 11 days or so. And during that time period, I found myself an agent. I left for two and a half months. Every day I was texting back and forth with that agent looking for a home. I found something, took me a while to really pounce on it, but I found something that I really wanted, bought that home, lived in it, did pretty much nothing to it, then got that $100,000. Of course, I should have been a little bit smarter at what I did with the money. I did kind of recycle it, but I wish I had have invested it. And ultimately, I wish I had kept the house too.

Ashley:
So was this house the brand new build or the brand new build comes next after this?

Rashad:
Yeah, the house that I first purchased was built in, I think 2011. I purchased it in 2017. Then the following property, actually the next property I bought was my next primary residence. But after that, I bought my first investment property and that one was a brand new build.

Ashley:
Let’s go through that experience of why you decided to do a brand new build compared to buying an older property like the first one that you had purchased.

Rashad:
Sure. Yeah. I made the decision to buy a brand new bill simply because I didn’t know as much about real estate investing as I do now. So I wanted something that was a little bit easier from a time perspective. And what I mean by that is I didn’t want to always have to be worrying about fixing something or having a new problem that I did not really have any experience with. So I called up my agent and she put together quite a few different options for me, but the majority of what she put together were brand new bills for that very reason. I made the decision that maybe she’s right, there’s something to this, got the new build. Haven’t really had any trouble out of it. And all the trouble that I have had has been warranted anyways.

Ashley:
So basically you put together your buy box, your criteria, what you were looking for, and then your agent came back to you with these deals. And I think that’s such a great lesson for rookies as to like, that is one thing you should be doing right now. If you haven’t reached out to an agent or you haven’t even got your first deal is really defining the criteria of what you’re looking for and building out that buy box and building out your criteria of what you want in a house. So the people who are searching for deals for you and even you when you’re looking for deals scrolling MLS, you know exactly what you are looking for.

Tony:
Ash, do you remember the guest we interviewed and his entire strategy was buying new builds and he would buy … So for those who aren’t familiar with like the new builds, if you’re buying in like a larger subdivision, they’ll typically release homes and phases. So they don’t release everything all at once. They’ll build out a small phase and then they’ll set the prices there. Then they’ll do their next phase and they’ll increase the prices. The next phase they increase the prices. And there was a guest who we had interviewed where his entire strategy was buying these properties in phase one as a primary residence, living there for one to two years. Sometimes he’d keep it. I think sometimes he’d flip them. By the time he got to phase five or 10 or six or whatever it may be, the value had increased so much that he could sell it for a big gain or do a cash out refinance to get some cash back.
And that’s how he built his entire portfolio. So I actually do really love the idea of the new build as a strategy, but sometimes it is a little trickier to get cashflow positive. So were you making actual cashflow on this deal?

Rashad:
I would love to say that I was making cash flow on this deal. I’m going to go ahead and say no. It pretty much breaks even. And I kind of got a little lucky here because I purchased the property after it had been appraised. So when it was originally appraised for tax purposes, it was appraised as just the land value only. So that’s what I paid for year one. Year two rolls around, I’m paying the taxes on the dwelling as well. That being said, technically you could say I cash flowed, but I didn’t actually pull the money out. I just left it in escrow. So all in all, I’m counting that as pretty much neutral. And I’m okay with that, especially as someone new with no expectations of hitting it right out of the park from the get- go, just give me something new, give me something easy, let me learn from it, and then try again on the next one.

Ashley:
So for rookie listening, what are some of the things that maybe made you feel more comfortable that you were going to break even on this property? And what should a rookie look for or think about before they actually decide, “You know what? I’m okay with doing breakeven.”

Rashad:
So one of the things that made me comfortable breaking even is because I had the cash reserves. Just in case something were to go incredibly wrong, who knows, hailstorm, house gets robbed, any number of things that happen, maybe they all happen at once. I’ve got the cash reserves to sort of mitigate against the risk. If you don’t have the cash reserves, I would say maybe not go the route of going completely negative cashflow or neutral, but if you can partner with someone who can help you on the cash side, that might be a route to go as well. So long as the understanding is this is not a forever thing, and of course you have to do better next time. So

Tony:
Would you do a new build again, Rashad? I guess you talked about some of the pros and cons, but given what you now know, do you feel that’s a good firs step for a rookie investor?

Rashad:
I think it is a good first step for a rookie investor, specifically folks who are looking to invest not necessarily in their local area. If they get something new, it’s a little bit easier to deal with. And I do want to kind of quantify this in a time perspective as well. You are going to spend time managing your assets. There’s no way around that, but for something that’s new, it is a lot less time. For someone like myself who has a weekday or 40 hour a week job, I also get stuck in traffic at least two hours a day. That leaves me 10 hours that I’m already just dedicating to work. So I have to sort of use my time in a wiser manner to make sure it makes sense. So if anyone else is in that predicament, then sure. But if you have more time than you have money, I would say maybe the new build might not be the way to go.

Ashley:
We have to take a short break, but we’ll be right back. While we are gone, make sure to subscribe to us on YouTube @realestaterookie. We’ll be right back. Okay. Welcome back. We went over Rashad’s first deal, the new build, but for your second deal, you actually decided to partner with your sister and form an LLC. So money and family, what conversations did you have upfront to make sure that this partnership was going to work out?

Rashad:
Yeah. So first off, we have an incredibly good relationship. There’s no way I would try this with anyone, whether they’re family or not, if I didn’t have a good relationship with that person. The conversations that we had were, what questions do we need to answer and put in front of an attorney to form our articles of organization? While we both trust each other, trust only goes so far in business relationships and we’ve got the paper to back it up. So pretty much we were asking, what happens if either one of us dies? What if we come into a disagreement? What if I want to sell the property and she doesn’t? Those sorts of things. All of those questions, I think an attorney goes a long way in helping people to get.

Tony:
Now shameless plug here. Ash and I wrote a book, Real Estate Partnerships. You guys can pick it up at biggerpockets.com/partnerships. But in that book, we talk about a lot of those questions like what Rashad just mentioned that you should ask before you get into a business partnership with someone. And another book that I usually like to recommend as well is called The Partnership Charter by David Gage. It’s not specific to real estate investing, it’s more so a general business partnership book, but another one that kind of prompts a lot of those questions to ask to make sure that the partnership stays smooth if things do get rocky. So you guys asked a lot of those tough questions upfront, but I think even before that, Rashad, what made you feel that getting into a partnership was a necessary next step for you?

Rashad:
Ah, I love this question. I got into a partnership for the reason that most people don’t necessarily consider, at least not the investors that I know. It’s for the time and skillset. We both have different time, different amounts of time, and our free time lines up differently. Also, our skillsets are differently. I like to focus on the operations type stuff, and she likes to do what I call the nerd stuff in the back end. Running all the numbers, making sure I don’t go too crazy with operations. From that perspective, I think it works out incredibly well. So really what I look for is skills that compliment each other. Time is another big one, and of course they have to have a great personality if they’re a partner. That’s just something I look for because I don’t want someone who’s customer facing potentially to just have a terrible personality.
And I personally think the last reason to ever form a partnership should be lack of money, especially if someone doesn’t have skill.

Ashley:
So after you formed this partnership, you guys decided to analyze over 200 deals before you actually found the right one. So was this a grueling process and what was your process for actually sourcing these deals? Was it just MLS deals or did you have other tactics to bring deals in?

Rashad:
Yeah, the process itself was, I would say, a learning process. It was not quick and I don’t want anyone to take away that it was quick or that we shortcut because we only did 200 or that 200 is a lot. You never know what the exact number is until you run the numbers enough and you’re comfortable with it. But our process is very lengthy. It essentially boiled down to looking at different zip codes in town for San Antonio and what HUD paid for those zip codes. We were specifically targeting Section eight, so that’s why we were doing that. Once we found what HUD was paying, actually once we found zip codes that paid pretty high, we looked at the price to rent ratio. That was also important. Then we started narrowing down to what fits inside of the amount of cash that we have. And that’s how we pretty much landed on the first property that we found, which would have been perfect for us had the deal not fallen through.

Tony:
So Rashad, first, I appreciate you breaking down your process in such a systematic way. And when you say HUD, you mentioned that that’s what Section eight pays, right? So you’re looking at who by the zip code is commanding the highest rent for section eight rentals, and then who has the best price to rent ratio? I mean, we’re just comparing the rent to the actual purchase prices in those zip codes and whoever has the best ratios where you kind of focus your time. So I love that approach, but were you just sourcing all of these deals right off the MLS? Were you working with wholesalers? What was your process for actually finding these different properties to look at?

Rashad:
Yeah. Initially we were pretty much searching right on the MLS, which worked out pretty good through, I don’t know, a confluence of conundrums. We ended up not purchasing when we wanted to purchase. So we had to wait a little bit longer and that’s when the market was then swinging more towards a buyer’s market. Then we were pretty much solely looking on MLS. We also used our agent who’s been very helpful. She found some off-market deals and she also had some pocket listings. They didn’t quite fit exactly what we were looking for, but they were really good. But yeah, MLS was, it was great. Even now, the MLS is still great.

Ashley:
Rashad, can you explain what a pocket listing is?

Rashad:
Sure. Yeah. A pocket listing is just a listing that an agent has that necessarily … Excuse me. A pocket listing is just a listing that an agent has that hasn’t necessarily hit the market yet. So it’s something that they’re keeping in- house that they can then set you up with before it ever hits the market.

Tony:
And now Rashad, you mentioned that the deal that you found that you were like, “Man, this one really actually does seem pretty strong that that deal actually fell through.” What was the backstory there?

Rashad:
Yeah, I think we got some really bad vibes from the seller and also some bad vibes from the tenant. So we found this property. It was tenant occupied and HUD was already paying the housing choice voucher of Section eight and it was actually paying pretty good compared to what the monthly mortgage would’ve been. We found it, thought it was perfect. The seller did tell us that there was one thing wrong with the property prior to us going under contract. The one thing that he said was wrong was that there was a broken sewer line, which wasn’t the only thing wrong, and I’m pretty sure he knew that. So we then go under contract and that’s when we find out, well, that broken sewer line then translated into a terribly cracked foundation, just awful. That didn’t turn us away upfront. The thing that really turned us away was we sent our inspector over to do an inspection.
He couldn’t even do an inspection because the home was so … It was very occupied with belongings. I guess that’s a nice way to say it.

Ashley:
I’ve had a couple of those houses.

Rashad:
Yeah. We fell out of contract because we couldn’t even get a really good inspection and there’s just no way we’re going to make an offer and follow through with it if we don’t know everything that’s wrong with the property or at least most of the things that the inspector could find. It just didn’t make sense from a business perspective.

Tony:
Just one thing I want to say, Rashad, is kudos to you and your sister for walking away because I think we’ve seen a lot of newer investors who get so emotionally attached when they’ve … Like you said, you underwrote 200 plus deals. You finally found one that checks all the boxes, you’re excited, you’re like, “Okay, this is the one, we’re here, we did it. ” And then you get to your due diligence period and things start to pop up that don’t make sense. And oftentimes we can rationalize those things that are major red flags simply for the fact that we’ve got this emotional attachment to trying to get a deal done, but I think there’s so much more discipline and the better investors. It’s not about how often we say yes, but about how often we say no in our discipline in saying no. And I also appreciate that you said the foundation itself wasn’t even necessarily what made you say no, because maybe that’s something that we can get fixed, but the fact is you couldn’t do an inspection at all could be tough.
Now, I’ve actually never purchased a property that was tenant occupied.That’s just always been part of my buy box. “Hey, I don’t want to deal with the tenants. I want it empty.” But Ash, have you ever had a property where you were maybe in a similar situation where you couldn’t even get the inspection done that you did move forward with? And if so, how did you build that confidence in yourself?

Ashley:
Yeah, I think I went into it knowing that it was going to need a full gut rehab on the property that this was a property that the actually welfare family services had come in and taken this woman out of the home. She was 101 or 103 years old. I can’t remember exactly living there alone and the property was dilapidated. There was so much stuff in there you could barely move. There was no heat except for one little fireplace. So she ended up being removed from the home and then I’m assuming a court appointed attorney or somebody took care of the sale of the house and actually went on the MLS. And so we just bought the property knowing that this was going to be a full project. And we actually got pretty lucky in the fact that it was the first time I use a guy that has dumpsters and then he has a crew for doing garbage removal.
So they’ve done a lot of rehabs for us. And this was kind of the first hoarder house where they were coming in to take us stuff out and they low balled it. And I feel bad because they really, really underestimated the amount of stuff that was in that house and how long it would take them. And looking at what they charge now just for a regular clean out, they definitely undercharged for that property for sure. But I would say to make yourself feel okay, you already have to have the mindset going in knowing everything needs to be ripped out and redone without being able to see what’s happening behind or underneath all of this stuff.

Tony:
So Rashad, what deal did you end up landing on and what issues did you overcome as you went through that deal?

Rashad:
Oh man, where to start with the issues? We’ll start with the deal first. The deal, it was actually one that the agent had proposed to us a while back and we kind of thought, oh, maybe this isn’t the one. We did a little bit more research and the pictures were terrible. There were only four pictures of the exterior of the home and the listing agent wasn’t even really willing to show us the inside of the home because it was tenant occupied until we went under contract. So automatically that just ruled out pretty much everybody that’s not an investor. So we thought, “Ooh, this might be one of those unicorn things that we’ve been hearing so much about. ” So we went under contract. We looked in the house after that. It wasn’t in great shape, but it wasn’t in terrible shape. We ended up closing on it.
I think we offered 94 and they came back at 93. Hold on. It was 93 and they came back at 94. Yeah, that’s more right. So we ended up purchasing it for $94,000 and the home, it has a valuation of 170. That’s one person’s valuation, but still that’s pretty good. So we thought, okay, this actually seems like we need to follow through with it. As far as the issues goes, oh, there’s a mound of roaches in that house. Just however many you’re thinking, go ahead and triple that. There’s that many in there. There is a couple mice in the property. There’s a little bit of mold. On top of that, the tenant was a little troublesome, but she ended up leaving pretty much a month later anyways. The property’s empty now, which is another issue is getting it renovated. So yeah, it’s got some things wrong with it.
It’s also not in the best neighborhood, which is fine.

Ashley:
This property bought it for 94,000. And this was without you doing anything. It was already appraised at 170,000?

Rashad:
Yeah, we did absolutely nothing to it. It’s at 170 as it stands.

Ashley:
And what is your plan for this property going forward?

Rashad:
I am glad you asked. We originally started with a plan that has scoped a little bit further now. It’s a three bed, one bath. We were just going to do some minor renovations, fix the mold, fix everything that could break down, basically mitigate the expenses moving forward. But then we thought to ourselves, no, that might not be the right plan. If we’re already getting it renovated, it has a single car garage, we’re going to convert that to a primary suite since there’s only one bathroom in the house. Then once we do that, the goal is to still get a Section eight renter in place. The rent in that particular zip code for four bedrooms, like 1950 a month, that’s the top, doesn’t mean we’re going to get that, but still that’s a dramatic improvement from the 1,025 rent that the tenant was paying.

Tony:
And what would the cost to be, Rashad, on converting that from a 3.1 into a 4.2? And how do you guys plan to finance that?

Rashad:
Yeah, I’m actually really glad you asked that question. The original plan, making the 3.1 a little bit better, it came in at right at $50,000, which is pretty decent. And I have my contractor coming back over today to finalize the bid, but he thinks it should be around 80,000 to get the conversion and get it completely made over. But I think we can cut it back to 70,000. As far as financing goes, we’re more than likely going to look into a hard money loan. And I also have a community bank here in town that I’m going to approach as well and see what they have to offer, hoping that pans out. But if not, the hard money route’s probably the way to go.

Tony:
I mean, with that much equity baked into the deal, I would imagine that there’d be some local lender, bank, credit union, whoever it may be that would be interested in taking that deal on. And this is me just like if I’m you, that’s probably going to be my first though before I go to hard money because generally speaking, the local banks and credit unions will give you better rates than the hard money folks. So the property right now is vacant as you guys kind of go through this process of getting renovated. And how much time do you guys think the renovations will take?

Rashad:
My contractor can usually get things done pretty quickly. I think it’ll probably be 12 to 16 weeks, but we’ll budget for 16 weeks just to be on the safe side. So another four months of vacancy while it’s getting repaired.

Ashley:
So you had mentioned that you wanted to put a Section eight tenant in this unit when it’s completely renovated. What are some misconceptions that other investors may have about Section eight that maybe you want to debunk for us as to why you’ve decided you want to go that route?

Rashad:
Sure. I grew up in a small town at Shreveport, Louisiana, and I knew some folks who were on Section eight. And just like any renter, regardless of where the funds come from, there’s going to be good tenants and then there’s going to be bad tenants. Just because you have someone on Section eight doesn’t mean they’re terrible for you or your property. All that means is you have to do your due diligence just as good as you would as if they were not on Section eight. The other thing about Section eight that I don’t know if I’d call it debunking, but I want to touch on is typically those folks stay in place a little bit longer because of their situation, which is unfortunate, but sometimes you have people staying in place 20, 30 years versus just your regular turnover. And so I think I want to help people understand that Section eight could be a good option simply because the amount of time that tenants stay in place mitigating the turnover expenses.

Tony:
And Rochado, just got to give you … Go ahead.

Ashley:
I got to say, anyone listening that’s been an OG rookie listener from the beginning, did your eyes just get as big as mine when he said he was from Shreveport, Louisiana because that was Tony’s first deal that he had was from that town and we talked about it forever and forever, I thought it was Freeport, Treeport, like everything but Shreveport.

Tony:
So Rashad, you’re from Shreveport, shout out to the 318, right? But did you ever think of actually investing in Shreveport?

Rashad:
The more I learn about it, the more I consider it. Things that do scare me a little bit there is the property taxes because they’re roughly the same as they are here in Texas, but the average income is lower. So that does scare me. Also, the income of the area is just not the same as it is in other places. Would I invest there short of it is yes, it’s not on my shortlist, but absolutely. There’s some good spots in town.

Tony:
There are. And I had a really good first deal there, a really not great second deal there, but if it wasn’t for the flood insurance, I think that second deal would’ve been great as well, but it’s a market that’s relatively low cost to get into. And even though it’s a smaller market, there’s military there, which has been a pretty constant presence that brings in a lot of military folks as well. There’s surprisingly been investment from people like 50 Cent, trying to turn that into a bit of an entertainment hub as of late as well. So anyway, for anyone that’s thinking, Shreveport might be a place to check out, but I think you might be the first guest that we’ve had that’s from Shreveport, so small world. I love it.

Rashad:
Yeah, hardly anybody’s from Shreveport.

Tony:
It’s a fair point. So we heard about Rashad’s first and a second deal, but when we come back, let’s find out about his latest REO deal. All right, welcome back. We’re here with Rashad and we talked about the first couple of deals, but I want to talk about a deal that you bought solo, which was an REO deal. First, can you explain for folks that aren’t maybe familiar with the term, what is REO? What does that mean?

Rashad:
Yeah. REO is real estate owned, which basically translates to the property was more than likely foreclosed on and is now owned by the bank and probably going to go up for auction.

Tony:
And REO, I think a lot of people, especially coming out of this 2008 crisis, that was a big term. Everyone’s buying these REOs because there were so many of them. I feel like the volume of that has definitely dried up a little bit and you don’t hear about it as much, but the benefit of these REO deals is that oftentimes you can get them at significantly below market value. So how did you come across this REO deal? Was it just, again, listed on the MLS? Was it a pocket listing? Was it somewhere else? How did you find the deal?

Rashad:
Yeah, I actually found this deal in the process of analyzing homes to purchase with my business partner. I found this one on the side and go, oh, I might keep that one for myself. No, I presented it to her and she passed up on it. But yeah, it was just on the MLS and I saw it and I told my agent about it and she told me that, yeah, this one’s going to come up for auction soon. So we pretty much had to go over there on one of my lunch breaks. I didn’t even eat that day, just went over, checked out the house, didn’t even necessarily know 100% what I was looking for. But from my knowledge, it seemed like a solid deal. Of course, I didn’t know what the price was going to be. That was up to me. But yes, that was an MLS deal.

Ashley:
I’ve bought one REO property and it was on the MLS also. And I think it was originally listed at $90,000 and they just kept dropping the price. And this was right before COVID. And then I actually bought it right in the height of COVID, like March and April. I got it under contract. I think I closed in June and I bought it for like $29,000. But it was a very interesting process, kind of like having my agent deal with the bank and their attorney, because in New York State you have to use attorneys, but a very different process, but a very, very good deal that we were able to get the property for.

Tony:
Ash, what was that process? I’ve never purchased REO before, so how does it differ from buying from a traditional seller?

Ashley:
Yeah, honestly, it wasn’t much different. It was more of just the communication aspect of my attorney trying to get ahold of them, the back and forth. My earnest money deposit check got lost, I had to send out a new one. So it was just having to deal with the back and forth between And the attorneys, but they would threaten that there was timelines and these need to be done and stuff, and then no follow through. So it wasn’t more that the process was different. It was just that it was more difficult to actually move forward with the flow of the deal, I guess.

Tony:
And Rashad, what about for you? How was the experience in yourself? Were you able to do an inspection? Could you negotiate in the same way that you can with the traditional seller? How did that process look like for you?

Rashad:
I did get the opportunity to do an inspection, but unfortunately the inspector couldn’t come out in time. So we rolled forward anyways. For me, I found it the day, it was two days before the auction actually. So we just kind of had just rolled through it, just said, “Hey, we’re going to do this thing.” It was just a lot of me talking with the agent, understanding what I wanted to offer, even though it was listed for sale at a certain price on the market. It was just basically doing that communications and letting her know this is my top dollar.

Tony:
So Rashada, I want to compare this deal to the deal with the foundation issues that we talked about earlier. Both of those deals seem like on paper, really good opportunities, but some question marks around, okay, what’s the condition of the property? And neither one could you get in and do a full inspection. But with the first one, you decided to not move forward with the deal, but with this REO opportunity, you decided to move forward with the deal. What was the difference there? Why did you have the confidence the second go around, but not the first time?

Rashad:
Honestly, that confidence comes from listening to a podcast like this one and the OG BiggerPockets podcast, as well as having investor friends out in the community that said, “Hey, this is how you can get in and improve the situation.” And also learning about hard money. That was my first hard money loan, and it actually worked out pretty good. It gave me the confidence to walk in, do a little bit of inspection myself. I could see obviously the foundation needed some work. I could see the roof needed some work. And pretty much 70% of the things that I identified were the same thing that the inspector said, which gave me even more confidence because I did get an inspection, but it wasn’t until after I put the home under contract with no option to back out.

Tony:
So I think the lesson there for our rookie audience, and this is a point that Ashley and I try and drive home all the time. And Rashad, you actually said this earlier, is that the purpose of your first deal and even your second deal is not necessarily to retire you from your day job. The goal of those first few deals is to build your confidence so that your third deal and your fifth deal and your 10th deal become a little bit easier. And it is such a common occurrence where we see the complexity of deals start to increase as you go from deal one to deal two to deal three to deal five, because every deal builds a little bit more confidence than the last one. And even though we’re only talking one or two deal difference, you walked away from the first one because it just didn’t feel right, yet you confidently move forward the second time around because you had built up that confidence.
So I think that’s a really important point for our Rickis to understand. Now, do you feel that you bought it at the right price, Rashad? Given everything that you couldn’t get into it before and was actually the right deal to move forward with?

Rashad:
I think for multiple reasons it was the right deal to move forward with, with price being probably the least important one. I think I might’ve overpaid by about $10,000. Even my agent was signaling to me that maybe this is overpaying a little bit. And she even coached me through the decision I had to come forward with was, am I willing to overpay a little bit to stop the search? And for me, I think it made sense to end my search, even though I did overpay. We talked about it a little bit earlier. I have at least 50 hours a week dedicated towards work and commute. That doesn’t include anything else I do. So that’s time that I’m losing and time itself is in fact money. So moving forward with it did make sense. But for me, the main reason I wanted to move forward with it, and maybe Tony, you’ll appreciate this, is because of the area that it’s in, it is great for short-term rentals and there’s only so many rental permits that the city’s giving out.
And that one actually does qualify for the permit.

Ashley:
Oh, wow. Interesting. So you’re paying the 10 grand to buy the permit. Basically, that’s how liquor license work in New York. They only issue so many liquor license and my liquor store doesn’t make a ton of money, but it’s the fact that I had the liquor license in that area for the only store that can come in, in that area. So that’s the true value of it. So you can also frame it that way as you paid that extra $10,000 to actually be one of the few that has that short-term rental permit. So now with this property, what is the status of it today?

Rashad:
Ooh, yeah. The status of it today, it is week number 17 of the renovations and they are putting the finishing touches on it. I’m actually going to drive by there in probably an hour or so, make sure everything looks good and get ready to refinance it next week. That was hard money, so I’m going to go into a debt service coverage ratio loan with my entity, but yeah, it’s looking good. Did overpay a little bit, but the numbers support it.

Ashley:
So what did you end up buying it for? Again, what was the price for that? And then what do you think it’s going to end up appraising at?

Rashad:
Yeah. So I ended up purchasing at 160, which is slightly higher than what the average was for homes in that zip code in that condition. And the ARV was estimated to be 265. I just had a recent valuation done at 269. The home wasn’t completed. They’re going to do another one at the end of the week. Hopefully it comes in at at least 275, but even if it comes in slightly over the original projections, I’m okay with that.

Tony:
And what did you put in for the renovation costs, Rashad?

Rashad:
So this is also a fun topic. I was estimated to put in 88,000, but as I knew it was going to be a short-term rental, I had a few extra things done, rewiring the electrical, putting in an EV charger, things like that. So I ended up total withholding costs, today I’m at 102. So that brings me from pretty much 160 to 262.

Ashley:
So it’s appraising for right around what you bought for it and what you put into it. So when you go ahead and refinance this property, how much are you planning on leaving into the deal? Is it going to be 20%, more? Yeah.

Rashad:
When I refinance a property, I’m not going to pull anything out of the deal. I think it might make more sense to not be overleveraged. I don’t think I need to at this point in my life and where I stand financially to take any money out. It just doesn’t make sense for me. So yeah, leaving it all in.

Tony:
Yeah. And I just did the quick math, right? Assuming you can get 80% LTV on that 275, I get you to about 220 on your loan balance. So you’d leave about 45K in the deal, give or take. And just like ballpark, so are you committed to this being a short-term rental or are you still open to it being a long-term rental as well?

Rashad:
I am mostly committed to the short-term rental prospect because of where it sits as the first reason. Second reason, I think hosting, I don’t know, I’ve always been good at customer service and I kind of miss it. I’m not customer facing anymore, so I kind of want to get back into it. But also for tax purposes, I’m talking with my accountant and yeah, it makes sense for tax reasons to have at least one short-term rental.

Ashley:
We have to talk about this. Tony, let out the secret.

Tony:
So I’ll give the quick rundown. So what Rashad is talking about is what’s known as the short-term rental tax loophole. And it’s not really a loophole, it’s like written into the tax code, but basically if you own a short-term rental where your average length of stay, so the average amount of time that a guest stays at your house is seven days or less, then it qualifies for this tax loophole where basically you can take all of the paper losses from your short-term rental and apply those against other forms of active income, AKA your day job. So there are a lot of folks who go out and they purchase short-term rentals. They get a big paper loss by doing what’s called a cost segregation study and leveraging what’s called bonus depreciation. And those two things combined oftentimes can significantly reduce or sometimes eliminate the tax bill from your day job.
Now, I’m not a CPA, this is not professional tax advice, go talk to an attorney, but that is a strategy that a lot of folks use to really supercharge their tax savings and their tax returns. Now, there are certain requirements you have to hit to be able to do that. It’s called material participation, but just know, talk with an attorney or with a CPA and they can kind of give you all the ins and outs of it.

Ashley:
So Rashad, before we wrap up here, what is the biggest mistake that you think you’ve made across all of your deals and how has it actually changed the way you think about a deal moving forward and how you’re underwriting and how you’re going to operate the deal?

Rashad:
I still think my biggest mistake was that third deal that we talked about, not fully getting an inspection done before going under contract with no contingency. That was a mistake. I would never do that again. That was risk I was willing to accept one time for the purpose of propelling my finances forward. I would not do that again. I would say to everybody out there listening, make sure you get an inspection done. And more importantly, make sure you understand the things that are in that inspection and what it takes to mitigate the risks from the deficiencies.

Ashley:
Well, Rashad, thank you so much for joining us today. We really appreciated you coming onto the show and sharing your experience and the knowledge that you’ve obtained over the years of your real estate investing. Where can people reach out to you and find out more information?

Rashad:
Yes. If you guys are interested in seeing what I’m up to, you can check out my YouTube. It’s youtube.com/@king_crispy with a K. Outside of that, you can reach out to me on BiggerPockets. I’m Rashad George. To my knowledge, I’m the only one.

Ashley:
I don’t know why, but that YouTube name is making me think Burger King, the King and a crispy chicken sandwich. But I did read when you submitted your guest application that you have been documenting your whole journey of this process and it’s specifically one of your properties, right? Showing the whole process start to finish?

Rashad:
Yeah, I’m documenting it. The documentation of it is not as good as it could be. So the beginning is a little rough, but the ending parts are getting a little bit better. But yeah, I decided to document it, not the work that’s happening, but specifically what it looks like from the investor standpoint. So that is documented and it is on YouTube.

Ashley:
Awesome. Cool. I can’t wait to check it out. Well, thank you again so much for joining us. I’m Ashley. He’s Tony, and this has been an episode of Real Estate Rookie, and we’ll see you guys next time.

Henry:
How much short-term sacrifice are you willing to make to control your long-term financial future? Would you share a bathroom with three strangers? Cameron Philgren didn’t start investing in real estate with a master plan or a ton of money. He and his wife just made a decision to sacrifice comfort early so they could buy back their time later. They househacked in Waco, Texas and rented out their extra bedrooms to maximize cashflow. And yes, there was at least one gross uncomfortable situation involving that shared bathroom, but that property set Cameron on a path five years ago. Today, he owns more than 30 rental units. Instead of working a traditional day job and slowly saving for retirement in his sixties, Cameron followed a proven repeatable real estate investing strategy. Now he’s running a specialty coffee shop as a passion project, spending leisurely mornings with his kids and traveling the world with his church.
That’s Cameron’s financial freedom dream, and he’s living it today. Take a moment to think, what’s your dream? Are you on the path to achieving it? This episode isn’t about get rich quick schemes or extremely risky investing. It’s about what can happen when an average person makes a few uncomfortable decisions and sticks with them.
What’s going on everybody? I am Henry Washington, co-host of the BiggerPockets Podcast. And today’s episode is an investor story with Cameron Phil Green from Waco, Texas. And this is a special one because I had a chance to meet Cameron in person during the BiggerPockets Cashflow Roadshow in Texas last month. Dave and I actually visited one of the properties Cameron talks about in this very episode to see how he turned his former primary home into a rental property cash flowing thousands of dollars per month. So I’ve seen firsthand how almost anyone can repeat this formula and replicate Cameron’s success in just a few years. I cannot wait for you all to hear how he did it, so let’s bring Cameron on. Cameron, it’s good to see you again.

Cameron:
Hello, sir. Great to see you.

Henry:
Let’s talk a little bit about your journey, man. Tell the audience your background and how you got into real estate.

Cameron:
Well, first off, I’m not trying to be a teacher’s pet, but I do owe a lot to BiggerPockets. I discovered you guys back in 2018 through Graham Stephen’s YouTube channel. Totally got the bug and started house hacking in this house we bought in 2018. Moved down to Waco, Texas in 2019 and got as much square footage as we could for a really good price, fixed up the kitchen, Airbnb all the bedrooms. And so very much bootstrapped our real estate investing career. After reading Brandon’s book, The Book on Rental Property Investing, made the goal of 25 units by 2025. 25 by 25 was our thing, my wife and I. Before 2025, I think we hit 28 or 30 units or so. Amazing. So hit the goal and it’s been a blast. We’ve learned a lot and really thankful for BiggerPockets and just the education and that you guys provide through the podcast and the forum and so many relationships.
And it’s led to us opening a coffee shop here. We can talk about that. And man, and financial freedom. I mean, it’s freedom of time and just really thankful for you guys. So appreciate you.

Henry:
Oh man. Well, thank you. BiggerPockets has always been a great help to me as well when I was first starting. So I completely can get on board with that sentiment, but I appreciate the kind words. But I want to dive a little deeper into what you said in terms of telling your story of how you got started, because you did several things it sounded like. And one of those things sounded slightly uncomfortable, yet you were able to pull it off.

Cameron:
This was actually back in Lawrence, Kansas. We had a little three bedroom house with one bathroom upstairs, and we were sharing the bathroom with our Airbnb guests. And that turned into some funny stories. One time this, I wouldn’t call her super strange, but she had this guy over and I noticed the next morning my toothbrush was used. And so I approached them about that. And that was probably one of the weirder things that happened like, dude, this Airbnb guest used my toothbrush.

Henry:
Did you continue to use said toothbrush after?

Cameron:
No, sir. But I did continue to Airbnb the room because we got a house sack. We got to eat. And so anyway, when we moved down to Waco, we kind of did the same thing, but it was a five bedroom house and we Airbnb’d the rooms, also shared bathrooms with guests. And that’s not for everybody. I think that’s my point in sharing. That’s not for everybody, but I’m a huge believer in househacking and eliminating your housing expense as a way to get started investing in real estate. And I’m just so thankful for those uncomfortable times that led to funny stories and all the people we got to meet along the way. It’s been a blast.

Henry:
Yeah, man. I thank you for sharing that because a lot of people, we talk all the time on the BiggerPockets podcast and on various other platforms on the BiggerPockets ecosphere about how much we love househacking just as a strategy. And you did what we would call a, air quotes, extreme version of househacking, where you lived in the house, but you also had strangers living in the house with you via short-term rental. That’s definitely a house hack. You can also house hack by renting out a separate unit so you’re not actually living with your tenants. But to me, househacking is just finding a way for your primary residence to pay for itself to generate some sort of income.

Cameron:
Yeah, nailed it. I mean, I’ve been doing wedding photography for about 12 years, so it wasn’t my only form of income, but yeah, definitely have over the last six or seven years put every dollar I can into real estate. Huge believer in this method of investing. And I just want to say also there’s less uncomfortable ways to house hack. We chose the discomfort for the extra cash flow, but we could have just had roommates. What were we thinking?

Henry:
What kind of profit you were getting for said uncomfortability? How much were you renting each room out for versus what was your mortgage?

Cameron:
Yeah, I think our mortgage on that house is somewhere around 1,400. In Waco, I think a room, like roommates, I’d say about 500 a room is appropriate. So we could have had three roommates and made 1,500 bucks just from a few friends. On Airbnb with just a bed and some light furnishings and sharing the kitchen, sharing bathrooms with people. I think we were bringing in something like 3,000 a month, but it felt worth it to us because we had this five bedroom house. We had to do something with it.

Henry:
I don’t know that it’s worth it for everybody, but to bring in $3,000 where instead of now you’re having to pay for a place to live, but now you don’t have to pay. And I want people to see the compounding benefit of doing this because we all have to spend money on a place to live. So let’s say you were going to spend 1,500 on a place to live. Now you don’t have to do that. Plus you were bringing in an extra 1,500. That’s three grand a month of additional income that you could put towards focusing on building your investing business. And so I often tell people that the more uncomfortable you’re willing to get, the more profitable or the more opportunity for profitability there is. Again, not for everybody, but if you’re similar to Cameron where you have an anomaly of a wife who wants to be okay living with strangers in their house, then this is a great way to build up some capital.

Cameron:
This is also before we had three kids, so keep that in mind too. Another thing I just want to say, if you’re listening and you’re like, “How do I get started? I need to get my first property.”This property, which is our second property, one property can change your life in a pretty significant way. I mean, we paid 180 grand for it, pretty cheap property, not super nice. We fixed it up, we painted, we did the kitchen ourselves, added a porch in the back. And I want to share, later on, we turned the two car garage into a dwelling, separated it with a little fence. And then in 2020 with COVID, we moved out, moved into a different house, rented that house for 2,800, and then ended up later renting the ADU for, it averages around 2,000 a month. And so one property is bringing in 3,000 to 3,500 a month, one property, you guys.
And everyone wants to go and get 10 units that are each going to cash flow two or $300. What if you could get into one property and live there for one or two years and move out and rent it? That’s what we did. And I’m just thankful for that. And again, I give a lot of credit to BiggerPockets for even implanting that idea in my mind.

Henry:
Yeah, man. I think that obviously I got to see this property when we visited you in Waco, and it’s a pretty cool story and a pretty cool property. But I want to dive into a little bit of, what was the goal? So you moved here, you started house hacking, you were saving money. You said you set the goal of 25 doors by 2025. That seems if you’ve only done one or two deals, like a pretty aggressive goal. Yeah. Tell me what kind of fueled the fire. Why 25 doors? What was the plan?

Cameron:
Well, I will say in 2020 when we set that goal, it felt so daunting and so impossible. We’re going to have to really bust our butts to get there. Our primary form of investing was the BRRR method because I’m not a trust fund kid. I don’t come from money. I mean, so it was very much like starting from nothing, kind of using whatever money we made from wedding photography. We would try to put that into a property and then refinance out of it. If we bought the deal right, my back of the napkin math is around 70 or 75% rule is what I aim for. If I can hit that, then I can get all my cash back when we refinance and then do it again. And then over time, of course, I discovered hard money lenders. There’s individuals out there that are comfortable lending to me.
And so I can do multiple deals at the same time because cash and capital is not the constraint. And so that became a thing. As those relationships and the network grew and continue listening to podcasts and reading books, it just became easier and easier. Once you do it a couple times, then you’ve got the system down. And then yeah, before we knew it, we had hit 25 units and we’re still growing. I’m still hitting it hard. I’m focused on flips now. But yeah, it felt super daunting at first and just became easier as we went.

Henry:
Setting a goal, an aggressive goal is a good thing to do, but then actually being able to execute it on it is difficult. And typically the key constraints to growing and scaling a real estate business is access to money and access to deals. You talked about access to money. You were using hard money and built relationships with lenders, but you still got to find deals to buy. So what was and what currently is your primary method for finding deals to help you hit your goals?

Cameron:
Yeah. I mean, there’s a couple Facebook groups here that are just wholesalers posting deals. I’m not going to lie. Some MLS deals have been super solid, maybe a pocket listing from a realtor. I’ve done some direct to seller, I’ve done mail, I’ve done cold calling, I’ve done driving for dollars, I’ve put notes on people’s doors. You name it, I’ve tried to get deals. Roll down the window, talk to somebody, “Hey, you want to sell your house?” I literally got a deal that way, just a lady raking her lawn. So all over the board, but I’d say the most consistent is on market deals that I tend to have to do, make 10 offers in order to get one because I’m usually low balling or wholesalers are a great way.

Henry:
I love that, man. I wanted people to hear that because I mean, 25 can sound like a daunting goal, especially if you’ve only done one dealer to some people out here listening who probably have done no deals. But you can find deals through free channels like utilizing wholesalers. And for those of you who don’t know what a wholesaler is, wholesalers are people who go out and spend money on marketing and go direct to seller. They find a deal and then they look for people like Cameron or myself to sell the contract to. And then Cameron and myself will buy the property typically at a discount. And yes, the wholesaler does make a fee, but the goal is there’s typically still meat on the bone for us to be able to be profitable. And then on market, there are more on market deals right now than I’ve seen in a long time.
It’s

Cameron:
Crazy, dude. Yeah.

Henry:
It’s opportunity is out there if you’re willing to look and if you’re willing to get uncomfortable enough to make the offers necessary to get the deals at the price point we need them at. Yeah.

Cameron:
Because

Henry:
I assume this is still current day how you’re finding your deals.

Cameron:
Yeah, for sure. And I agree. There’s a lot of on market deals right now, especially January where in the middle of winter and stuff has been sitting on market. So quick tip if you’re listening and you’re like, “I want to check out Zillow and get an on market deal.” What I search for on, I think it’s Redfin that you can do days on market plus the price per square foot is in our area. Every area is going to be different, but as a good rule of thumb, like anything under $100 a square foot that’s been on market for more than 45 days, I just have that as a filter and then it will like notify me. It’ll email me whenever there’s a house that’s been sitting for more than 45 days that’s under 100 a square foot. And I’ll try to reach out and look at it.
Usually I need it for closer to 60 or 70 a foot, but if it’s been sitting, the sellers are going to be more inclined to accept a lower offer. I

Henry:
Hope y’all took some notes. That’s a little bit of a cheat code you just gave. I mean, seriously, to be able to, you’re fine, because what you need to get a deal are two things, right? You need equity and you need motivation, right? People have to have equity in their home for you to make them an offer that they’ll actually make some money. If they were to sell to you and people need motivation, they need a reason to sell at a discount. And if you’re shopping on the MLS, the only true way to figure out motivation is to use an indicator like days on market or expired listings. You’re just assuming that because it’s sad and hasn’t sold, that that seller may be willing or may be motivated to take a lower offer. And so it’s very simple stuff, guys. These are things that anyone can do.
You can all go out right now and get on Redfin and set up a filter for price per square foot that would be under the average price per square foot in your market. You could do under a hundred a square foot in your market. In my market, that would get you maybe a parking space, maybe not. But in some market, you have to figure out what that price per square foot is for you.
Put that as your filter and then look for properties that have been sitting. I typically tell people, look, if you’re going to look for days on market, figure out what the average days on market is in your market and then add 30 days. So if the average days on market is 30 days in your market, you should be looking at anything that’s 60 days or older that fits your buy box and then you have to make the uncomfortable offers. But that’s a great way to get free deals on the market. Is it easy? No. Are you going to get told no a lot? Absolutely. You’re going to get told no a whole lot. But when you get the yes, that’s how you start building wealth and the profitability. So I love your story because it’s truly, you said it earlier, it’s like you bootstrapped your way in, but that’s what it is.
You buy a house, you house hack, you save the money, you take the money, you put it towards your investments, you start looking for deals. You didn’t have to go send direct mail immediately. You didn’t have to go higher

Cameron:
Up

Henry:
VA to manage cold calls. You just looked in the places where people said, “Hey, I’d like to sell a house,” and you were able to make some offers. And I want to highlight that because this is something that anyone can do. These methods have been around for decades and it still works if you do it consistently enough. So I love hearing your story. Thanks, man. All right, Cameron, I want to transition and talk a little bit more about the actual process of you scaling maybe what your first true investment deal looked like, but first we have to take a quick break. As a real estate investor, the last thing I want to do or have time for is to play accountant, baker, and debt collector. But that’s what I was doing every weekend, flipping between a bunch of apps, bank statements, and receipts, trying to sort it all out by property and figure out who’s late on rent.
Then I found Baseline and it takes all that off my plate. It’s BiggerPockets official banking platform that automatically sworts transactions, matches receipts, and collects rent from every property. My tax prep is done, my weekends are mine again, plus I’m saving a ton of money on banking fees and apps that I don’t need anymore. Get $100 bonus when you sign up today at baselane.com/bp. BiggerPockets Pro members also get a free upgrade to Baselane Smart, and that’s packed with advanced automations and features to save you even more time.
All right, we’re back with Cameron Fieldgreen, and we’re talking about how he grew his real estate business from zero to 25 doors by 2025. All right, Cameron. So you moved to Waco, you house hacked, you saved money, you started to buy deals and do some birds. You were setting a goal of 25 doors by 2025. What did that first true investment property look like that you didn’t live in?

Cameron:
Yeah, man. I’ll be honest, it was super difficult. I remember it was 601 North 5th Street, if you want to look it up. And we bought it for a little bit too high. I mean, it wasn’t a home run on our first one. I remember we bought it for 95,
But we actually prayed about it and we really felt like the Lord was saying, “Hey, go for it. ” And we actually fixed up the whole thing ourselves. My wife and I, my wife is amazing. She gets her hands dirty and she’s a hard worker. And I have a little bit of a handy background with my dad and we’d fixed up our basement together. So I knew a thing or two, but YouTube University got me through this house and we ended up way deeper into it than we expected. So I ended up redoing all the plumbing, drains and supply, rewired the whole house. It was a full gut. We did some pretty significant framing changes ourselves and honestly just like friends and helping us out. And it was three grueling months being there six days a week, taking one day off. But it was really fun, but I mean, really, really hard.

Henry:
What’d you spend on that renovation?

Cameron:
Like 80. And then the ARV was like 200, so we were way over. But hey, we have an investment property. We have a rental property and we did it. It was a huge success, learned a ton. I’m really thankful for a lot of the handy and just construction stuff that I learned during that. I don’t take that for granted, but we learned that we don’t want to do that again. We learned like we do not want to be doing the work. And so that became a huge goal of mine is like, “Hey, can I invest in real estate and scale using other people’s labor, using other people that actually know what they’re doing better than I do, buy the houses at the right price, calculate the rehab more accurately than I did with that house and do it again.” So nowadays where I used to go fix stuff, like now I’ll just pay the $99 service call or 150 bucks to have someone else do it so that I can focus on my kids and my family and finding deals.
That’s where I need to focus my time.

Henry:
I like this part of the conversation because I believe there’s a lot of new investors who are in this position because a lot of people are handy and can do the work and find it difficult to want to pay somebody a few hundred dollars to do something that might take them an hour or two in their spare time. But I think a lot of it too is you have to remember why you’re doing this. A lot of people are getting into this for freedom, for freedom of time. And then they take their time and they spend it renovating a property to save a few dollars. That’s one thing that I wish I had done sooner. And now that I’m growing, I’m putting in processes to remove myself, but I still spend time doing things that I shouldn’t. Now I’ve never been handy, so I don’t have the problem of being able to fix something, but I do have a truck and probably go to Lowe’s way more often than I should picking up things that someone else could be doing.
And so I want people to think about it this way. If you set up your business to not need you to do those things, it doesn’t mean you can’t do them. It’s actually better because now you get to pick and choose the things you decide to do because you don’t have to do it. So you can really work on the projects you enjoy working on versus having to go to a house and fix some plumbing that you don’t want to fix.

Cameron:
100%.

Henry:
How did you get out of that one since you were all in for about one, it looks like you were all in for about 175. ARV you said was 200. Did you rent it? Did you borrow it? Did you sell it?

Cameron:
Yeah, we refinanced. We rented it out and we obviously left some cash in that deal, but the lessons we learned, everything that we came away from that deal with, I think was worth the extra like $30,000 that we ended up leaving in it.

Henry:
So did you pull any cash out?

Cameron:
No, we weren’t able to pull cash out. Now here’s the beauty of real estate is like fast forward five years. I think that that note came due as like on a five one arm or something and we were able to refinance and it appraised for like 270. And so we were able to pull a little bit of cash out.

Henry:
The slow burr.

Cameron:
The slow burr.

Henry:
Nothing wrong with the slow burr, guys.

Cameron:
That’s right.

Henry:
Yeah. So Cameron, you did the thing. You house hacked, saved money, started to buy properties, set the goal, 25 doors by 2025, you hit that goal. That’s an amazing accomplishment. You did it by sourcing deals yourself through free channels and being a little bit creative with how you are monetizing those properties. Great business, great way to grow and scale. What has that allowed you to do? You’ve hit the 25 doors by 2025. What has that cashflow allowed you to do?

Cameron:
Yeah, so the cash flow has definitely given me freedom. I mean, I’m super blessed and really thankful for this business and thankful to the Lord for everything he’s given us. And I’m able to … I wake up early, but I don’t have to. I love waking up early. I love working, but I’m able to just kind of wake up, spend time with my kids, make breakfast, get to work whenever I am ready, whenever I feel like. And that’s just a tremendous feeling. And that’s why I love real estate investing and why I encourage other people to look into it because the time freedom is just phenomenal.
Along with that, that house I talked about in Lawrence, Lawrence, Kansas, I went to KU and that house in Lawrence we bought in like 2017, as I said, and we lived there for a couple years and then rented it out for three years and then sold it. And if you don’t know, if you live in a property for two out of any five-year period, the IRS has a rule that you can sell for tax-free gains up to, I think it’s 500 grand for married couples. So we sold that house and we made like 110 on just this dinky little three-one house. There was nothing special. It was like a hundred-year-old house, foundation issues. I’m just telling you guys, get into something like buy something that you can live in and that could be your first investment property. But we sold that house and with the 110, we put it into this commercial property here in Waco.
And we ended up renovating this commercial property and owner occupying it sort of with a coffee shop. So I’m a huge coffee nerd, specialty coffee, and everywhere my wife and I travel, we’re just looking for where’s the good coffee, where’s the good food? So by this time we had lived in Waco three years or something and we just kind of saw the niche that Waco needs. So anyway, we started For Keeps Coffee. This was in 2023. It’s just been super fulfilling, love our staff and love that we get to serve the community with this product that we were only able to do it because of real estate investing. And we were only able to do it because we got into that first owner-occupied property in little Lawrence, Kansas, you guys. And so if you’re on the fence about starting or you’re on the fence about, should I buy a property to live in?
The answer is just do it. Come on, do whatever you have to do, put as little amount of money down as possible, which is what we did, and try to get a good deal, try to get something that needs some aesthetic work that’s always helpful. And then just watch where it takes you in five or 10 years. It’s a slow game, but it’s a great way to build wealth and to just do what you’re passionate about. So if it’s not coffee, what is it? What are you passionate about and what business might you start because you bought this dinky little owner-occupied residence.

Henry:
I have been to your coffee shop and I have seen that it is a passion project for you. You can see all over that business how much you care about the product and service that you’re putting out into your community.

Cameron:
Yeah. Thanks,

Henry:
Man. And I think when people hear Yahoos like Dave and I get on here and talk about real estate, they can see the passion that we have for real estate. But I’ve often said and want people to realize that real estate does not have to be your passion, but it can absolutely fund your passion. And you’re right, the bakery was phenomenal. So if you get a chance to go get yourself some baked treats. But I love your story and love how you were able to take real estate and use it to fund a passion project that has turned into something beautiful for your community.

Cameron:
Thanks, man. Real estate is a great way. Again, whatever your passion is, whatever your why is, get clear on that why and let that fuel you in your investing journey because it’s not going to be perfect. You’re going to make mistakes, there’s going to be hard times, but having that why is super important for us. Yeah.

Henry:
All right. It’s time to take a quick break, but we’ll be right back after this message from our sponsors. And we’re back on the BiggerPockets Podcast. Yeah, man, thank you so much for sharing with us your passion project that real estate has allowed you to provide to your community. Before we get out of here, Cameron, can you share with our audience maybe just a couple of small things that they could be doing if they are starting their journey into real estate investing, specifically looking for properties to Burr?

Cameron:
Yeah. I mean, I think meetups are another great way to connect with other investors. Once you become known as someone who does buy, whenever you become known as a cash buyer, they’ll call you. You get on those email lists, you get on those wholesalers, text feed, you meet them face to face. I mean, that’s a huge way to find deals.

Henry:
Those are great tips. And I think things that people need to do, especially do more seriously. Yes, people know you should go to meetups, but I think you need to go to meetups consistently. And I think we need to be speaking up at meetups and letting people know who you are and what you do. I think a lot of people go to meetups and they sit in the back, they don’t talk to anybody, they just wait and listen quietly. But you got to let yourself be heard and be known and be seen as a mover and a shaker because if people think you’re doing things, then they’re going to bring you more opportunities.

Cameron:
Yeah.

Henry:
Cameron, I think one thing that’s unique about you is you were doing photography prior to investing in real estate, then you were investing in real estate and still are investing in real estate and running a coffee business. Do you feel like your journey as a photographer kind of prepared you for being a real estate entrepreneur and now a coffee shop entrepreneur, or is it all like completely different things?

Cameron:
I think the time freedom bug, the entrepreneurship bug, I definitely got that several years ago and just fulfilled that through wedding photography. I’ve just always wanted to work for myself and not beholden to the nine to five. So it definitely informed and gave me the freedom of time to go fix up that property, go find the deals. There’s a great book by Dan Martel called Buy Back Your Time, and I just read it a few months ago, but phenomenal book, if you want to learn, what are the first kind of hires, what are the first kind of action steps I need to take to buy back my time, to literally purchase someone labor or something that can free up my time so that I can spend it more wisely. Super helpful book.

Henry:
I think exposure to entrepreneurship is very helpful if you haven’t started investing in real estate yet, no matter the kind of entrepreneurship. A lot of the lessons across any entrepreneurship journey are going to translate regardless of the product or service that you’re providing. So for me, it was my father. My father was a high school art teacher, but he owned an arcade back when you had to go places to play video games. He sold ice cream out of a little push card. He had a barbecue restaurant for 10 years and never spoke to me about being an entrepreneur myself. That was never a thing. He was never like, “Start your own business, son.” But because I saw him own businesses, it helped open my eyes to that this is a thing so that when it was time for me to be an entrepreneur, a real estate entrepreneur, I never questioned if entrepreneurship could work because I saw it work through my father.
It kind of helped eliminate some of that fear that I think people feel when they’re jumping into entrepreneurship. And so my advice to anybody who is thinking about jumping into entrepreneurship, most communities have like local entrepreneurship meetups where local entrepreneurs just meet, sometimes have coffee talk,
Get around some of those people and just start to see how they move, how they talk, how they operate, talk to them about their problems. And I think it will start to maybe alleviate some of those fears that you have around jumping into entrepreneurship. Totally.

Cameron:
Yes.

Henry:
All right. One more question, Cameron. Talk to us about where you are now on your real estate journey. You hit your goal of 25 doors in 25 years. Are you still doing deals? Are you still growing or are you just a coffee man now? Yeah. So we got

Cameron:
Something like 20 25 properties in 35 units. 80% of it is residential, triplex, duplex kind of stuff. And then 20, 25% of it is commercial space. So that’s the coffee and we have a cigar place and a clothing boutique. And cash flow, I think we’re right around 18 or 19,000 a month if you add it all together.

Henry:
That’s amazing, man.

Cameron:
And I’m focused on flips this year. So my goal is to do 12 flips this year. And my goal is to make 60 on each of them. So I’m really focused on flips. Some of you may know what I’m talking about. When you do the birdmat thing, when you start investing in real estate, you’re going to feel poor for a long time. And I think to an extent, we kind of still feel that way. It’s just like every dollar that comes in, we’re putting it right back into real estate. So I’m trying to flip my way up a little bit. And we purchased this 50,000 square foot retail commercial. It’s like two blocks of buildings. It’s like seven different buildings and we’re going to completely revamp the whole thing and make it a really beautiful spot for families and folks to come. And so several restaurants and clothing and retail and really excited about that.
So that’s going to be like an 18 or 24 month project. Just really feel like we’re doing a great work for the neighborhood. And if you’re curious, it’s called Brookview Hills. It’s on 34th and Bosky here in Waco, Texas. So you can watch that come to life on my YouTube channel. And yeah, we’re excited about that.

Henry:
Yes, man. I love to see that you are continuing to grow your real estate business, moving into doing more commercial deals, but still improving your community. I think that is awesome. And yes, you and I were talking. I feel like for me, the sweet spot is 24 to 25 flips a year. That’s like two deals a month. So if you’re consistently buying two a month and churning them, after about a year or two of doing that consistently, then you start to hit that consistent, every month I’m selling a deal. Every month I’m getting that paycheck. I feel like that’s the sweet spot. So we’re going to test that out this year. I’ve upped my goals to 25 flips and to do that for a couple of years consistently and see if that helps me feel more … I don’t know if financially secure is the right word.
It’s more just about knowing when that next paycheck is coming. I think that’s the tough part about entrepreneurship for people. I saw a video that was like, nine to five broke ain’t like entrepreneur broke because nine to five broke, you know when that next paycheck is coming. But entrepreneurship broke, man. It could be months before that next one’s coming. So we want to have that more consistency of income. And I think that about that two deals a month is where I think that sweet spot starts to come

Cameron:
In. Yeah. And here’s a great example of inspiration that can come from relationship is like we were chatting and I was like, “Well, how are you going to source your deals?” And you said you’re doing mostly direct mail, right? And I don’t do like … I’ve had very little success with direct mail, but now I’m like, “Bro, if Henry’s doing direct mail and he’s trying to do 25 flips a year, I’m going to do direct mail and try to get up to his level.” So thank you, man. That was inspiring. I’m going to be looking into direct mail.

Henry:
And you inspired me to hire that full-time handyman. So get out there and network with investors. When Cameron and I were chit-chatting, I was like, yes, that is what I need to do. So spend some time around other investors. The inspiration is helpful. Cameron, thank you so much for sharing your journey.

Cameron:
Thanks, Henry. Great to be with you and thank you for all you do in BiggerPockets. Thank you guys.

Henry:
Thank you so much, Cameron, for coming on and sharing this very inspirational journey. For anyone out there that is listening that wants to come on the show and share their real estate journey with us, you can head to www.biggerpockets.com/guest and fill out the form. Thank you everyone for listening. We appreciate you being here and we’ll see you on the next episode of the BiggerPockets Podcast.

In This Article

This article is presented by RentRedi.

When I bought my first rental, I was determined to self-manage. Not because I loved property management, but because I wanted to learn. I wanted to understand tenants, maintenance, leases, and cash flow instead of outsourcing everything right away. At the time, it felt like the responsible thing to do and a way to save money on management fees.

At first, self-managing seemed manageable—a few texts from tenants, a couple of maintenance calls, rent coming in each month. Nothing felt broken. 

What I didn’t realize was how inefficient I actually was. I tracked things in my head, saved notes on my phone, and buried receipts in my email. I wasn’t losing money in obvious ways—I was losing it quietly.

As my portfolio grew, I tried the opposite approach and hired a property management company. While it helped in some areas, it didn’t solve everything. I still lacked visibility and didn’t fully understand how my properties were performing. 

Eventually, I came back to self-managing again, but this time, with systems and the right tools in place. That’s when everything changed. I stopped relying on memory and started using processes.

I’ll be honest, I don’t think self-managing was the mistake. The mistake was trying to do it without systems. If I had used RentRedi earlier, I could have had centralized rent collection, maintenance, leasing, and finances all in one place. Then I would have caught many of these issues long before they started costing me money. 

Looking back, I can clearly see where money was leaking at every stage. Most landlords don’t lose money from one big mistake. They lose it slowly, in places they don’t even realize exist.

1. Poor Tenant Screening (When Everything Lives in Your Head)

Tenant screening is one of the most important parts of self-managing, yet it’s often the least structured. 

Early on, I didn’t have a written process. Each application was handled slightly differently, depending on how busy I was or how badly I wanted to fill the unit.

Some tenants submitted full documentation. Others sent partial screenshots. Sometimes I verified employment. Other times, I trusted what I was told. None of this felt reckless at the moment, especially when an applicant seemed friendly and responsive.

The problem with inconsistent screening is that it introduces emotion into what should be a neutral decision. When a vacancy feels stressful, you start justifying things you normally wouldn’t. You tell yourself it’s better to get someone in than to let the unit sit empty another week.

That’s how late payments start becoming normal and boundaries blur. And that’s how one poor screening decision can wipe out months of cash flow. 

Once I turned tenant screening into a standardized process, everything changed. Applications, documentation, and criteria became consistent, regardless of who applied. That structure didn’t just protect my properties. It protected me from making rushed decisions. 

Good tenants aren’t found by instinct. They’re found by process.

2. Vacancy Drag From Slow Turnovers

Vacancy is one of the most underestimated costs in real estate investing. A single empty week may not feel like much, but those weeks add up quickly over years of ownership.

Early on, I treated turnovers as something I handled after move-out. Lease end dates would sneak up on me. I waited to schedule cleaners and delayed listings. Everything happened in a rush.

The issue wasn’t effort. It was timing.

When listings go live late, you miss qualified renters who are actively searching. When photos aren’t ready, showings are delayed. And when vendors aren’t scheduled early, vacancy stretches longer than it needs to.

Once I started planning turnovers ahead of time, everything improved. Tracking lease timelines allowed me to prepare early, and tools like RentRedi made it easy to list units quickly as soon as notice was given. That speed helped reduce downtime and keep income consistent. 

What made the biggest difference wasn’t working harder during turnovers but having everything in one place. Using a single system like RentRedi can help eliminate delays and remove the guesswork. RentRedi can be used to track lease timelines, list units, and manage communication, which can reduce the need to extend a vacancy far longer than it needs to. 

Vacancies rarely come from a bad market. It usually comes from delayed action.

3. Underpricing Rent (Out of Fear or Convenience)

Underpricing rent rarely feels like a mistake because nothing feels broken. Rent still comes in. Tenants are happy. Everything appears stable. 

But stability can be misleading. Expenses increase every year. Taxes go up. Insurance costs rise. Maintenance becomes more expensive. When rent stays flat, cash flow slowly disappears.

A small gap below market rates might not seem significant, but over time, it compounds: $100 a month becomes $1,200 a year. Multiply that across multiple properties and years, and the impact is substantial.

Rent should be reviewed consistently, not emotionally. The goal isn’t to push tenants out. It’s to ensure your property remains a healthy investment. 

Cash flow is rarely lost all at once. It fades when adjustments are avoided.

4. Reactive Maintenance Instead of Preventative Maintenance

For a long time, I believed I was managing maintenance well because I responded quickly. If something broke, I fixed it. If a tenant called, I handled it. 

What I didn’t realize was that reactive maintenance is almost always more expensive. Emergency calls and after-hours labor cost more. Small issues turn into major repairs when left unresolved.

When maintenance communication comes through texts and calls, it’s difficult to spot patterns. You don’t realize the same system keeps failing, or that one property needs far more attention than others. 

Once maintenance requests were tracked in one place using tools like RentRedi, those patterns became obvious. That visibility made it easier to plan preventative maintenance instead of constantly reacting. 

The biggest shift came from having everything in one system instead of juggling texts, spreadsheets, and scattered apps. This is because all of the maintenance lives in one place, in RentRedi. Problems become predictable instead of expensive surprises. 

Preventative maintenance isn’t about doing more work. It’s about doing the right work, earlier.

5. Overpaying for Vendors (Because You Don’t Have Benchmarks)

Vendor expenses can quietly eat away at profitability when there’s nothing to compare them to. When you self-manage, availability often matters more than price. If someone can come quickly, you hire them. Without benchmarks, every invoice feels reasonable. 

But when expenses are reviewed by property, patterns begin to appear. Some vendors cost more. Some repairs repeat. And some properties consistently require more spending.

Once I began reviewing vendor costs intentionally, I was able to negotiate pricing, build better relationships, and make smarter decisions about whom to call for specific jobs. 

Most landlords don’t overpay intentionally. They overpay because they never pause long enough to evaluate.

6. Not Tracking Expenses Properly

One of the biggest turning points in my investing journey was realizing that a positive bank balance doesn’t mean a property is profitable. 

When expenses are scattered, it’s impossible to understand performance. Receipts get lost. Costs blend together. Decisions are based on feeling instead of facts. Without property-level tracking, you don’t know which rentals are working and which need attention.

Using a system that integrates property management and bookkeeping changed that. With RentRedi’s integrated bookkeeping, income and expenses are automatically categorized by property, making performance easier to review. 

Bookkeeping isn’t about perfection. It’s about clarity. And clarity leads to better decisions.

7. Your Time (The Cost No One Puts on the Spreadsheet)

The most expensive cost of self-managing is time. The late-night messages. The rent reminders. The constant interruptions. 

At first, it feels manageable. Over time, it becomes exhausting. 

What helped me avoid burnout wasn’t stepping away from self-managing; it was removing the need to be constantly available. RentRedi allows you to stay in control of your properties while automating the day-to-day tasks that used to keep me on call around the clock. I could focus on reviewing numbers, improving properties, and growing as an investor instead of reacting all day.

Self-managing doesn’t mean doing everything manually. It means staying in control while letting systems do the repetitive work. 

Your time is your most valuable asset. Protecting it is part of protecting your portfolio.

Conclusion: Self-Managing Isn’t the Problem. Managing Without Systems Is

I’ve self-managed inefficiently. I’ve hired property management companies. And I’ve returned to self-managing with the right structure in place. 

What I’ve learned is this: The strategy isn’t the problem. The lack of systems is. 

Most money leaks aren’t dramatic. They show up through missed follow-ups, preventable vacancy, reactive maintenance, unclear finances, and time slowly draining away.

Self-managing can absolutely work, but only when you manage intentionally. You don’t need to hand everything off to a property manager to be professional. But you do need professional-level systems if you want to scale without burning out.

For me, the biggest shift didn’t come from managing less. The shift came from managing smarter using a single system, like RentRedi, which replaced the patchwork of tools, notes, and reminders I had relied on for years. It allowed me to stay self-managing while bringing rent collection, maintenance, leasing, and bookkeeping into one place. If you’re starting to feel stretched or scattered, it may be worth exploring what managing everything inside one system, like RentRedi, actually looks like in practice. 

Sometimes, the right move isn’t managing less. It’s managing better.

In This Article

Solo living is no longer a state enforced on a spouse when their other half passes away, but increasingly a lifestyle choice many Americans prefer or have found themselves in when their family lives elsewhere, and the idea of cohabitation doesn’t appeal. 

For landlords, catering to this growing demographic can be a big boost to the bottom line. According to KFF Health News, just under 30% of Americans aged 65 and older now live alone—a dramatic increase from 10% in 1950. Lower marriage rates, higher divorce rates later in life, the decision not to have children, and the post-COVID pandemic desire to live in isolation are some of the factors driving the increase in solo living.

According to Yardi’s RentCafe data, summarized by NAI Global, the number of renters living solo increased by about 1 million, or 6.7%, from 2016-2021. Solo renters are especially prevalent in high-growth job markets such as Salt Lake City and several Texas metros, where in-migration is strong.

In Salt Lake City, the solo-occupant population increased by nearly 25%—about 50,000 people—accounting for 15% of the city’s renter population. Although baby boomers are still the main demographic of solo renters, making up 32.4% of them, per RentCafe data, 29.5% of millennials are flying solo. In addition, millennials’ average salary of $55,973 is more than $22,000 more than that of the average renter, meaning this generation has money to spend. 

The Affordability Issue

Affordability challenges in the for-sale housing market are another reason for the increase in solo renters, as renting is now less expensive than homeownership when mortgage payments, taxes, insurance, and maintenance are factored in. 

However, that does not mean renting is a breeze for solo dwellers, especially for older renters on fixed incomes. AInvest’s recent analysis shows that the share of solo senior households spending over 50% of their income on housing was over 16% in 2020.

An Opportunity for Investors

This year, the oldest boomers will turn 80, Senior Housing News reports. With the boomer population increasing, comprising 64 million people, or nearly one-fifth of the population and rising, the housing industry isn’t keeping up. In fact, the number of senior housing facilities in some markets is shrinking.

This presents an opportunity for landlords if handled correctly. RentCafe’s data shows that, on average, older tenants are willing to pay a premium for privacy, but overall face financial burdens because they cannot split costs with roommates or partners. 

Some seniors realize the need for companionship and cost-cutting and have moved in with roommates. A 2025 senior housing trends report from NIC MAP says the sector will need 560,000 additional units by 2030 to meet the per-capita availability target.

“Many of our communities don’t have the housing that many aging adults can afford, with features that support them, in locations where they want to live,” said Rodney Harrell, PhD, AARP vice president of family, home, and community. “To meet this growing need, we must expand the nation’s housing stock and work to make our communities more livable with an all-ages mindset.”

Interestingly for investors, among those interviewed in the AARP survey, 75% of adults aged 50-plus said they still wanted to live in a single-family home and weren’t keen on living in a community for older people. One in four current homeowners aged 65+ has said they would consider buying or building an ADU.

Cohousing communities have been a way for seniors to maintain independence while still feeling connected to a community. In Silicon Valley’s Bay Area, a three-story building comprising 19 units opened in 2015, The Wall Street Journal reported, and there is a 20-to 30-person waiting list to move in.

Making Regular Rentals Senior Compliant

Most seniors aging in place are not looking to rent two-story houses, but rather small, single-family units with accessible floor plans, step-free entries, grab bars, good lighting, and walk-in showers, according to The National Institute on Aging.

Many of those features can be added gradually to existing small rentals to make them ADA-compliant. However, there are other steps to take if you want to take the process to the next level and convert a single-family home into a residential assisted living home, as documented on this BiggerPockets Forums thread, which can be highly profitable but requires obtaining the right permits and licenses. There are companies that can assist in the process.

Serving the Needs of Single-Tenant Renters: Midwest Cities Where Numbers of Solo Renters Are Soaring

PwC’s and the Urban Land Institute’s 2026 Emerging Trends In Real Estate report shows that senior housing, followed by workforce housing—both heavy single-tenant-based sectors—are two of the most in-demand housing sectors this year. The cities where solo renting is soaring have both a high percentage of boomers and millennials seeking tech-based jobs.

The Midwest, specifically Akron, Toledo, and Dayton, Ohio, has a low cost of living and a higher proportion of older residents. Similarly, Pittsburgh is generally cheaper to live in and has a mix of older residents and younger tech workers centered around big tech companies such as Alphabet’s Google, Microsoft, Facebook, Nvidia, and others.

Why Solo Renters Make Good Tenants

Less damage

Fewer tenants in a rental means less wear and tear.

High demand

As mentioned, between 2016 and 2021, the number of renters living alone increased by about 1 million people to 16.7 million, a 6.7% jump that made solo renters the fastest-rising renter group in the country.

Higher-income tenants will pay a “solo premium.” 

This doesn’t apply to all solo renters, of course, but there are many who have significant savings and assets or are employed in higher-paying tech jobs who can pay premium rents to live alone.

Simpler property management

Fewer tenants equals fewer property management headaches.

Longer-term rentership

This is particularly true of older tenants. They’re not looking to move. They want to find a place they can settle into for the long haul, prioritizing privacy, safety, amenities, and flexible digital services over sheer size.

How to Attract Solo Renters

Design smaller, efficient, and more affordable units. 

According to RentCafé’s 2024 review, “most cities are still experiencing a decline in square footage. For instance, Seattle ranks first among cities with the smallest new apartments, with units completed between 2015 and 2024 averaging 649 square feet. That’s a 57-square-foot decrease compared to older rentals.”

With the country mired in a housing affordability crisis, savings beat size every time.

Emphasize safety and neighborhood feel. 

Safety is one of the top priorities for tenants, especially older residents, along with walkability, according to RentCafe.

Offer strong, photo-rich, easy-to-navigate digital walkthrough tours. 

Almost 50% of 5,000 surveyed tenants from RentCafe said that clear photos and videos of specific units were helpful, while 39% interviewed by iApartments have used self-guided tours, and 26% have said they prefer a tour without a representative around.

Offer layouts that accommodate work-from-home jobs. 

Solo renters are often remote workers. Ensure your rental includes alcoves and areas that can accommodate a desk, creating a work-from-home office.

Provide storage, outdoor space, and parking.

These factors have also ranked highly in surveys for solo renters, especially those who spend long periods at home.

Price rentals with “solo premium” pricing. 

RentCafe reports that solo residents need about $8,600 more per year in income than the average renter. This means solo residents tend to skew toward high-income or older tenants with savings. Ensure your apartment pricing fits within a single renter’s budget.

Market to a solo renter demographic. 

Millennials and baby boomers are your target audience. Phrase your property descriptions accordingly.

Highlight features that support independence, privacy, and low-stress living. 

People often live alone for a reason: They value independence and peace of mind. Stress a responsive maintenance request protocol and clear communication.

Use surveys and feedback to understand what solo renters want.

These can include secure package delivery, modern kitchens, in-unit laundry, and spacious closets.

Final Thoughts

Investors often overlook one or two-bedroom houses, thinking that three-bedroom homes and above will appeal to tenants with kids looking to live in good school districts. Consequently, low-bedroom-count homes are often underpriced and can sit on the market longer—meaning they could be the source of great deals and cash flow. Modify your buying criteria accordingly, factoring in neighborhood safety, walkability, and parking, and you could find you have little competition when shopping for deals.

In This Article

California Governor Gavin Newsom has rarely been in lockstep with the federal government recently, but they agree on one issue: stopping corporate investors from buying single-family homes.

Investors in California have quietly snapped up 40% of the fire-scorched lots in Altadena, a Los Angeles suburb, according to a recent Redfin report. Newsom is calling for new state oversight in stopping large investors from buying single-family homes in California.

“When housing is treated primarily as a corporate investment strategy, Californians feel the impact,” a source in the governor’s office said. “Prices go up, rents rise, and fewer people have a chance to buy a home.”

It echoed President Trump’s earlier post on Truth Social, where he said, “I am immediately taking steps to ban large institutional investors from buying more single-family homes.”

Waiting for More Details

There have been no specific numbers on what “large” institutions investors mean, although the president’s use of the word “institutional” would imply Wall Street REITs and hedge funds rather than smaller mom-and-pop investors. Newsom hasn’t offered further details, but a recent statement implies that Wall Street was also the target of his ban.

“These investors are crushing the dream of homeownership and forcing rents too high for everybody else,” Newsom said in a statement. “I think it’s shameful that we allow private equity firms to become some of the biggest landlords in our cities.”

Smaller Investors Own Most of California’s Single-Family Rentals

As with much of the U.S. single-family housing market, corporate investors are not the primary owners in California, where fewer than 3% are owned by companies that own at least 10 properties, according to an analysis by the California Research Bureau.

Only 20,066 homes are owned by firms with portfolios of 1,000 or more, the largest being Invitation Homes, which owns 11,000 in the state, the California Research Bureau says. That is a sliver of the more than 16 million rental units across California, according to Census data.

This information was stressed by Scott Lincicome, vice president of general economics and trade at the Cato Institute, who told CNBC, “Institutional investors are just not the main market movers. It’s mainly a supply issue.” He describes the proposal as “populism 101.”

Are Fire-Damaged Lots a Good Investment?

The combination of federal and state efforts to curb large investors buying single-family homes, when applied to neighborhoods where institutional investment is concentrated, could mean fewer bidding wars against deep-pocketed adversaries for fixer-uppers and rentals. 

However, to buy anything in areas affected by the L.A. wildfires, such as Pacific Palisades and Malibu, you need deep pockets. Mom-and-pop investors in these neighborhoods are already multimillionaires. But for the homeowners, selling their lots is likely a different story.

“In Altadena, there’s a real push around the idea that the community is not for sale,” Redfin agent Sylva Khayalian said in the Redfin press release. “People who plan to stay are encouraging others not to sell because of how much it could change the neighborhood—but for some residents, selling is the only option that makes financial sense.”

Consequently, some are “signing on the dotted line because they’re desperate to sell” due to the cost of cleaning up smoke and ash damage, Khayalian adds, which can run into hundreds of thousands of dollars, especially when remediation and the cost to treat lead exposure and landscape destruction after heavy rains are factored in.

High Outlay

For investors, buying one of these fire-damaged lots means a big initial outlay. Khayalian says that Altadena lots are selling in the $500,000 to $600,000 range, and surviving lots with similar homes might command $1 million or more. Meanwhile, in Pacific Palisades and Malibu, the number is closer to $1.3 million to $1.6 million. 

“There are so many lots sitting on the market that sellers are starting to cut prices to attract offers,” Khayalian said, suggesting that leverage has tilted in favor of buyers here. Still, it’s a heavy initial outlay for an investor, even though they are not bidding against Wall Street behemoths.

Adding Units Through ADUs Could Be a Game Changer

A lot depends on the nature of Newsom’s crackdown. If the legislature adopts tax changes that penalize bulk acquisitions or tighten rules on corporate ownership, it may ease competition and create opportunities for small landlords to buy single-family rentals and small multifamily properties.

If this is combined with Newsom’s already stated interest in alternative construction methods, including modular housing, and with encouragement of ADU construction, smaller investors could benefit by adding units, converting properties, and participating in rebuilding efforts, despite the initial outlay required to purchase lots and damaged homes.

Final Thoughts: Factors Smaller California Investors Must Consider

Investing in a single-family home in California, especially in a fire-prone area, is not a simple process. Khayalian explained:

“The homes for sale that didn’t burn are only attracting offers if they’re priced reasonably and the owner has remediated ash and smoke damage. The most important thing someone looking to buy in this area can do is figure out if they can afford insurance. Mortgage lenders in California require homebuyers to have fire coverage, and premiums have gone up by 35% to 50% since the fires.”

Unfortunately, even if a neighborhood was not recently affected by a wildfire, investors in California could still be affected by one, given the state’s proximity to forests. Most of California is a potential tinder box. 

Deciding where to invest means getting a good deal on homeowners’ insurance. Between 2019 and 2024, more than 100,000 homeowners lost coverage. The California FAIR Plan, known as the “insurer of last resort,” has grown by 155% since 2021, but its coverage still pales in comparison to conventional insurance. For the time being, it’s all that many Californians have, and rental property investors have to decide whether that’s a risk worth taking.

Ashley:
What if the real reason you’re not buying deals has nothing to do with the market and everything to do with how you’re approaching money, deal flow and funding.

Tony:
Today we’re answering three questions from the BiggerPockets forums that hit the exact pain points that rookies just like you are struggling with right now, getting deals without a bunch of capital, finding quality wholesalers to find you the right deals and knowing when to line up your financing.

Ashley:
This is the Real Estate Rookie podcast. I’m Ashley Kehr.

Tony:
And I’m Tony j Robinson. And our first question today comes from Victoria in the BiggerPockets forms and Victoria’s question is, I’m curious about what methods you all are using to acquire investment properties without a ton of capital upfront. There are so many strategies out there partnering with private money lenders, joint ventures, creative financing assignments, subject to seller financing, lease options and more. It would be great to hear from investors actually doing deals right now about what is working in today’s market, which strategies you like best and what pitfalls to avoid when using little to no money down approaches. A few questions to kick things off. What methods have you successfully used to acquire properties without large amounts of your own cash? How did you structure the deals, roles, profit splits, risk and protections? How would you do it differently if you were starting over with limited capital today?
Looking forward to learning from everyone’s experiences. Alright, so the question is how do you get into a deal with little to no cash of your own out of pocket? I think the first thing that I’ll say is that everybody listening probably wants to do a lot of deals without using any of their own money, right? That’s the golden goose for building a real estate portfolio is the ability to leverage other people’s capital. That said, I think a few things have to be in place first before you can successfully do that. Number one, it helps to have some sort of track record. If you can show people that you can be a good steward of maybe your own capital first, it makes it more competent for them to actually give you their own capital in a deal. But if you’ve got zero real estate experience, I’m not saying that it’s impossible, but it is a slightly bigger hurdle to get over if the first deal that you’re doing requires you to get someone else’s capital.
So just keep that in the back of your mind that if you’ve got a track record, even one or two deals, that helps build confidence in other people, then you can replicate that with their own money. The second thing that I’d say is even if you are using someone else’s capital, not your own, there’s still I think a certain level of financial cushion that you want to have in case the deal goes sideways. If you guys go over on your budget, if unexpected expenses come up, whatever it may be, if there’s a month where occupancy dips lower than what you had anticipated, it’s still good to have some form of reserves for yourself just in case things hit the fan. So just two big ideas up front for me. Ash, what are your initial thoughts on the question?

Ashley:
I, one other thing along with finding out your path, your strategy and what you’re going to do is once you at least know your strategy, build your buy box. But when you’re looking at different ways to fund the deal, I think you should have multiple options. Instead of just saying, I’m just going to get a bank loan, I got pre-approved and that’s the only thing I’m going to do is look at other things. So you can submit multiple offers on the deal, so you have multiple opportunities to negotiate. So oftentimes I will submit an offer with bank financing. I will submit an offer with seller financing. I think seller financing is a great opportunity to get a deal with low money into the deal and be able to negotiate the terms so it’s more beneficial for you. And I think if you limit yourself to only thinking about I need to set aside one funding strategy and stick to that is going to limit the deals that you can do.
So try and find out if you can line up a private money lender that maybe you will or won’t use. Look at how you would structure seller financing for a deal. You can do as many different offers as you want. And the thing I love about doing multiple offers is it makes it the buyer’s decision. Everybody loves to make their own decisions. So I’m sorry, the seller’s decision. The seller will get to decide which offer they want to choose, and everybody likes to make their own decision not be told what they’re going to do. So that kind of gives you some negotiating power there.

Tony:
But to answer the question of what methods have you used, I’ve used 100% bank financing. So my first few deals were 100% funded by a local bank that I found, and I know investors today that are still using forms, that form of financing. Now usually that requires finding deals and need some renovation and some rehab. So there’s some margin in there, but call every single bank in whatever market that it is you’re thinking about and see what kind of loan products they offer that are low or no money down. I’ve also used private money where I’ve worked with private investors to fund my acquisition, the rehabs. I know other folks who have used private money in combination with hard money. I just think that if you are going to raise capital from someone else, especially in your first few deals, I would maybe focus on transactional real estate.
So something like flipping where you can kind of get in and get out in six to 12 months and also walk away with a bigger chunk of cash because then that will position you better moving forward to maybe start doing some of your own deals. So the bigger question isn’t does this work or can I get someone else’s money? I think the bigger question that most folks struggle with is how can I go out and identify those people that would be willing to work with me? So I would invest a lot of my time, effort, and energy into building your network, meeting folks who might have the capital but not the time or the desire to do these deals themselves and figuring out how you can align yourselves with them to make it a win-win situation for both of you.

Ashley:
And then to address the question of what would you do differently if you were starting over with limited capital? I actually really like the way that I started. I took on a money partner who funded the whole deal. I set it up so that it was 50 50 equity, but also they were being paid back principles. So the capital they invested into the deal plus five and a half percent interest over a 15 year amortization. So this was a really sweet deal for them and it was my first deal. So I wanted to give someone more sense of a security. So they were getting all their money paid back over time and they were getting equity in the property and 50% of the cashflow of the property, which I will say was pretty minimal at first to start, but it was their first deal and my first deal.
So I think if you are starting today and you’re looking at what to do, the biggest thing is for me that really helped me was not being worried about giving up too much in the deal. If you don’t get a ton of return or you give up equity or you give away a portion of the cashflow, this first deal doesn’t have to be a huge money maker. And even if you’re doing a lot of the sweat equity, which I was a property manager, I found the deal, I did everything for the deal, but I gave up a lot just to get started just to get that first deal. So don’t overcomplicate it and don’t overthink it when you’re purchasing that first deal with a partner that it’s okay if they end up getting the better end of the deal because it’s the way that you got started and you can grow and learn from there.
It’s one deal that you’re doing with them. The next deal, you can negotiate the terms. I still have that first partner and when we do a deal today, it is very, very different. I make out on the sweeter end of that deal because I am the one doing all of the work and I know what my value is because of all the experience and the things that I’ve learned, but they’re still being able to invest in real estate and have to do very, very minimal work. So it still works for them also too. So coming up, everyone says build relationships with wholesalers, but how do you actually find the good ones without wasting months chasing bad deals? We’ll dig into that after a quick word from our show sponsors. Okay, we’re back. And our second question is, I have been investing for two years now.
Since then I did my first project and looking to do multiple ones this year. Congratulations on your first one. And I’ve been trying to connect with solid wholesalers so far. Most of the deals I’m coming across aren’t a good fit. I post regularly in the Facebook groups, check investor lift and stay active in the community, but I’m clearly not reaching the right wholesalers yet. What might I be doing wrong? And where do experience investors usually find reliable wholesalers who consistently bring real workable deals? So I’ve never bought a property from a wholesaler, but I am on a bunch of buyers list they call it, where wholesalers keep a list of their buyers. When they get a deal, they send them out. So here’s the three ways that I would find a wholesaler is one I would go to in-person meetups in your network, wholesalers will be there.
Sometimes they even bring deals in a clipboard for you to sign up if you want to get on their buyer’s list. The second thing is if you’ve ever gotten a text message from somebody who wants to buy a property, maybe your primary residence or maybe the investment property you already have, respond back to them and say, no, I’m not interested, but I’d like to be on your buyer’s list. Most likely they are a wholesaler trying to find deals. So usually I just have to give them my email address and I’m on their buyer’s list. You could also tell your friends and family that they could if they get one of those messages, to send the contact information your way and you’ll go ahead and respond with your information. And then the third thing is Googling. So whatever market you are investing in is Google, sell my house fast, buffalo, New York, or whatever your market is. And all of the wholesalers will usually come up like we do cash offers, things like that. And you’re going to message them and instead of being somebody who wants to sell your house, just let them know you are a buyer and you would like to be on their buyer’s list.

Tony:
Great points. Ashton, I just want to highlight why most rookies might not ever even see all of the really solid wholesale deals. And it’s because what wholesalers really value is certainty in the person that they’re working with, right? They’ve got this property in their contract, they’ve already made commitments and promises to the seller. They want to make sure that whoever they go under contract with has a good chance of actually closing, right? Otherwise they sour that relationship with the seller and they might end up losing the deal. So oftentimes what you’ll see wholesalers do is that before they email out their entire list, they’re picking up the phone, they’re calling or they’re texting, they’re trusted and closest buyers to say, I just locked this up. Here are the details. Are you interested? And oftentimes only if those buyers pass then does it go off to their larger list.
So the question for you isn’t even necessarily, how do I find more wholesalers? Because it sounds like you’re doing all the right things. The question is how do I get into that inner circle so I can be on that short list of what buyers or what wholesalers are actually looking for? And I think there are two ways you can do that. Number one is just continue to build a better relationship with those wholesalers. Don’t just wait for them to send you deals. Just reach out to them every once in a while. Let them know what you’re up to. Give them more certainty on what you’re doing in your business to position yourself. Tell them, Hey, look, I just raised 300 K that I need to deploy. Do you have anything that I can buy right now? Right? The second thing you can do is maybe take a deal that has slightly smaller margins just to build that relationship with those wholesalers.
So if you’ve got a minimum goal on a flip of like, Hey, I want to make a hundred K on a deal, maybe take a deal that gives you 30 k. If it means building a better relationship with that wholesaler. So I think the bigger question is not how do you get more volume, but how do you build a deeper connection with the folks who are already wholesaling in your chosen market? Alright, we’re going to take a quick break before our last question, but while we’re gone, be sure to subscribe to the realestate Rookie YouTube channel at realestate rookies where you can find us and we’ll be back with more right after this. Alright, we’re back and let’s hear. Our last question was come from Brandon and the BiggerPockets forum. So Brandon says, question four, active investors here. Do you prefer having financing options ready before submitting offers or do you secure funding after you have a deal locked in?
Pros and cons to both? Curious to know how you would approach it. My answer is going to be pretty quick and straightforward on this one. Ash. I prefer to know what my purchasing power is before I invest a lot of time searching and hunting for deals. Because what would suck is that you find a great deal, you get it under contract, you try and go get your financing, and they’re like, Hey, this deal is $500,000, but you can only get approved for $200,000. Now you’ve just wasted a lot of time, effort, and energy on deals that you actually had no ability to close. So for me, I feel like one of the very first steps, even before you really focus on a market is understanding what is your purchasing power? How much cash do you have on hand? How much can you deploy into a deal? And what kind of loan amount can you get prequalified for?

Ashley:
It’s definitely so much easier to go that route, to be prepared and to know ahead of time to be able to get your deal done. There definitely have been a lot of times where I’ve found the deal and I’ve then figured out the financing, maybe because I wasn’t planning to buy a deal, but the deal is too good to pass upon or whatever the reason may be, or it came up upon a second deal or something that I wanted to take on at the same time. So it’s important to have options, I would say. So figure out different ways that you can pay for things. And even though you may not use all of them that first deal, at least know what are the steps to take. So getting pre-approved is a great choice. Having somebody that’s lined up as a private money lender, it’s definitely easier to make the offer and get the offer accepted too when you can have proof of funds or proof of financing.

Tony:
And a lot of sellers, they won’t even entertain an offer if you don’t have some sort of pre-approval letter attached to that offer. So I think a lot of times your hand is kind of forced into get into financing, at least somewhat figured out first.

Ashley:
This off market deal that I’m doing right now, I actually got the pre-approval letter and everything when I got it ready to submit my offer, and I was waiting to submit the offer to get the preapproval, and I submitted the offer with anticipation that I would have the proof of funds within the next 24 hours. So when they asked for it, I’d have it ready. They didn’t ask for it, but it still was good peace of mind to know I have the financing lined up or whatever.

Tony:
And just one last point on that too, Ash, you talk about off market. We just had a question about wholesalers. Even for wholesalers, a lot of times they’ll want a non-refundable EMD just to lock the deal up. So if you go out and you put down 5, 10, 20, $30,000 as a non-refundable EMD, and then you try and go get the financing only to figure out that you can’t, that’s a tough spot to be. And so I would strongly encourage every rookie to try and figure out your financing first.

Ashley:
Well, thank you guys so much for joining us on today’s episode of Rookie Reply. If you have questions, you can always join us in the real estate rookie Facebook group, or you can message us on Instagram at BiggerPockets Rookie. I’m Ashley Houston, and we’ll see you guys next time.

 

Dave:
… To rent or to buy. You might think it’s an obvious choice, but it actually isn’t. Both Henry and I own dozens of rental units with millions in equity between us, but I spent five of the last six years renting a property, not living in a home I owned, and my net worth still grew a lot during that time. Most people would probably not expect that. You got closer to financial freedom while paying thousands in rent every month. The problem is that every online calculator, every podcast or YouTube video is telling you it’s a rent versus buy decision. That isn’t the case. Today, Henry and I are giving you three scenarios where you can rent, buy, or do a combination of both and grow your wealth in each scenario. So if renting makes more sense in your market, you can rent and still build wealth.
If buying a home is more affordable, you can ensure it’ll pay off when you move out. And finally, we’ll share the cheap code strategy that some of the smartest real estate investors use to make hundreds of thousands of dollars just buying a regular affordable home to live in. This decision could change the track of your financial future and you could be significantly wealthier because of it.
What’s up everyone? I’m Dave Meyer, Chief Investment Officer here at BiggerPockets. My co-host, of course, is Henry Washington. He’s here too. And we’re going to jump right into this conversation about whether it’s better to buy or rent or if that’s really even a decision that you need to make at all. So Henry, if you read the news right now, apparently just buying a home is just a terrible idea. That’s what everyone seems to be saying right now. Are you buying it?

Henry:
No, absolutely not. Buying a home is not a terrible idea, but I will admit that it doesn’t make sense for everyone to buy a home, and it doesn’t make sense for everyone in every market to buy a home. I do believe there are situations where it does make more sense to rent than buy, but I am a firm believer in no matter which you do buy or rent, you should be doing it with thinking about how to invest what you’re saving by not doing one or the other tactics.

Dave:
Yeah. All those articles you see, it’s every day in Bankrate or NerdWallet or anywhere that’s saying it’s cheaper now to rent than it is to buy. That’s a very simplistic and specific scenario. That’s just basically like if you’re a regular person and you’re choosing whether to buy your dream house or rent an equivalent property, that’s actually true. It’s probably better for most people to rent in that scenario. In fact, there’s only one city in the entire country where it’s better to buy than rent right now. Can you guess what it is?

Henry:
Somewhere in West Virginia?

Dave:
Very close geographically. It’s Pittsburgh is the only place right now where it’s actually better. But we’re investors, so we’re not thinking about it this way, like, should I buy my dream home or an equivalent property? We’re going to break down now how you can strategically think about your primary residence and ways that you can use it to grow your portfolio, whether this is your first property, whether you’re looking to do an owner-occupied strategy or not, and you’re just trying to buy rental properties and grow a bigger portfolio. We have strategies for everyone to leverage the choices they make about where they’re physically going to live to help grow your portfolio. So for investors who are trying to maximize the use of their residence where they’re living, what are the different scenarios they should be thinking through?

Henry:
Yeah, it really comes down to about three scenarios with some forms of variation, depending on the scenario. We have the option to rent your primary residence, we have the option to purchase your primary residence, or we have the option to own or occupy your primary residence as an investment vehicle. In other words, some form of house hacking. And when we say house hacking, we don’t always mean just buy a duplex, rent one side and living the other. House hacking to us just means finding a way to monetize your primary residence.

Dave:
Okay. So we’re talking about whether investors should rent, just straight up buy their primary or do an owner occupied. I think people are probably going to get mad about this. I actually think there are uses for all three. I think that renting makes sense sometimes. Grant Cardone’s going to be mad, but I think buying just your primary residence makes sense sometimes. I think owner occupied makes sense sometimes. So let’s just break these things down. I think rent’s going to make people the maddest, but do you agree that there are reasons why even real estate investors, even experienced real estate investors should consider renting a property?

Henry:
I absolutely do. And I say this as someone who owns my primary residence and hasn’t rented in years. And for me, it comes down to what’s the cost to rent each month versus buy each month? And that’s going to vary depending on your market. We’d be foolish to say that there aren’t markets where it costs substantially less to rent a like- kind property. And so if you’re going to end up buying a house that’s going to cost you 4,000 a month in a mortgage payment, and in that same market, you can rent a house that’s going to cost you 2,000 to 2,500 a month for the same kind of property. To me, especially as somebody who wants to take their additional income to invest in real estate, it would make a whole lot more sense for me to rent that property, save myself two grand a month and put that two grand a month aside so that I can buy rental properties where it does make sense for me to buy rental properties.

Dave:
The thing that sort of drives me nuts about either it’s people on social media or even these reputable websites saying it’s cheaper to rent or buy, they only look at the out of pocket cash. They say like, “Okay, my monthly mortgage payment is 2,000, my rent is 1,800, therefore it’s better to rent.” That is not how I would evaluate that because as you know in real estate, there are a lot of other ways that you’re making money. You have to think about the amortization on your mortgage payment, the potential for appreciation, which no one really knows, but over time the average is about 3%, so that really matters. And when you’re leveraged, that really helps a lot. And also tax benefits, right? You have to also think about the fact that your mortgage interest is deductible off of your taxes. And so just think about it that way, but it is the right question to ask.
When you incorporate all those things, if you actually do the math right and you see that renting is going to help you save money each and every month, you should do that. If you’re trying to maximize and not thinking about lifestyle, you should absolutely do

Henry:
That. Yeah. What we’re saying when you rent versus you buy is I’m saving monthly income and yes, I’m giving up the equity and appreciation, but I’m taking that additional income and then investing somewhere else where it makes more sense financially, whether that’s in my backyard in a different neighborhood or whether that’s in a whole nother state, then you are getting the benefits of real estate because you’re investing in a property somewhere else where you can take advantage of those benefits in a more financially beneficial way than you spending substantially more each month and then that hindering your ability to go buy property somewhere else.

Dave:
So what do you do then with the money? If you’re saving money every month, do you invest out of state? Do you buy a property in state or what do you do with the money you’re saving?

Henry:
If you are investing in real estate because you want to build up cashflow over the next five years to help replace your income for your job, yeah, you probably need to be looking at markets where you can get cashflow, where there’s a more favorable rent to price ratio, where you can buy a property and rent that property out and it pays for itself and then pays you some cashflow. There are tons of markets all over the country where you can find real estate that gives you those benefits. And I think it’s just up to us as investors to figure out where that makes sense for us based on our goals, but you should be looking to implement that money in a place that’s going to help you meet your real estate goals.

Dave:
Yeah. I think this is particularly important for everyone who’s listening out there. If you live in an expensive market in California, Washington, the Northeast, wherever, somewhere that it’s super expensive, this is a good strategy. It makes a lot of sense. I talk to a lot of people here in Seattle about this all the time because there’s a lot of people who have some money in tech or whatever and they’re like, “It doesn’t really make sense to house hack even here in Seattle. What should I do? ” I’m like, “Go rent a super nice apartment for three or $4,000 a month. That’s what it costs in Seattle.” But a mortgage payment here is $6,000 a month. So go spend three, 3,500 bucks and take that money. You’re saving two grand a month. You could buy a duplex a year with that savings in the Midwest. You do that for five years, you know, 10 units in another place.
That’s personally what I would recommend for the majority of people. Yeah,

Henry:
I can’t disagree with you because there are markets where even if you were to buy a duplex and house hack, remember a duplex is going to cost you typically more than a single family is. And so if you go and buy the duplex, even if you rent out the other unit, sometimes what’s left on your mortgage is still more than it would cost for you to go rent by yourself.

Dave:
It is. I was doing the math because I’m a giant dork. I made this huge calculator a couple of years ago that measures this. And honestly, I’ve used it every year of my life. It’s free on BiggerPockets. If you want to go to biggerpockets.com/resources, it’s just a house hacking calculator. It shows you whether it’s better to house hack, to buy, or to rent. So you should definitely check that out. But in a city like Seattle, renting is better. Just mathematically, it makes more sense. I get there are personal decisions. I have made all three of these decisions. I’ve bought my primary, I’ve house hacked, I’m doing a live and flip now, I’ve rented and bought in other states, but I’m just telling you, if you want to follow the math in an expensive market, this makes a lot of sense. There is one other scenario for renting instead of buying that I think people overlook, and it’s if you don’t know how long you’re going to live in a specific place.
That’s fair. I’ve lived in a ton of places and I have rented. I rented. When I was in Europe, I rented for five years. I would’ve made a lot more money if I didn’t, but I just didn’t know how long I was going to live in any of those places. And there’s transaction costs. In the US, it’s six to 8% essentially to go and sell. So even if you say, “Hey, I have this primary residence. It’s a great location. It’s going to build a ton of equity. I’m getting at a great price, but I might only live there for three years, probably better to rent, honestly, because it usually takes three or four years of appreciation growth, even good appreciation growth to overcome just the cost of selling.” And so I think that’s something you really need to think about. A lot of times this decision really comes down to like, are you going to live there for three or four years?
Four or five years, you’re probably good buy the house. But if you’re going to live there for less than five years, it’s kind of a toss-up.

Henry:
Absolutely that matters because we’re not in the market we were in 2021 where appreciation was going through the roof in a short frame of time. You’re not going to be able to take advantage of some of the ancillary benefits of real estate in a less than five-year period. And so again, you got to pay attention to that monthly cost. If I’m in a place where it’s very, very expensive, I think in any of those scenarios, it makes more sense to rent.

Dave:
Totally. I live in Seattle. I should, if I was just doing this straight on math, I should be renting right now. I don’t want to even tell you what my markets cost is. It is way more than I could rent an equivalent house for. But what I did choose to do was to buy a primary in a way that I do think is actually a reasonable way to offset. It might not be the most optimal, but it is actually working for my lifestyle. And I do want to talk about when you should buy your primary residence, but we do have to take a quick break. We’ll be right back.

Henry:
All right. We are back with the BiggerPockets Podcast and we’re talking about when it makes sense to rent your primary residence versus when it makes sense to buy your primary residence. And we just covered scenarios where both Dave and I agree, we think it might make a lot more sense to rent your primary residence instead of buy. But now let’s transition, Dave. In what scenarios do you think it makes sense for someone to buy their primary residence instead of renting?

Dave:
I think when you have somewhere close to breakeven on this calculation, like rent or buy, it doesn’t have to be exactly, but when you’re relatively close. So that’s number one. It has to be relatively close. And then I think there’s probably two different criteria I would think about. One is lifestyle decisions. That’s part of it, right? You can’t ignore this. If you would prefer to own your own home, that makes a lot of sense. But I think for me, the real criteria is, could I rent out that primary when I move out of it and make it a good rental property? Because as we were just talking about before the break, you have to hold onto it for four or five years. And if you think, “Hey, I might move out after two or three years,” that’s fine if it’s going to cash flow as a rental.
Just as an example, I guess it was like 10 years ago now, I was house hacking and I kind of just wanted to own my own home and I wound up finding a property that was in the path of progress. I got a great deal on it and we wound up buying it and it did increase my monthly burn because I was househacking in a place I got for super cheap and I wound up paying out of pocket for my mortgage every month, but it was worth it to me because it was a great place for me and my wife to live. And now I still own that as a rental. We moved out of that property six years ago and it’s still a cash flowing rental property in a great neighborhood. I bought it at 450. It’s probably worth 800 now. So it’s been a great investment for me and we lived there for five years really comfortably.
So it worked out as a really good investment.

Henry:
Yeah. I think if you live in a market where your rents or your mortgage payment for the same type of property are about the same or even skewed where your mortgage payment would be less than what it is to rent, you absolutely should buy. This is a scenario you should buy your property in because you’ve now put yourself into a position where you’re not losing money by buying instead of renting. You’re going to spend the same amount or pretty close to the same amount either way. And so now what I’m thinking about as a real estate investor making this rent or buy situation is if it’s going to cost me the same to rent or to buy, that means I have the same money to play with each month to put towards investing in real estate. So I should buy because now I not only have to spend the same amount each month, but I get the ancillary benefits, I get the tax breaks, I get the appreciation over time.
And then I can think about scenarios like you just talked about. When I move out, I can now keep this property as a rental property and then I get the benefit of debt paydown that I’m not actually paying down the debt for that a tenant is. I think this is a scenario where you should consider buying over renting for sure.

Dave:
There’s a key caveat here though. In my example, and I think this is probably true for most people, I didn’t go out and buy my dream home. I mean, if you asked Jane, it was whatever the opposite of dream home is, that’s what it was for her. Nightmare home? Got it. A nightmare. Yeah. We used to play a game just gunshots or fireworks. Often, honestly, total toss up. I’m not saying you have to do that, but I viewed it as an investment. I wasn’t saying like, “This is the house we’re going to live in for the rest of our lives.” I was in my late 20s and I was like, “This is not where we’re going to hopefully raise a family one day.” Where I bought in the path of progress and in a place where I felt like I could really have a good investment.
I think the area where Robert Kiyosaki or Grant Cardone are right, because they are owed, just if you don’t know, two big, famous real estate names who are very adamant that your primary residence isn’t an investment. Robert Kiyosaki even calls it a liability, but where their sentiment at least is right is like if you’re going to go out earlier in your investing career and buy your dream home, often that is not the best use of your money. You could probably either be renting and buying something else or you could be buying more of a starter home, maybe something with sweat equity in it where you could go do that.

Henry:
And I think that this is the caveat that we wanted to make sure that we hammer home with people. We’re thinking about this decision to rent or buy as real estate investors at heart, right? And that’s how we’re talking to you as the audience. If you’re a real estate investor and you’re trying to decide rent or buy and you live in a market where it’s about the same price, we’re saying buying is the right choice in that scenario, but be smart about the buy. If you’re first getting into your home ownership journey, maybe this is your first home purchase to live in, maybe it’s your second home purchase to live in, chances are you’re not picking that home as your forever home yet. You probably just aren’t in that stage of your home ownership journey yet.
So buy something that will make sense as a rental property down the road, because if that’s your goal is to build a portfolio of rental property of cash flowing assets, utilize your owner-occupied loans to buy something that can be added to your portfolio in the future versus you buying something so expensive that you can’t add it to your rental portfolio and you end up having to sell it. And I’m not saying that makes it a bad financial decision because if you keep it long enough, it’ll appreciate. But being able to buy something that can double as an investment property is A, a safe investment, and B, allows you to kind of kill two birds with one stone. You have a safe, comfortable, primary residence, but now you have something that you’ve added to your portfolio. And we all know the key to real estate is the longer you own it, the more financially beneficial it becomes.
So you might as well buy that rental property now.

Dave:
I guess the advice here is if you want to buy your primary residence for lifestyle decisions or for financial decisions, underwrite it like a rental property. Go use the BiggerPockets calculator, treat it like you are going and buying a single family rental and just see where it comes out. If it’s going to be really net negative, that’s probably not the best financial decision. You might be better off doing an owner-occupied strategy or doing the rent and buy strategy. But if it comes close or you’re like, “I’m going to live here two years, rents are probably going to go up and we’ll be cashflowing when I move out, ” that’s a totally good decision.

Henry:
Now, I want to ask you another question about this because I can already see the comments coming on this video is if we’re saying buy versus rent in this scenario, even when it’s close to the same, what about the maintenance issues that you have to pay for as an owner that you wouldn’t have to pay for as a renter? How do you factor that into your decision if you’re in a place where renting and buying technically costs about the same each month?

Dave:
Well, I’ll give you the real answer and I’ll also give you my hot take that’s going to piss a lot of people off right now. My hot take is when I was living in Amsterdam and renting, it was so nice. I loved being a renter. I had great landlords. Every time something broke, I just called someone else and then just went about my day. I didn’t have to go call nine contractors to go fix something, sit at home all day, maybe they’d show up or maybe they wouldn’t. So I actually, I think there’s part of that. But I do think it’s just a matter of underwriting, right? You have to treat it similar to a rental property where you’re assuming there’s maintenance because every home I’ve ever bought and lived in, the maintenance has been higher than I expected. And I actually think you should maybe even budget a little bit more than you would for a rental property because your personal standards are going to be higher.
If you are living with a spouse or you have kids, even if you wouldn’t make that upgrade, that repair for a rental grade apartment, it’s your home.You’re going to want to do it. And so you just really make sure that you’re budgeting for that.

Henry:
Boom. That’s exactly my thought. I think that’s a valid concern. If it costs the same to rent or to buy in a market, just consider the additional maintenance in that decision. That way you can buy understanding that, yes, it’s going to cost me $2,000 a month to pay a mortgage here. It would also cost me $2,000 a month to rent a property here. Let’s call it $2,300 a month because I’m going to factor in the additional maintenance burden that I will take on as the owner of this property versus just calling somebody as a renter. And in that scenario, I think a few hundred dollars you should still own.

Dave:
All right. Well, we have one more scenario which is owner occupy that’s either house hacking or a live-in flip, which I think is a much better option for people than they even realize. We’re going to get into both of those right after this quick break. We’ll be right back. Welcome back to the BiggerPockets Podcast. Henry and I are here talking about the best ways to think about where you live, your personal residence, to maximize growing your portfolio. We’ve talked about when and how you should consider renting. Next, we talked about buying a primary residential living in it, but then there’s sort of a combination strategy, which is owner-occupied. You’ve probably heard us on the show talk about house hacking plenty of times. This is when you either buy a small multifamily, you live in one unit, rent out the others, or you could do the co-living approach where you buy a single family home, live in a single bedroom, and then rent out the other bedrooms.
But in addition to house hacking, you can also do something called a live-in flip. Henry, what’s your feeling generally about owner-occupied strategies?

Henry:
I love them so much. I love them so much. Nothing more to say. Just love them. Same. So what we’re talking about is monetizing your primary residence, right? What ways can you offset the mortgage payment? And that helps you have more money to save for investing or whatever else you want to do with your additional income. But I love that strategy. And technically, I do it today because we talked about I bought a single family with an ADU. We rented the ADU and then the money we were saving from a mortgage payment from before, we just put into a savings account until we had enough for a down payment, and then we ended up buying the home that we’re in now. The other thing that we don’t typically talk about with this strategy is, yes, I lived in a two family, I rented one of the units that offset my mortgage, but then I moved out.
And when I moved out, I now was able to rent the unit I was living in. And so now that created a situation where I have cashflow from that property because rents have gone up over time as well. And so we were making enough to almost cover the full mortgage by renting out the ADU, but now we rent out the main house and that creates a lot of cashflow. And I take that additional cash flow and it pays for about half of the mortgage at my dream house now. So technically my house isn’t an investment property because I’m not monetizing the house that I’m living in, but I am taking the cashflow from my house hack to cover half of my mortgage. So technically it’s an owner-occupied investment strategy, just kind of continuation of that.

Dave:
I think house hacking for most people, I’m going to give a caveat, unless you’re living in a very expensive market like we were talking about, is the best way to go about it. Just on paper, lifestyle decisions aside, it just makes so much sense. You get the benefits of rental properties, you get the amortization, you get the tax benefits, you get the benefits of primary residence, you get owner-occupied financing. There’s just so much good stuff to like about this. And I’m going to be honest, we’ve talked about this on the show before. People say that it’s some big sacrifice from a lifestyle perspective. I just don’t buy it. It’s not. Maybe the co-living thing is, that’s not for everyone.

Henry:
That’s fair. For sure. That’s very true.

Dave:
But if you could go out and buy a side-by-side duplex, right? You got your own yard, you got your own driveway. Frankly, if you want to grow your portfolio, that’s a very small sacrifice, in my opinion, for the benefits that you get from house hacking. So I just think for most people, where there’s good properties to do it, because that’s another caveat. There are some parts of the country where you just can’t find good small multifamilies, but if you’re in a place where you can find good small multifamilies and you’re willing to do this, you should probably just go do it. Anywhere in the Midwest, this is just a no-brainer.

Henry:
Yeah. That’s a slight uncomfortability for the option to build amazing wealth. I’m fine with that. And also, you’re the landlord, so you have some say in who lives next to you.
It’s not like you have absolutely no control over that situation. So small sacrifice to me. And if you live in a place similar to the scenario we talked about where it’s the same price to rent and buy, buying with owner-occupied strategy in mind just kind of doubles the benefit of you buying that property. Because if you say, “Okay, well, I can rent and buy. Well, let me go look at what it costs to buy a duplex, a one to four family.” And then house hack, you’re just multiplying the impact of that buy decision. Or like we talked about, buying something that will make sense as a rental property later or buying something that will make sense as a multifamily later, because in a lot of places in the country, you can build ADUs. And so maybe you buy a single family home on a piece of land that you know has enough space and has the potential for approvals for an ADU, and you can add an ADU to that property down the road and increase your potential.

Dave:
Last thing I want to add on house hacking is that you do not need to cash flow on house hacking. That is great if you can pull it off. It is hard to do realistically in this market, but think about it, how much money you’re saving for that next purchase. I know I gave that example of buying my own primary for the first time in 2016. I had been house hacking. I wasn’t cash flowing even back then in 2016 in Denver. I think I was basically living for free. It would’ve cost me 1,400 bucks a month to live in that apartment. I did that for two years. That’s my down payment on the next house. I wasn’t cash flowing, but I saved so much money that I could go buy the next house, still own that place as a rental property. I got great financing on it that I still have 10 years later and I still have the property 10 years later.
So just think about it as a stepping stone. I think when you meet people at meetups, Henry, I think the people who’ve grown the fastest, in my opinion, for average people who aren’t starting with a ton of capital are people who house hack four to five times in a row.That is the most, I think, proven way to get a good portfolio when you’re just starting middle class regular person.

Henry:
100%. They either house hacked a few times in a row or they leveraged their first primary residence as a rental property after they moved out because that allowed them to have so much equity built up that they could take out a line of credit on that equity and use that to fund their investment career. It gave them a boost and a headstart. Absolutely.

Dave:
So there’s one more we got to talk about, another owner-occupied strategy, which is the live-in flip, which I am in the … I don’t know if I can say I’m in the middle of doing this. I bought a house with the intention of

Henry:
Living- Intent. You have

Dave:
Intent. I intended to do it. I moved in in June of 2025. It is now January of 2026.

Henry:
Give us a percent. Percent done.

Dave:
Zero. Haven’t swung a hammer. Nothing has happened in here. But honestly, part of that was intentional. My wife and I don’t really know how long we’re going to live here. So we were like, “We’re going to live here for three or four months, figure out what we want to actually do to the property.” We now have a plan and I actually, we have contractors line up to start in March, so keep you posted. But I will just sort of explain the concept here. It’s a strategy that mixes the idea of house hacking and house flipping basically at the same time. The idea is you buy a property, you actually move into it and live in it, but fix it up while you’re living there. And you can add value in the same way that you do in a flip, but there are some benefits overflipping, at least in my opinion, that are really, really important for people to know.
First and foremost, you get owner-occupants financing. As Henry can probably tell you, I’ve only been a part of really two or three flips in my life, but man, that financing is expensive. You’re paying a lot of points, you’re paying 12% on a hard money loan. I am living in a potential flip right now and I have a 5.25% mortgage rate. So I’m pretty happy with that. That’s why I can take the time to figure out what I’m going to do. Number two is it reduces your time pressure. To get the max benefit of a live-in flip, you should live in it for a minimum of two years because in the US tax code, you live in your primary residence for two or more years, all the capital gains that you get, those are tax-free. So if I do a renovation on this house, I sell it, I move out.
Unlike a flip where Henry pays normal income tax on that-

Henry:
Short-term capital

Dave:
Gains. Short-term capital gains, I’m paying nothing on that up to $500,000, which if it’s over more than 500 grand, I’m pretty happy to pay that tax because I just made a lot of equity. So I think that takes sort of the time pressure off of it and it allows you to take advantage of the financing. So personally, I can’t speak from experience. I’m doing it for the first time right now, but on paper, I just love the idea of a live and flip. I will say that I’m going to do the baby move and I think we’re going to move out of our … We’re doing a first phase where we’re not moving out, but when we do the big part where a lot of the systems, the windows, those things are getting replaced, I probably will get near BB for a couple of weeks.
So there are ways to mitigate that. You don’t have to live in a construction zone 100% of the time. I think

Henry:
This is Great strategy if you’re in a position where it makes sense to do this. Is it a strategy you can scale big? No, absolutely not. But it is definitely a strategy where you can make a lot of money in a reasonably short period of time. I mean, you’re talking about being able to walk away with 100 to 200, sometimes $300,000 tax-free in your pocket. There are investors who literally do this as their primary resident strategy. They do a live-in flip. They do it about three times and by the third live-in flip, they’re in this amazing dream home and they were able to just carry over these profits into their dream home so that they’re owning their dream home almost free and clear because they’ve just moved the profits forward into bigger and bigger owner-occupied live-in flips. I think it’s a fantastically undervalued strategy.

Dave:
100%. If you know Mindy Jensen from the BiggerPockets Money Show, she does it. This is basically all she does is just do live and flip, live in flip, live and flip. And Mindy’s doing pretty well. So I think it’s worked very well for her. And I will just say, I think this is a really good option for people in expensive markets. In Seattle, I was doing an analysis. I didn’t want to rent just for lifestyle decisions, but this was the second best option for me for financially on paper, how to leverage my primary residence into a good investment. I think this is true in other expensive markets in California, in the Northeast.This is something that could just have huge financial benefits in almost any market. So I think this is something you should definitely consider doing. All right. I think we went through all of our scenarios, Henry.
Any last parting words of wisdom here?

Henry:
Yes. I think the caveat we’re trying to lay out here is no matter what you’re thinking about buying or renting, be thinking about it from an investor’s perspective and pick the choice that allows you to reach your investment goals sooner than later. And if we’re smart about whether we rent or buy in order to take any additional income that we make to grow our investment business, I think it’s going to put you in a better financially sound position sooner than later.

Dave:
Just don’t listen to dogma. Anyone says it’s always better to rent or buy. It’s always better to buy or rent. Just do the math. You can do it like there are calculators in BiggerPockets. I told you about the spreadsheet I made. You can download it for free. Go check that out, do the math for yourself, and you can make a really good decision. Henry and I, I think have both shown that you can get huge benefits. It can be a launchpad to your investing career if you think about this in the right way, and pretty much anyone can do it. So go check it out.

Henry:
Amen.

Dave:
All right. Well, Henry, always fun hanging out. Are you scared of the comments?

Henry:
I mean, I think they’re going to be some spicy ones for sure, but that’s a good thing.

Dave:
Bring it on. We want to hear what you think about this episode. Thank you all so much for listening. We’ll see you next time.