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Market Volatility Got You Spooked? Here’s What to Do (And NOT Do!)

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The market’s doing its rollercoaster thing again—and if your stomach’s doing flips, you’re not alone. But before you hit the panic button or cash out your 401(k), let’s take a collective deep breath. Because when things get bumpy, the worst time to make big money moves is right now.

Scott and I said it on the podcast, and I’ll say it again here: now is NOT the time to create a brand-new investment strategy. Emotions and market swings don’t mix well when it comes to your financial plan.

That said, this is the perfect time to observe how you’re feeling. Are you nervous? Excited? Ready to never look at your portfolio again? That emotional intel is gold—it’ll help you build a smarter, more personalized investment plan later when things settle down.

In the meantime, some of the brightest minds in personal finance are weighing in on what’s happening:

Stay informed, stay calm, and remember that volatility is part of the journey.

This, too, shall pass.

Do you agree or disagree with these folks? Shout out in the comments below!

The Money Podcast

Kickstart your personal finance journey with Scott and Mindy as they break down the good, bad, and ugly of people’s personal money stories. From interviews with entrepreneurs and business owners to breakdowns of listener finances, you’ll get actionable advice on how to get out of debt and grow your money.



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The World Has Changed, But THIS Is Still the Best Way to Invest in Real Estate

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Real estate investing in 2025 has huge, underrated potential to make you wealthy—but hardly anyone is talking about it. As tariffs, mortgage rates, and stock market volatility take over the news cycle, average Americans are turning away from time-tested investments like real estate and worrying about unstable markets instead. This could be a huge mistake because, as I’m about to show you, the ability to get rich with real estate has not disappeared—if anything, the opportunity has grown.

For months, I’ve been talking about how we’re entering the “upside” era of real estate investing—a time when patient, prudent investors can make a killing by pinpointing often-overlooked opportunities. Today, I’m sharing the exact “upsides” to look for in 2025 and how I’m buying real estate deals RIGHT NOW that will make me wealthier in the not-so-far future.

Even better? I’m proving how real estate BEATS your other investments—especially during turbulent times. Stocks, bonds, cryptocurrency, and even private businesses can’t hold a candle to real estate. Now is the time to get in, and if you don’t, you can be sure other investors will pick up what you missed, building their financial freedom where you could have built yours!

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Help Us Out!

Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here. Thanks! We really appreciate it!

In This Episode We Cover:

  • The “upside” era explained and seven different ways to build wealth through real estate NOW
  • Real estate vs. stocks vs. cryptocurrency vs. businesses: which reigns supreme?
  • How to achieve financial freedom in just a decade if you start investing NOW
  • Real “upside” deal examples Dave is doing now to build wealth in today’s market
  • Huge economic tailwinds real estate has over the next few years (if not much longer)
  • And So Much More!

Links from the Show

Interested in learning more about today’s sponsors or becoming a BiggerPockets partner yourself? Email [email protected].



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Why is the Delinquency Rate For Commercial Real Estate Surging?

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Before President Trump’s tariff announcement sent markets into a tizzy, the big news in the real estate world was that the surging rate of delinquency on commercial mortgage-backed securities, most notably in the office sector.  Indeed, in December 2024, the delinquency rate on office CMBS hit 11%, exceeding even its peak during the height of the 2008 real estate meltdown!

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Wolf Street

The delinquency rate trended down early this year but is still at an extremely high level of 9.76%. Other sectors of commercial real estate have performed better. 

But aside from industrial (with a 0.6% delinquency rate in March 2025), each are still relatively high, with a March 2025 average of 6.65%, and have also been trending upward throughout 2024 and early 2025.

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This sounds bad. Indeed, I saw multiple posts on social media talking about this development as if we were on the precipice of another real estate-driven financial collapse—this time driven by commercial real estate.

Now, a recession very well may be imminent (or may even have already started). J.P. Morgan puts the odds of a global recession at 60% right now. But if this happens, it will be driven by a combination of an overvalued stock market, strapped consumers, geopolitical uncertainty, and a trade war, not real estate.

The reason is simple: Commercial real estate is a relatively small percentage of real estate overall. The office sector itself only amounts to about 16% of commercial real estate as of 2018, and commercial real estate is only 19% of all real estate. (Industrial, retail, hospitality, and multifamily make up the other types of commercial real estate, although it is sometimes broken down further with sectors like medical or special-purpose included.)  

All residential real estate (including multifamily, which is confusingly classified as commercial) accounts for 81% of all real estate.

Thus, the office sector accounts for substantially less than 10% of the real estate sector as a whole. And single-family housing is the biggest sector by far. (There are about 85.3 million SFR and 32.6 million multifamily units in the United States as of this year.)

Single-family homes were the epicenter of the 2008 mortgage meltdown, but the trends in delinquency for single-family homes haven’t budged at all in the last three years since coming down from a brief COVID-19 pandemic-induced spike. As of February 2025, serious single-family delinquencies are sitting at just 0.61% for Freddie Mac and 0.57% for Fannie Mae.

This graph makes it look as if the economy is in tip-top shape.

image3
Calculated Risk 

That said, this is a bit misleading. Serious delinquencies mean the loans are at least 90 days past due. The CMBS delinquency data is for 30-day delinquencies or more. In order to compare like with like, we have to look at 30-day delinquencies, which Fannie Mae and Freddie Mac did not report.

The Mortgage Bankers Association National Delinquency Survey (NDS) looks at a slightly different cohort than Fannie and Freddie. It includes loans on any property that is one to four units and includes non-Fannie and non-Freddie mortgages. Their most recent survey found a total delinquency rate of 3.98% for such mortgages in Q4 2024, of which 1.19% were at least 90 days past due.

Still, this is barely more than half of CMBS and a third of the office CMBS delinquency rate. And further, residential delinquency rates remained flat for years, whereas commercial is going up and office is surging.

So what’s going on?

Why Have Office and Residential Diverged?

The office sector has had a rough go of it, particularly in downtown areas. Back in 2022, I noted that downtown office real estate was in bad shape. Vacancy rates were at recession, if not depression, levels in many metropolitan areas.

“[D]owntown Los Angeles office space has hit 25% vacancy. In Manhattan, it’s over 17%, downtown Portland, Oregon, is at 26% vacancy, and in Washington D.C., it stands at 20%.”

But things were going to get much worse. The writing was already on the wall:

“The reason we can know for certain that this problem is going to get worse is the way commercial leases are structured. Unlike the typical lease on a home or apartment unit, commercial leases are usually 3-5 years long and sometimes more.

“Downtown commercial real estate was already declining before 2020, but the pandemic turbocharged that decline. Many of the firms that signed leases in 2017, 2018, and 2019 are stuck in those leases for a few more years. But all signs point toward a large number of them leaving after the end of their lease.”

Well, it’s been three years since then, and this has all come to pass, with vacancy rates breaking 20% in mid-2024.

image4 1
Statista

Unfortunately, commercial mortgages are structured similarly to commercial leases. The vast majority of such loans have terms that run between five and 10 years. This does not mean that the borrower needs to pay off the loan after five to 10 years. What it does mean is that the loan’s interest rate will reset to market at that time. 

And let’s remember what happened to interest rates in late 2022:

image7 1
Freddie Mac

At the same time, commercial property values plateaued in 2023. 

Finally, to make matters worse, inflation has been substantially higher in recent years than before, which increases operating costs on everything from utilities to insurance. 

Thus, numerous commercial property owners bought or refinanced before 2022, with debt service expectations way below what they would be if such properties were bought today. Now, those purchased or refinanced between 2015 and 2020 are starting to have their mortgages reset to market rates. This is killing their profitability and, in some cases, driving the owners into delinquency. 

For single-family houses, the story is completely different. In fact, this was the main reason I was so certain that no 2008-style financial crisis was looming (at least, not one that originated from real estate). As I noted:

“The other factor that made loans unpayable [in 2008, aside from loans made to uncreditworthy borrowers] were the interest rates that shot up after the teaser rate expired… those are mostly gone. But in addition, there are fewer adjustable-rate mortgages than there were in the years before the crash. As The Financial Samurai points out, only 4.7% of mortgages taken out in 2021 were adjustable-rate mortgages! The rest were fixed-rate.  

“For comparison, back in 2006, almost 35% were adjustable-rate mortgages.”

After 2008, adjustable loans on single-family homes went the way of the dodo bird.

image5 1
Financial Samurai

This has made it more difficult for homeowners to sell, as they are locked in with golden handcuffs and cannot afford to buy the same home now as they could before mid-2022, when rates were substantially lower. Sales volume has fallen since rates went up, but home prices didn’t go down. In fact, they have consistently—albeit slowly—gone up.

Thus, increased rates have added no pressure to homeowners’ ability to pay as long as they don’t move. And unemployment is still low, which takes away the largest cause of people falling behind on their mortgage payments.

But even if a homeowner does get into trouble, since prices have gone up and homeowners are paying off principal each month, they can generally still sell and pull out money above and beyond paying off the mortgage. So, even if they do fall behind, foreclosures are rare. 

What Will the Ramifications Be?

Commercial real estate is struggling, and the office sector is doing particularly poorly, but it’s important to keep things in perspective. The actual number of commercial foreclosures, while rising, is still relatively low. In May 2024, country-wide commercial foreclosures hit 647, up 219% year over year, but still almost 30% below where they were in 2014 and way below where it was during the Great Recession. 

image2
MPA Magazine

While commercial properties have seen only a little appreciation in recent years, everything bought before 2022 saw significant appreciation in those years. And no matter what, owners were paying down the principal on their loans the whole time. Thereby, even with significantly higher vacancy rates and a flat market, distressed commercial property owners can usually sell without getting foreclosed on.

The only acute concern regarding offices is in particular submarkets, most notably some of the distressed downtown areas noted. (Although some of those areas, such as New York City’s downtown, are showing positive signs of a comeback.) 

I see nothing in the data that shows commercial real estate could collapse and bring down the rest of the real estate market or the economy, as it did in 2008. So that’s good.

That being said, commercial real estate, in general, and office in particular, are quite fragile right now. If a trade war kicks off or the stock market does turn out to be highly overvalued and the air is just now coming out of the balloon, that push could send commercial real estate spiraling as a second-order effect.

Those factors would make me nervous to buy commercial right now, particularly office, but not so hugely concerned to sell what I have.

One Last Note of Advice

If you have a low-interest mortgage about to reset its interest rate to market, a good approach to consider is to request to re-amortize the loan. This would start the loan over from the beginning. 

So, for example, if you are five years into a $1 million loan amortized over 25 years at 4.5% interest, the payment would be $5,558.32. If it resets to 7% interest, the mortgage payment would go up to $6,752.07 and would likely make the property untenable. 

However, after five years, the mortgage has been paid down to $878,579.03. If you re-amortized the loan and started it over at its new principal amount, the payment would be only $5,932.23. It will still be almost $400 more than it had been but $800 less than it would be otherwise. That spread could be the difference between profitability and delinquency. 

This is especially true for loans that have been paid down even further. We have re-amortized several loans that were five to 10 years old. In one extreme case, the interest rate went from 4.25% to 8%—yet our payment actually went down!

Not all banks will do this, of course. In fact, it might only be local banks that will do so without simply refinancing the loan. And yes, we are not paying off anywhere near as much principal each month on the loans we’ve re-amortized, but cash flow is king in real estate. So it’s something to consider as more and more pre-2022, low-interest commercial loans reset in the years to come. 

After all, you can pay your mortgage with equity.



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Real estate typically requires a significant upfront investment, but what if you could buy new construction rental properties with little to no money down? By leveraging builder incentives, portfolio loans, and creative financing strategies, investors can maximize their purchasing power, secure multiple properties, and generate cash flow with minimal upfront costs. 

Companies like Rent To Retirement are helping investors make this goal possible with turnkey new construction investments using these exact methods.

Leveraging Builder Incentives to Reduce Costs

One of the most significant advantages of buying new construction investment properties is the incentives builders offer investors. These incentives—often ranging from 5% to 10% (or even 20% in some cases) of the cost of the build—allow buyers to buy down interest rates, receive cash back, or reduce closing costs.

For example:

  • A $300,000 home with a 10% builder incentive gives the investor $30,000 toward interest-rate buydowns, cash back, or closing costs.
  • Many investors reinvest the cash-back option into purchasing more properties, scaling their portfolio faster.
  • Since investors buying multiple properties generate more volume for builders, they often receive greater incentives than individual homebuyers.

Using Portfolio Loans for Low Down Payment Financing

Traditional investor loans often require a 20% down payment, which can quickly deplete available funds. However, local credit unions in most markets offer portfolio loan products with as little as 5% down. 

The issue is being able to take all the necessary steps to secure the best deals, including buying from builders in bulk for better pricing, connecting to credit unions with the best portfolio loans, and negotiating with lenders and insurance providers. Rent To Retirement is one of the specialists in providing all these benefits and more in their investment deals.  

Key benefits of portfolio loans:

  • 5% down payment options, allowing investors to spread their capital across multiple properties.
  • 30-year loan terms with 10-year and 15-year fixed-rate periods, ensuring long-term stability.

Comparing a Traditional Purchase vs. Leveraging 5% Down Portfolio Loans

We may have heard that you can only buy investment properties (or any property) with a 20% down payment. What if I told you that you can almost 4x your investment by working with the right company to get you a 5% down investment loan, or even better? 

Let’s say you have $100,000 to invest.

Option 1: Traditional investor loan (20% down)

  • You purchase one $500,000 property.
  • Your down payment is $100,000.
  • Your monthly payment (6.5% interest, 30-year loan, $3,000 annual taxes, $1,500 insurance): $2,903.
  • If the property rents for $3,200, your pre-expense cash flow is $297.

Option 2: Portfolio loan with 5% down & builder incentives

  • You purchase four $500,000 properties instead of one.
  • Each property requires only $25,000 down.
  • Builder incentives (5%-10% cash back) could offset the down payment, allowing zero out-of-pocket costs or even getting paid at closing.
  • If you negotiate a 5% interest rate buydown, your monthly payment per property (30-year loan, $3,000 annual taxes, $1,500 insurance) is $2,924.50.
  • If each home rents for $3,200, your pre-expense cash flow is $275.50 per property.
  • Total cash flow across four properties: $1,102 monthly—plus four appreciating assets instead of just one.

Why This Strategy Works

Investing in new construction homes offers significant advantages, particularly maintenance and long-term financial stability. Unlike older properties that require costly repairs and frequent upkeep, new builds come with modern construction standards and warranties, reducing unexpected expenses. This translates to lower capital expenditures (capex) and fewer headaches for investors, ensuring more predictable cash flow.

Additionally, owning multiple properties instead of just one helps mitigate risk. A diversified portfolio protects investors from localized market fluctuations and tenant turnover, stabilizing income streams. More properties also mean more significant appreciation potential as real estate values rise. With builders currently eager to offload surplus inventory, investors have a rare opportunity to negotiate better pricing, incentives, and financing terms, further enhancing their return on investment.

Scaling Your Portfolio Faster

By combining low down payment loans, builder incentives, and strategic financing, investors can multiply their buying power, secure cash flow, and grow their rental portfolios without depleting their savings.

If you’re ready to leverage today’s unique market conditions and buy new construction rental properties with little to no money down, now is the time to work with a company like Rent To Retirement. Builders’ incentives won’t last forever, and investors who move quickly will benefit the most.



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Inflation Fears Soar to 1980s Levels

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Consumer confidence collapses, China flashes its “nuclear option,” Zillow goes after secret listings, and uh oh, renovations could get even pricier—what does it all mean for your investments?

Americans are dealing with severe trade war whiplash, and it’s starting to show. Consumer sentiment has fallen off a cliff in the most recent reading, with many Americans fearful that inflation will spike back up, the economy will slow way down, and we’ll be stuck in economic quicksand. How close is this to reality, and if average Americans are panicking, what should investors do to keep their sanity and portfolios stable?

It’s been quite a week, so we’re bringing you the biggest headlines from the housing market and more! Zillow fights to unlock some of the “gated” listings agents and brokers have been using to curate their clientele selectively. Don’t know what secret listings we’re talking about? There’s a good chance they were hidden from you, too!

China holds the “nuclear option” that could end the trade war, but will they use it, knowing that it could quickly send a shockwave across the shore and straight into China’s own economy? Plus, are things really that bad? According to Americans…yes. Consumer sentiment is now hovering around ten-year lows. Flipper confidence could be next, as construction costs may rise due to tariffs. How do you protect your deals, no matter what’s coming down the pipeline?

Dave:
The so-called Liberation Day tariffs have officially kicked in sending shockwaves through the markets and raising big questions for real estate investors. Today we’re breaking down what all the recent news means for the economy, the housing market, and for your portfolio. I am your host, Dave Meyer, and I am joined with our esteemed panel, Kathy Beckie, Henry Washington and James Dard. We’re going to be diving into the latest headlines, sharing our hot takes and helping you make sense of the madness. Now, James, Henry, Kathy, are any of you just completely exhausted by the word tariff at this point? I am tired of saying

Henry:
The word. You better get used to it. I don’t think you’re going to stop hearing
It for
Quite some time, my friend.

Dave:
Well, welcome to all of you. Thanks for being here and thank you all so much for listening. In this episode, we are going to talk about tariffs. We’re going to talk about a couple of other things as well. We’ll start by talking about mortgage rates because there’s some big swings to mortgage rates that honestly, I didn’t really think were going to be an immediate result of tariffs, but that is happening and we should talk about it. We’ll also talk a bit about how tariffs could impact construction costs, why consumer confidence in the US is tanking and we’ll talk about how Zillow is pushing to make real estate listings more exclusive. Alright, let’s jump into this. Kathy, you brought us our first story here. You’re going to take on the hard one here, so let us know what’s on your mind.

Kathy:
Alright, well I brought a kind of a scary headline. I suppose you could say. This is from Yahoo Finance and the headline is the Nuclear Option China could take in Trade War with the US. Spoiler alert, we’re not talking about nukes, we’re talking about bonds and the fact that China has so many US treasuries, they say a trillion dollars worth. Some say they don’t really know because some of it may be hidden in European bank accounts or something, but the bottom line is we know that China is a huge holder of US treasuries, so is Japan, and we saw last week on Wednesday that Trump gave 90 days pause on the tariffs and guess why? It’s because the bond market carries so much weight, so much so that it was able to send a very clear message to President Trump that listen, we have power over this situation and if we dump our bonds and our treasuries, and this is all kinds of countries who may be very upset with the US right now if they sell off their bonds all at once.
Well, it’s kind of like selling real estate in one market all at once. If you flood the market with an asset, there’s too much supply, prices go down, yields go up, and that’s basically what happened last week. There was a bond sell off and there’s lots of questions as to why. Is it because there’s been confidence lost in the US financial markets and so they just want out even at a loss or was it a clear message? We don’t like what’s happening over here and we have a little more power than you think. So that’s kind of where it is. Whatever it is, Trump heard it loud and clear and put a pause. Now, I’m not sure the White House is quite admitted to that yet, but it is interesting that it all kind of happened about the same time

Dave:
And they did. They sort of indicated that the bond market was what they were worried about, not really the stock market.

Kathy:
So that’s where things stand right now is the bond market spoke out. Now, how this affects real estate investors, again, we’ve talked about it so many times here on the market, when the market is flooded with bonds for sale basically then the yields go up and when yields go up, that also translate to mortgage rates going up. So we saw mortgage rates go up again just after they had come down and there was this little reprieve and there was a bunch of mortgage applications because finally rates were coming down and they shot up again. So who knows where they’re headed? I think the bottom line is the US has to build confidence again with the world if we want them to continue to buy our bonds.

Henry:
I mean, I think right now it’s very easy to see why there’s a lack of confidence in investing your money in the US market. It’s so uncertain. It’s uncertain and there’s no predictability. No one truly has any idea what’s going to happen next. And when there’s that level of volatility, then people are going to protect their money and so they’re not going to invest.

Dave:
I just want to make sure everyone understands exactly what this means that mortgage rates have gone up because international actors largely and some domestic actors have for one reason or another decided to sell a lot of their bonds when bonds flood the market, like Kathy said, that basically pushes down prices for bonds like it does in any asset class that pushes up borrowing costs. And so there are some theories that perhaps people are losing confidence in the US and they want to move their money to other places. There are some theories that the international community wants to sort of punish the US for these tariffs by increasing our borrowing costs and this higher borrowing costs could cascade throughout the economy. But obviously as real estate investors, this hits us pretty hard because it almost immediately impacts mortgage rates when borrowing costs in the 10 year US treasury go up, mortgage rates go up, and we’ve seen this sort of just huge pendulum swings. We were at 7.1 in January, we’re down to 6.6 now we’re back up to 7%. And I think the thing that’s sort of been an eyeopener here, at least for me, I don’t know about you guys, is like, yeah, the bond market moves in a lot of mysterious ways, but a lot of what’s happening with mortgage rates can’t be controlled by the Fed. Even if the Fed lowered rates right now, that might not change what’s going on here.
And
So it does create this feeling of hopelessness. I don’t know. We’re completely powerless over how some of these things are changing because we have this super diverse globalized financial system which has benefits and trade backs, but this is one of the trade-offs that we’re starting to see right now.

Kathy:
And I look at this oddly enough as part of what makes our country healthy and great is that we are allowed to try things and then learn from it and correct. So oftentimes that’s why you see, you’ll see one party win and then they lose two years later because
They
Get to try different things that they’ve been talking about, they’ve been thinking about, and then they get their answer pretty quickly. So it’s to me a little bit of the checks and balances that Trump got a pretty big answer to some of the questions that he’s had for many, many decades and many of his followers have had as well. So what we’re learning is it’s a different world. There’s a lot of factors at play and when you test things out, you’re going to get results a lot faster and then hopefully right the ship,

James:
The one question is though, where do they put their money? What economy is thriving right now? Most of ’em are not doing well, right? Chinese economy, it’s kind of overinflated, it’s padded up Europe’s economies, none of ’em are doing well, so where do you put the money?

Dave:
But people believe in their bonds at least, so they’ll put their money in Japanese bonds as a commonplace or the British bonds or Euro bonds because at least people feel like, I think there’s just growing confidence that they’ll at least pay their debt, whereas I don’t see any sign that the US isn’t going to pay their debt, but it’s a little less certain today than it was three weeks ago

James:
Because if China sold off, all their bonds are a huge chunk of ’em, they lose so much income that they won’t be able to replace in different bond markets. That’s detrimental for them too. I guess the real scary thing is they don’t really care as much as we do. Our consumers have this, anything happens and they freak out, whereas they just kind of keep moving.

Kathy:
Well, James, that’s what the article does talk about this article that basically says the nuclear option China could take, but why would they?
It was almost the same. Like I was saying, when the banks had to foreclose on so many homes back in 2008, they quickly learned that putting those homes back on the market all at the same time was you just can’t flood the market with a product and hope that the values are going to go up. It just doesn’t work that way. They go down. So it would hurt China too, so it’s not a solution. However, if it really turns into a full-blown war, just like any war, you do take some hits, you’re willing to take some hits to win. So just hopefully we don’t get to that point in every and the clearer heads will prevail.

Dave:
I’m just annoyed. It’s like there’s all this stuff, but we’re here trying to predict mortgage rates and we’re already trying to factor in what the fed’s going to do. We’re already going to try and figure out what inflation’s going to do. Then we have to think about GDP. Now we have to think about Chinese foreign policy. It’s like, come on, this is becoming ridiculous for trying to forecast what is supposed to be a very stable asset class of real estate,

Kathy:
But it is Dave, but it is because

Dave:
It still is

Kathy:
Here. We’ve been watching, and I hate to be so mean on my Instagram post, but I kind of like it at the same time as like, Hey, you know what? I’m sitting here as a buy and hold real estate investor and rents haven’t changed. My portfolio hasn’t changed, nothing has changed in the feki world as a result of all of this. Because I mean obviously we’re looking at deals, we’re looking at a storage unit build that the seller is trying to sell the land for 1.2 million. We offered 800,000 for the land because we had to add in the difference of tariffs. So it’s like, okay, we can work around this, but you’re going to have to sell your land for much less to make this work for us. So on construction, on flipping anything where you’re having to use construction materials that have tariffs on them and are more expensive, you’re going to be affected. But if you already own the properties and you’re sitting there buy and hold collecting rent, it’s been stable.

Dave:
Yeah, it’s totally true. I think rents will stay stable whether or not we see further downward pressure on prices, we’ll see. I don’t know what you guys think, but quickly, I think maybe a little bit more softness, higher rates and declining stock portfolios does have some impact, but not to affect where it’s going to crash and we’re going to see huge swings like we did in the stock market. That seems highly unlikely.

Henry:
The only thing I would think is that again, with such uncertainty out there in the financial markets and now this volatility of interest rates, it may slow down some people
From
Making the decision to go out and buy property, which could affect pricing in the long term if enough people decide not to buy during such a volatile time. But other than that, it’s pretty stable.

Dave:
All right, well let’s move on. I’ll actually go next because Henry talked a little bit about people maybe pulling back, and my story is related to that. We got two data sets that show that people, they’re not liking the economy right now. They’re not feeling good about it. The first thing that came out was consumer sentiment, which is a measure of just generally how people are feeling about the economy. And it is at the lowest point it has been since I think the end of 2022 when inflation was at 9% and it’s at the second lowest point in the last 10 years. So people are not feeling that. And then another measure of people’s expectations of inflation came out, and that is now at the highest level has been since 1982. It is higher than it was even when inflation was super high and they could be wrong about that. People might be a little more fearful than is realistic for inflation there, but there are studies that show that expectations of inflation actually do beget real inflation. And so I guess my question to you guys, one, what’s your sentiment? Let me just start there. James, what is your economic sentiment right now?

James:
I’m weird. I like chaos. I’m excited because I do think one thing I’ve kind of learned about consumers, especially the last four or five years ago, a little easy when they’re printing so much money and everyone was just kind rolling and then anything changes, people just lock up. So I don’t mind when I feel like we might be going into a deep end for a minute because there’s so many more opportunities, but do I think we have issues coming up? Yes, I do. I think that this summer is going to be not a great time to be selling properties because it slows down anyways. Rates could be higher tariff impact, there’s going to be issues in the short term.
But the thing about this, there’s always waves. They come and go and it’s all about being proactive and going, okay, what did I need to do to make those changes? If you’re nervous now and you have projects going on, audit your projects, what do you need to do differently? How can you change it up? How can you speed things through? But I do believe Trump and the art of the deal is we’re going to come out a lot better on the other side. I truly do believe that we’re going to get better trade agreements and he is coming in aggressive right now and it does not feel good for anybody, but people are already renegotiate. They’re starting to bring things back. I think it’s just going to be like a six month window of a little bit of pain and then it’ll be fine on the other side, but that’s the time to buy everyone. The pain painful times where you really don’t think you should be buying is when I have done exceptionally well and it’s uncomfortable, but just look at your processes and if you can make your processes work, it’s okay to buy in any market.

Kathy:
I agree. Anytime there’s uncertainty, there’s opportunity. I’ll just again say buy and hold. The fundamentals of that have not changed. There are still a record number of people who need to rent, who want a place to live, and that’s not going to change with tariffs. So there is a lack of affordable housing, and that’s the arena I play in is providing affordable housing to those who need it. And again, that’s not going to change

Dave:
Henry economic sentiment.

Henry:
I agree with James on the perspective that I think this is the time you want to be buying, but be smart about it. So the way I’m being careful is I’m buying properties that I know the majority of the current buyers want, so I’m staying away from things that are massive outliers. So super luxury, high-end flips maybe a different market that might be exactly what you should be buying, but in my market, that’s not what the majority of the buyers want. I can buy something on the lower end of the scale and then I want to buy them at a significant enough discount that I can weather a storm. I’m more cautious, but I’m still doing deals. I’m still accumulating properties, but I’m doing it with enough room in the deal for me to be able to pivot my strategy or for me to be able to exit that property at least two ways. I feel like if I can do that, I’ll be pretty safe.

Dave:
I’ll just say it. My economic sentiment is negative. I just think we’re going into a recession and if we’re not already in one, you just talk to businesses, you hear what people are doing, people are stopping purchasing, they’re halting hiring people, and that’s not showing up in economic data yet, but I think it’s going to over the next couple of months. As everyone said, a recession does not necessarily mean housing prices are going to go down, but I just think the economic sentiment that people are feeling is probably real. We’re probably going to see prices start to go up and there is definitely going to be some short term at a minimum pain in the economy. So I think we’re in for a rough 2025 if I had to guess. That’s not necessarily saying that about the housing market. I’m just talking about the economy in general. We’ll just have to see how this actually winds up turning out for individual investors for the labor market and all that. We’ll obviously keep you posted. We are going to take a quick break, but when we come back we have two more stories first about tariffs and how they might impact construction costs. Then we’ll also talk about how Zillow is trying to make listings more exclusive.
Hey everyone, welcome back to On the Market. We’re here with our headlines show. We’ve talked so far about China potentially mulling a nuclear economic option with the bond market, how Americans are souring on the US economy. Let’s James go to your story, which is about tariffs and the cost of construction. What have you learned?

James:
I’m learning a lot as every day goes by on costs and I think that’s really, really important. I think one of the biggest lies in real estate is the money’s made on the buy. It’s on the process right now. We have a floating target with tariffs. We don’t know what costs are going to do and it’s something that I’ve been digging into for the last seven to 10 days hard. So the article I brought in was tariff impacts on the cost of construction, and this was referenced off of a detailed Wells Fargo report kind of breaking down different types of constructions, cost increases and where those increases are going to be. And because I’m hearing some crazy things, people are talking about cost going up 40%
And that may be true, but that might be on a bolt that you’re putting inside your house. It’s not across the board on everything. And so I’ve been digging into this quite a bit, but the reason this article is valuable and has good information is it really breaks down what they think the average cost of construction or average cost is going to be even site. So for every new house getting built with the tariffs that are out there right now, they’re anticipating that the cost of construction will go up 75 to 8,000 to $12,000 per house for a new build, for a new build. And they were predicting that renovation costs would only go up eight to 12% in that time, which I actually a hundred percent disagree with. You think it’ll be higher? I think it’s going to be higher. Yeah. I think construction costs across the board for the last 12 months as far what we’ve seen is renovation costs have stuck more and new construction pricing has came down based on labor supply and other things, but it goes into the different areas of where the costs are going to be.
And this is what’s important. It talks a lot about appliances, HVAC equipment, metal, steel, because it tells you what to be buying, right? Because if my costs are going up, that’s going to be what it’s going to be, but I can buy different things or implement different strategies. It’s not to just assume a 40% increase, it’s also switch your plan up. We’re going through all of our projects right now. We have a lot going on. I think I have six or 7 million in construction going just on flips, not counting apartments and new builds properties that are getting all new HVAC systems with ducting. We are switching that up right now and we are going to mini split ductless systems because we can avoid that huge cost increase right there. Now, mini splits are also going up, but not the same as ducting. And one thing that the articles don’t talk about is the cost savings that’s happening too. I was talking to my cabinet company that we order over a hundred sets of cabinets a year from, he thinks their pricing and all their stuff comes from China is going to go up five to 6% after the tariffs hit because said his freighting cost is dropping dramatically right now,

Dave:
Even if tariffs stayed

James:
125%, his shipping costs he said has been cut in half.

Dave:
Wow.

James:
He said, people are pulling back and this is the information as investors, you want to know because that’s the quote you always get. You get a quote from somebody, you’re like, why is this so high? The tariffs or they’re going to say inflation, and you have to arm yourself with the right facts so then you can renegotiate that pricing down and you have to audit everything that you have in the pipeline. Now, anything we buy going forward, we can just adjust our pricing down and increase our budgets up. And so it’s just a really important time to audit what you’re doing right now and don’t get caught with your pants down in the middle. And so it’s all about being proactive right Now.

Henry:
I’m going to challenge you a little bit though, James, because most people probably listening to this show aren’t in a position where they’re having to buy in bulk and having to do the level of research that you are needing to do in order to make sure that you’re not going over budget. How does the normal person looking to flip a house or two a year, what should they be doing to understand how to underwrite a deal given the tariffs?

James:
Picking the simpler path? You can do a cosmetic renovation that it requires a lot less highest and best use. Might not be ripping out all the cabinets. It might be painting the cabinets. It might be buying your appliances from recycled places rather than brand new by American. That’s what I was doing right before this call. I was on the phone with my appliance supplier and going, Hey, what’s the brands that are the least effective by tariffs? And he’s sending me a list.

Kathy:
Amazing.

James:
And chop the clearance too because the clearance sales do work and you have to get a little bit of nitty gritty. And we had to do this in 2008 because the margins were not big, so we were grinding on everything and we were not buying a lot of volume back then.
We were doing two to three at a time for the investor doing one or two. It’s actually simpler when you’re doing volume, it’s much harder because you think you get this optimal pricing, but a lot of times you don’t. More you buy the more people charge you. And so go in, what do you need to do? What can you salvage is a big thing. What can you replace instead of changing the whole floor plan around can you leave your current system with the current ducts, then you have to replace the furnace only. It’s about the plan that you’re trying to put in, whether you’re big or small, it all comes down to that plan. And so shop the clearance. And then we’re also buying up materials. Today I order 10 sets of kitchens that I’m not ready for and I’m not going to be ready for eight to 10 weeks. But we bought ’em on today’s pricing. We bought flooring on today’s pricing for 10 houses, whatever houses that you have, buy your materials today. That way you’re locked in, buy out the materials,

Kathy:
Unless you’re putting it on a 30% interest rate credit card, then maybe you just should wait.

James:
That’s true. Very valid. Very

Dave:
Valid. Yeah, right. That’s true. Yeah, I think that’s great advice, James, about adjusting the scope of work and what you’re trying to do. Yeah, things are going to get more expensive and it’s hard to know what is going to get more expensive and to what degree at this point, we just don’t know. But I’m just curious what advice you would give to Henry’s point. It does feel like we’re going into this time where material costs are going up, and I’m not saying the market’s going to go down, but I don’t think we’re going to see some huge appreciation in the housing market over the next couple of months. So does that increase risk? James, you have a very sophisticated business, but for an average flipper, does that increase risk? Right now

James:
It does unless you’ve already bought it out and committed. Because if you’re on a general contracting contract and they’ve hard bid that kitchen, it’s the contractor’s risk, not yours. That’s why we only do fixed bids, get fixed bids on things, not materials plus time. And the other thing is renegotiate. You know what else is cheaper right now? Gas, they’ve been charging me more on labor for transporting. Look at the whole picture because it allows you to renegotiate. If there’s more expensive materials, there’s less construction going on. So therefore labor will come down and you have to negotiate it.

Henry:
And this is the time where investors who are doing those smaller projects are just one or two projects a year. If the contractor has hard bid that already, this is the time when you need to be going in and ensuring that the products that they’re using are the same quality products that they bid and they’re not going out and sourcing cheap stuff and you’re paying premium prices for it. So you got to pay attention to what they’re putting in

James:
And don’t do specifics on specs. That is a killer in this market. It’s close enough. Hey, I want this appliance set and I want it to be in this range right here. What do you got the best deal on? I want this floor and it needs to be a half inch and it needs to be this color scheme, but what can you get the best deal in close enough specs? We’ll cut your price way, way down.

Dave:
Alright, well that’s very good advice for people. We do have to take one more quick break, but when we come back, we’ll talk about Zillow’s move to make real estate listings more exclusive. Stay with us. Welcome back to On the Market. I’m here with Henry, James and Kathy talking about today’s biggest headlines. We’ve covered the tariffs, we’ve consumer sentiment. Now, Henry, tell us what Zillow’s up to.

Henry:
So my article is titled Zillow’s Fighting Back Against a Push to Make Real Estate Listings more Exclusive. And so what they’re essentially doing is in April they introduced a policy that mandated that any home publicly marketed, be it through yard sign, social media or brokerage website, must be listed on the MLS and made publicly accessible within one day. So this move is targeted to counteract practices that a lot of agents practice and brokerages practice, which we like to call pocket listings. And so what they’re saying is we want to make sure that every home is marketed to as many people as possible, and I think that’s how they’re marketing this strategy, but to me this is just a play so that they can get commissions on every listing that goes out there. Oh really? You

Dave:
Don’t think they’re just doing this to bring access to the people?

Henry:
This is for the people. The people need our help. And I think investors need to be careful, and I think pocket listings are a common practice and they have a name, but there’s a reason that pocket listings are pocket listings.
If agents thought that a property had the best chance to sell for the most money by listing it, they would. So a lot of the times these properties don’t get listed for all kinds of reasons. Some of those reasons are that the seller really doesn’t want it listed on the MLS right now. And so realtors have the option to still try to help that seller unload that property by marketing it to specific people who they think might be interested in this kind of property versus putting it out there for the whole world to see. And a lot of the times, if you have a property, as an example, I had a property that only an investor was going to buy and we decided to put it on the MLS just to see is there a buyer out there that would buy this property that needs a ton of work even at a discount?
And the kind of feedback that we got from people, they clearly didn’t understand that it wasn’t for them. Like this house isn’t for you, it’s for a specific person. It would’ve been much better marketed as a pocket listing than putting it on the MLS because your traditional buyer just, they’re not going to be able to do that kind of a project. They’re so put off by that kind of a home. They weren’t so mad at me for listing the property and then wasting their time because it wasn’t a property for them. And I think that buyers should have the option for their home tickets sold in the way that they want to sell it. It’s your property. I think that when these things get jumbled together and talked about in this way, it makes it sound like agents have been shady hiding these pocket listings only for the best of us what’s happening,
But that’s how they’re trying to play it so that people are forced to put everything on the MLS where they can go get a commission on it. The word that’s being used here, I think is a correct word. There should be transparency, but the transparency doesn’t have to mean that we have to put the property on the MLS. The transparency falls on the agent or the broker to communicate to their seller the trade-offs of the decision they’re making. If we list this, here is the potential outcomes. If we don’t list it and I market it as a pocket listing, here are the potential wins and trade-offs and things that can go right or that can wrong. The transparency does need to be there, but it should still be up to the seller to decide the route that they want to take.

James:
Totally agree. I think the whole regulation on pocket listings is the biggest joke. Its dumb. The second biggest lie in real estate,

Dave:
It’s so silly, right?

James:
Let’s just break why pocket listings do work. Because when you’re delivering an exclusive thing to somebody, they feel special and they will pay more.

Henry:
They’ll pay more.

James:
Because I buy more properties on market than off market. I don’t buy 99% of the wholesale deals that get sold into my market and they get sold higher than they would trade for on the market.

Dave:
Wait, I’m just realizing I’m that sucker. I buy a lot of pockets, but

James:
It really just depends on the deal source and what it comes down to is, as a seller, do you trust the person that you’re working with, that they are doing what they’re supposed to be doing to get you the best possible term on your deal?

Dave:
Man, all these potential changes to the way listings are done, it doesn’t feel like every three months some new story comes out about this and nothing ever really materially changes. There’s always these things like Zillow’s doing this and NAR is doing this, and it’s like, does any of it matter?

James:
Well, two years ago, Zillow was buying all off market properties. Hey, contact Zillow, getting off market, we’re going to give you the best number, right? They’re just trying to figure out the magic way to make money and they haven’t figured it out yet. I mean, they’d make plenty of money, but they’re trying to figure out that next step and they just keep guessing and changing the message and all you’re doing is confusing people,

Henry:
I don’t know, just try to get them estimates a little more accurate. That’s probably what they should focus on.

Dave:
Estimate is the most universally hated thing, I think, in the entire real estate industry. Alright, well, thank you all so much for being here, James, Kathy, and Henry. We appreciate it. And thank you all so much for listening to this episode of On The Market. If you guys have any other takes, any strong opinions on any things we discussed today, if you’re watching on YouTube, please let us know in the comments. I read pretty much every one of them and I would love to hear what you guys are thinking or you can hit any one of us up on BiggerPockets or on Instagram or other social media. Thanks again. We’ll see you next time.

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Early Retirement “Traps” That Delayed My FIRE by a Decade

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Early retirement in your 50s is a dream for most Americans, but today’s guest is sharing how she could have retired in her 40s, a decade earlier, if she had avoided these FIRE “traps.” Yes, it IS possible to FIRE in your 40s even with much of your money in retirement accounts. “But I thought you couldn’t take out that money until you’re 59.5?” That’s where you’re wrong, and today, Diana Hummel is showing YOU how to withdraw from your retirement accounts even earlier.

In her mid-30s, Diana had a huge wake-up call. Her parents, who had just retired, suddenly passed away. This lit a flame that would eventually ignite a full FIRE under Diana to live life on her terms well before the standard retirement age. She and her husband saved diligently, invested heavily, and were able to quit their jobs at 45, starting two businesses, one of which broke even while the other turned a profit.

The problem? Diana most likely had enough money to retire once she quit her W2, but she didn’t realize she could FIRE so early. Thanks to Roth conversions, 72(t) strategies, and smart tax planning, Diana is fully retired and ready to teach you how to FIRE faster!

Mindy:
What if you could access your retirement funds years before traditional retirement age without paying hefty penalties? Today’s guest is going to reveal how at age 55, while her peers were still grinding away at their corporate jobs, Diana had walked away from full-time work already. I am so excited to hear her story and see how you can recreate it. Hello, hello, hello and welcome to the BiggerPockets Money podcast. My name is Mindy Jensen and sadly neither Scott nor Amber Lee could join me today on this podcast, but fear not Amber Lee will be back. Next episode. Before we bring on Diana, I have a quick question. How many hours did you spend last month chasing down rent payments, sorting through piles of receipts or filling in spreadsheets? If the answer is too many, then I need to tell you about Base Lane. A trusted BiggerPockets pro partner base Lane is an all-in-one banking and financial platform built specifically for real estate investors.
Base Lane automates your rent collection and uses AI powered bookkeeping to auto track transactions for instant cashflow visibility and reporting without doing any manual expense tracking. Plus they have tons of other features like recurring payments, multi-user access, and free wires to save you time and money. Less financial busy work means more time to scale your portfolio with confidence. Sign up today at base lane.com/biggerpockets and claim your exclusive $100 bonus to kickstart your path to becoming a pro. Now let’s get into today’s show. Diana, thank you so much for joining me today. I’m so excited to talk to

Diana:
You. So good to meet you on the computer because I listened to you on my earbuds every day during my morning walks, I’m always doing my power walk, educating my mind and working at my body.

Mindy:
I love it. Thank you so much for listening. Let’s go back to the beginning of your financial journey. When did you discover the concept of financial independence or the fire movement specifically?

Diana:
I guess when we actually discovered the fire movement itself, it was probably a lot later, but what happened to us is in our mid thirties before that we had started working and we are saving and on a regular basis just kind of going through the normal grind in our mid thirties. All of a sudden my parents who had been working all their careers to be able to retire at 65 or maybe even 62, they both passed away and they weren’t able to do the things they wanted to do. They were waiting until they retired to be able to travel to spend more time with the family and all that. And my dad fortunately, retired at 62 and then passed away at 63 and my mom passed away a year later. So for us, it was a wake up call that said there’s no guarantees of how your life is going to, my parents had thought they were going to live into their eighties or nineties because their family all did. So they just assumed that, but they didn’t get that. So from our standpoint, it was a wake up call that said, what do we need to do to number one, get balance in our lives and do the things that we want to do now and also be able to retire earlier so that we have complete freedom to do whatever we want to do and not have to work. So that was our wake up call.

Mindy:
So what were some of these changes that you made?

Diana:
Well, we had been saving, we had been maxing out our 4 0 1 ks and so we continued to do that. We also were saving extra money one to $200 a month. They always say pay yourself first. So we were automatically paying ourselves first. Having that money go straight to different funds to different accounts, and so we were saving for that. And then also our children were young at that time and we opened up five 20 nines for each of them and had automatic monthly draws that went there as well. So we had all our little buckets that were being funded, but the most heavily funded one was our IRA 4 0 1 Ks that we were funding through our employer who gave us, I think a 7% match at the time. So that helped obviously, but that was in company stock, so it did help from that standpoint and we had that match and we took advantage of that and maxed out.
I think you could max out to 10% or something like that. So we both were big time into saving, but living our lives too, going on vacations and enjoying ourselves and spending time. Our kids were both active in sports and stuff, so spending time with them and all that as well. What was your career at this time? We were both very heavy duty into, we were professionals. My husband’s an engineer and he was in manufacturing. I’m a business major. I was in supply chain purchasing, so we had very demanding careers. We were working hard because my kids now my son’s big dog was like, you don’t understand. Yeah, I did understand. We went through that. We had those years where we were just grinding away, but trying to still have that balance with our kids so that we could do their sports and do the things with them trying to save as much as we could, but not being misers.
I mean, because that’s the thing I listen to a lot of the PHI people and a lot of them, they are so tight with their money because they’re trying to save 80 or 90% of their money. That’s me too. And when I have friends that do that, it drives me crazy like you got to think you can’t, especially if you can afford to do it, don’t agonize over a few dollars or whatever. Just do it. Just enjoy your life, do the things you want to do. So that was our balance that we were trying to do the things we wanted to do, but also being able to make sure that we had that balance, do the things but also save. So try to do that.

Mindy:
So you said just a moment ago that you were saving in your 4 0 1 ks, your IRAs, your kids 5 29 plans. Did you have any after tax investments?

Diana:
Well, that’s what I was saying. You also had some mutual funds and I think one of your recent podcasts I was listening to, you guys referred to Peter Lynch and at the time when we were young, he was the Fidelity Contra fund. And so we had a lot of our money went into that. That was a kind of invest in the that it performed really well. So fortunately we had some good strong performers, which I think helped our overall building, our base, our money base.

Mindy:
Scott and I have also been talking about the middle class trap recently where you’re doing everything right by the book, you’re contributing to your retirement accounts and you’re paying down your mortgage, but you’re not really doing anything outside of that. So you become a millionaire on paper, but then you look and you’re like, well, I can’t access any of this money unless I start paying hefty interest rates or unless I start paying fees to access the money that’s mine because I’m getting it early. And it doesn’t seem like this really applied to you that

Diana:
It actually does because we are definitely in the middle class trap as far as we have been since we’ve actually fired because we’re having to work that real balance. And we had healthcare because when we had our small business, we had healthcare through our small business. Once we actually completely retired, we had to get healthcare and we both had preexisting conditions, so we couldn’t just buy in on the regular marketplace because they wouldn’t cover our preexisting conditions. So we got stuck in that trap. I mean, we’ve gotten stuck in so many traps. It’s just I feel like we’ve learned so many things a hard way, but in that case there, when the Affordable Healthcare Act came out, that was our saving grace because they couldn’t discriminate against any preexisting conditions and we could get it affordably, but then you had to work that fine line, especially when you’re drawing out a lot of your 401k money that’s bumping up your income, and so you have to make sure that you keep your income within decent limits so that you’re not having to pay a bunch more. At 1.1 year, I think we withdrew maybe $10 too much and it threw me into the next thing and we had to pay back $20,000. So it was like, oh, you really have to, I mean, I have learned so many things the hard way from that standpoint of just knowing how to navigate and work, understand the system and being able to work within it.

Mindy:
That’s really key. Being able to work within the system. The system says this, okay, well let me figure out how to work within those boundaries. But yeah, you are not kidding. The A CA is a game changer. I also have a preexisting condition and had to stay employed or my husband had to stay employed once we got married. Otherwise there’s no insurance.

Diana:
It is doable, but it’s not the easiest, like you said, I feel like since being retired or since not having a regular job, my job now is how to figure out how to work our lives. Exactly. And I’m not getting paid for it except for instance, if I don’t do it, I’m going to be spending more money.

Mindy:
Now we need to take a quick ad break, but my listeners, I am so excited to announce you can now buy your ticket for BP Con 2025, which is October five through seven in beautiful, sunny Las Vegas Nevada score, the early bird pricing of $100 off by going to biggerpockets.com/conference while we take this quick break. Welcome back to the show. We are joined by Diana. Well, you have alluded to a small business and you had traditional W2 jobs. So when did you leave your traditional W2 job

Diana:
At 45? Okay, so at about right before 45, I guess I started looking at our savings versus our income, and I was like, our savings rate is growing at a faster rate. We’re making more money each year than we are on our actual W2 jobs. When you said, when did we discover fire? At the time, I didn’t know it was fire, but I knew that hey, our savings that we’ve been saving all these years is finally starting to add up and we’re making more money with our money than we’re making working, but I didn’t feel like, okay, we could just do nothing. Yeah, yeah, exactly. Yes, exactly. I didn’t feel like we could just do nothing. We were in our early forties. Like I said, it’s been like 10 years since my parents had passed and we had gotten to that point and I’m like, oh, we’re at that point now.
We can do whatever we want to do. So what is it that we want to do? I had always said I loved what I did as a career was like I said, I was a business person. I did supply chain. What I do now, spend analysis, I would look at companies like even when I was doing the consulting, I would look at the spend that companies were doing, figure out where their biggest spend is and look for opportunities to save money in those areas. That’s what I do with my life now with our personal finances. But back then I love what I was doing, but all of a sudden the corporate world, the company was going through some changes and I wasn’t having fun anymore. And I always had said, if I’m not enjoying it, I’m going to do something different. So I wasn’t having fun anymore and my husband wasn’t either.
And so we said, I think it’s time for us to figure out what do we want to do with our lives? Somehow we had gotten this idea back when we lived in St. Louis because we had moved several times throughout our careers and we had seen this small business that was kind of a family fun center. It had batting cages, mini golf go-kart track and stuff, and it was just kind of a fun place. And we said we would love to do something like that in the town that we were living in. We thought that that would be a neat thing to do. So luckily there was some land for sale right outside of our neighborhood, and we bought that, and hindsight is if we would’ve just bought that land and just sat on it and then sold it 10 years later, we would’ve been much better off.
But we didn’t bought the land and we built a family fund center on it. That’s what my husband did. So he left his corporate job to run that business and to work in that business, and I left my corporate job and became a supply chain consultant and worked for other companies helping. Some of ’em were small companies, a lot of ’em were big companies, helped in their supply chain organization or in their purchasing organization figure out how to save money as a corporation. So that’s what we did. Now what happened? So 20 years of savings before that, we just sat on, we said, okay, we’re not going to live off of that. It’s just going to continue to grow. It was already, like I said before, it was making our salaries, so let’s let it keep churning and let’s let it keep growing and we’re going to just focus on doing these other things.
And it got us more quality time with our kids because our kids wound up working in this small business with my husband and a lot of their friends got their first jobs too. So it was a real neat opportunity. We invested all of our money that was not inside of our 401k, which is really another key there. So our money that wasn’t in our 401k, we took that all and we liquidated it and invested it in this, developed this land into a family fund center, put in a lot of concrete for mini golf, put in the concrete for the batting cages, just spent a lot of money of our own money that we had saved as well as we took a home equity loan on our house initially until we could get a business loan because it wouldn’t give you a business loan right off the bat. So then we got a business loan. So we learned a lot of things, kind of the school of hard knocks, but it was a good experience and it was a good experience to be able to spend the time with our kids too and have more quality time with them and their friends, and they learned business skills as a result of seeing how a small business operates and such as Well.

Mindy:
So you keep speaking about this in past tense. I am assuming that you no longer own the family fund center.

Diana:
So we did that for 10 years. We knew that what was going to help us there is at some point we either needed to sell the business and they say like small businesses, it takes three to five years to finally break even. It was about just exactly that. At three years we finally broke even, and then the recession of 2008 hit and we could tell before anybody knew that there was a recession, people were complaining about not wanting to spend business just really went down because that’s extra money. People aren’t going to spend, if things are tight, they’re not going to go out and spend money playing mini golf or hitting balls or having an ice cream or whatever. So we started to see that already, but at that point we were in it and we were going to keep chugging through it, and luckily we didn’t have to tap our savings because the consulting part was paying the bills for everything.
And so we were able to do, all right, so we had that business for 10 years and then at about 55 is when we finally were able to sell it, and we knew that it was probably going to be a developer because we had some people at the end that we actually leased it out for a couple of years too, and they thought that they were had a lease to buy option, but they decided that it wasn’t, it wasn’t really a profitable business, it was a fun business, but it was kind of our community service to the area. So at that time, we were able to sell the business to a developer, and that’s when we got our money back out of it. And then I stopped consulting as well. And at that point too, our kids had grown up. They had gone off to college, so the business didn’t serve that purpose of having that family time. The kids had moved away for a year or two after we had sold it. I was still consulting, and I said, I can do that from wherever I can, just as long as there’s an airport so I can go to my client’s place, whatever, I can do that. So we moved further south, which is where our kids were. We were in Florida at the time, so we were up in the panhandle. Then we moved down to our kids were in Orlando and Tampa, so we moved down to the beach area outside of Orlando.

Mindy:
What percentage of your expenses did your supply chain small business cover?

Diana:
What percent of the overall business? Because in that case there, the money from my consulting, we didn’t save anymore. So it just pretty much covered all of our costs. We lived off of that, and it also helped support the small business too.

Mindy:
So you were coast by when you left corporate America and started out on your own, and then it just grew for 10 years.

Diana:
The money that we had saved was just continuing to grow and to save in there. We didn’t touch that except for the money that we did touch was the money that wasn’t in our 401k. So that’s how we got caught in the middle class trap is that so much of our money at that point was tied up because the money that wasn’t tied up in our 401k, we had put that into the business and the money that otherwise was in our 401k was we couldn’t touch it.

Mindy:
And you weren’t saving and investing after you stopped your corporate work. You didn’t do any sort of 401k for your company or Roth IRAs or anything like that?

Diana:
We could have. We could have. And again, when I look back at it now, even doing the 72 t, we should have at that time because when you have a small business, you can pretty much pay yourself whatever you pay. And in the first few years, our accountant had said, you’re going to have to my husband, you need to start taking a salary because you can’t just not take a salary. He wasn’t taking a salary because that business itself couldn’t really support another salary. We had employees, like I said, our kids and some of their friends that were working for us. So he finally had to start taking a salary too. So it all came under our overall corporate umbrella. The two businesses were individual businesses within the overall corporate umbrella. We didn’t take advantage of adding more savings. We didn’t convert things over to convert some of our 401k money at that time. We could have converted to Ross or started the 72 T earlier. So we had options, but at the time we weren’t looking at that. We were just trying to figure out how to not touch our savings and how to be able to live off of what we were making at that time.

Mindy:
Okay. So you just said a fun word, 72 t or a fun set of letters and numbers together. When did you discover that you could do a 72 T?

Diana:
The first time I heard about it was when I was in my early forties before we had actually left a corporate world. One of my coworkers had talked about it as to, he had just heard that there’s this thing a 72 TA way that you can actually access your 401k money early. So I had that in the back of my mind, but then all the years that we were doing this business, I didn’t think about it anymore until all of a sudden when we thought, okay, we’re going to get ready to actually fully retire, how can we access that money? Because so much of our money was in 401k and not that much that was available outside of it. So that’s when I asked my accountant, because we had an accountant that did our business work for us. So I asked him, can we do a 72 teen?
He is like, yeah, lemme look into that. And he’s like, yeah, you guys would qualify and you could do that. And like I said, we could have, now I look back at it, you have to take it five years or until you’re 59 and a half, whichever is longer. So we started it probably when we were like 54. We probably could have started it even earlier and been taking a draw that or converting it over to Roth because that’s what we should have really done was convert it over to Roth so it can continue to grow with no tax impact once you do the initial paying the taxes once you first move it over. So hindsight is definitely, so that would be one of my main takeaways for people is don’t get caught in that trap and figure out how to roll money over or to do a 72 T or whatever earlier.
But once you start a 72 T, you’re pretty much locked in, like I said, for five years or until you’re 59 and a half. So whichever is longer. So if we would’ve started it at 45, which we could have, we would’ve had it been doing it all the way until 59 and a half, but you can, in this case here, we could have done it and then moved it into Roth money or done something like that with it instead. So now we’re one of those people that’s going to be caught in that trap when we turn 73 and have to take our requirement minimum distributions. I’ve heard some of my friends that have gotten caught in that where they’re saying all of a sudden now my income is way higher than I’ve ever had because they’ve got so much money in their 4 0 1 ks that it’s throwing them into the higher bucket there. So I’ve been looking at that now, and so one of the things we’ve been aggressively trying to do is to start rolling money over into a Roths now, but we should have, like I said, we should have started that earlier, and we’ve been doing the 72 T since we started at 53. We’ve continued to do it. I mean that monthly draw that we were taking is what we’re living off of. And since we started it at 50, like a 53 I think is when we first start setting it up.

Mindy:
So you don’t have to stop at five years or 59 and a half. You can continue on.

Diana:
Yeah, you could continue, you can do, yeah. So that’s kind of how we’re doing that. Yeah, so we’re continuing on that way.

Mindy:
Let’s talk about the process of the 72 T. How does that work? Mechanically? That’s money that’s coming from your pre-tax 401k.

Diana:
It is really similar to a requirement minimum distribution. From the standpoint it’s based on your life expectancy, how much money is in the pot. So you could do it from your overall pot or you could do it from, if you’ve got several different accounts, you could do it from just this account or that account, and it takes into account how much money is in there and life expectancy. And so that tells you what the amount is that you have to take each month or each year I guess is kind of the overall.

Mindy:
And how do you take it? Do you take it monthly or do you take it once a year?

Diana:
Just so it’s kind of like our salary. We take it monthly. So it’s kind of our monthly income

Mindy:
That you’re making. Does it cover your entire expenses?

Diana:
It’s been covering about 80%. So the other 20, when we sold the business, we used the proceeds from that. After we paid our huge tax bill, we used the rest of the proceeds to actually buy a beach condo. So that’s a short-term rental, so that gives us some money. So 80% of our income that we live off of is from our 72 T, and then the remaining is from our rental income as well as other money that we have to scrape up from outside of our savings that we

Mindy:
Have the beach condo. That sounds really fun. That’s a short-term rental that covers the 20% of your expenses, or does it cover more than 20%?

Diana:
It probably makes up for the majority of the 20% that’s still left there. Yeah.

Mindy:
And are you actively doing Roth conversions now?

Diana:
Yes.

Mindy:
And that the Roth conversion is the Roth conversion where you take money from your 401k, you pay the taxes on it, but you don’t pay penalties on it because you’re putting it into a Roth IRA.

Diana:
Right. It’s rolling it into, it has to be directly rolled into the Roth.

Mindy:
Yes. You can’t take possession of the money. Your 401k doesn’t write Mindy Jensen a check, and then Mindy Jensen puts it in the account. Your 401k writes the check into the Roth area. If you take possession of it, then you’re paying taxes and penalties, and every once in a while the company that is rolling it over will make a mistake and will write a check out to Mindy Jensen. I wish that actually happened to me once. I was trying to go from one retirement account to a different retirement account. It wasn’t a taxable or penalty event, but they did it wrong and they sent me a check. If they sent me a check and I cashed it, then that would be the taxable event and fees and penalties on top of it. So what I did was I sent the check back to them and I said, this is not correct.
You need to make it out to, I dunno, Mindy’s 401k or whatever I was doing. It’s been a while, and therefore I skipped the taxable event. So just because they make a mistake, don’t compound that by cashing it and making your own mistake. But yeah, the rollover IRA or the rollover Roth IRA is a great way to, especially when you have low or no income, to start siphoning off some of those 401k monies so that you’re not subjecting yourself to RMDs at age 73. And I mean, this is a first world problem. This is as far as problems go, that’s the kind of problem I want to have. Oh gosh, I have so much money, I have to take so much money out and pay so much taxes. Well, you’re paying taxes on this income, so I don’t want to pay taxes if I don’t have to, but I do appreciate having a fire department and roads to drive on and all of that. So I’ll continue to pay my taxes, but as low as I can.

Diana:
When you move it from the 401k to the Roth, it is coming out of the 401k and you have to pay taxes on, it’s a taxable income. So yeah, so we’re paying that, but then it goes into the Roth, which then it can to grow tax free, and then we’ve already paid on it.

Mindy:
It’s a great way to start pulling. I mean, if I’ve got a million dollars in my 401k when I turned 73, then I’m going to have to take RMDs against a million. But if I had 3 million and siphoned off enough to skip those taxes, that’s even better. So since you quit the supply chain consultant company, wait a second, what did you do with that company? Did you sell it or did you just stop doing it?

Diana:
I just stopped doing it. I guess the thing is, I’ve had people say to me, oh, you need to get some employees and you need to actually be able to sell it as a business itself. Where we sold the business first, we were trying to sell it as a business, but then we just sold it as the land, as the property to a developer who took up all that concrete and everything and did something, put a shopping center in there. Yeah. But the consulting part, I just stopped consulting, but I still, since then, I have one time in the last 10 years I’ve had people always contacting me, trying to get me to take on a project, but they want me to come to a place and work Monday to Thursday or whatever. I’m like, I’m not doing a regular job anymore. So that’s a pin there, done that. But if it’s a fun thing, so the one thing I did do a few years ago is somebody asked me to develop some training material and then teach some classes. And so I did do that and I was like, okay, that’s fun. But at the end of the day, it really wasn’t worth my time and effort either, so I don’t have to do it and it needs to really be something that’s worth my time.

Mindy:
Exactly. I know a lot of people who have retired or retired early and they might do a project that they are interested in, but they’re like, I don’t need the money for this, so I’m not going to, it’s be this 40 hour a week job or 80 hour a week job. I’ve got some friends who are like, yeah, I’d be happy to consult on your little project for another friend, but don’t pay me. Then I feel obligated to work 40 hours a week and I don’t want to work 40 hours a week. So let’s have a conversation and a couple of hours of chatting maybe, but that’s all I want. So I have to ask you this question because I have spoken with several people recently who say, well, I don’t want to retire early because I think I’m going to get bored,

Diana:
Which is fair was actually my husband was never worried about that because he is always busy working on his little projects and every morning it’s kind of like we get up and say, okay, so what do you got planned today? What do you got planned today? And so from his standpoint, he never skipped a beat, never had any concerns. I, on the other hand was more concerned. I really enjoyed what I did and I was afraid that I was really going to miss it. And I’m such a personality person where I was afraid that if I’m not feeling like I’m contributing or doing something and I’m still every once in a while saying I need to feel like I’m doing something, do I volunteer in schools to help educate people, kids on just business planning or financial planning, something like that. Because the financial illiteracy is big time as far as kids understanding or people understanding all the ins and outs of things.
So I’ve thought about that and I’ve thought about different things, but I really haven’t. I’ve been really busy, and so I was concerned. So now my days are either, like I said, I exercise, I love to travel, so I’m either traveling or I’m planning travel, so I do a lot of travel planning. So I do really enjoy, we do try to get away on at least two to three big trips a year and then a lot of smaller trips. So I spent a lot of time planning. I haven’t really missed the work, but I was concerned about it. At first, I wasn’t sure what am I going to do with my time now I’ve got all this time and the day goes by and it’s like, wow, what did I do first? I felt like I needed to have my list of things and felt like I needed to have accomplished some stuff, but I got past that. So it’s been great. I haven’t regretted it at all.

Mindy:
Are you at all concerned about the recent stock market fluctuations?

Diana:
That’s a good question. I was thinking about that because when it happened to us the first time, and like I said, we had our bucket of money that we had saved, and this was after we were 45 when we were on our kind of slow fire, whatever, when 2008 hit, I think we lost 40% of our money, and that was pretty sizable. But the good thing was is I’m not one of those people that reacts to that stuff. And so I thought, well, we’re not having to touch it, so we’re okay because it’s there and it needs to grow. And it did. It came back in a couple years and it exceeded where we were and pushed on past it, so that was fine. Now it’s kind of scared me too because now we’re actually drawing from it, and now I’m thinking, do we need to draw less?
Do we need to? Because we are, like I said, 80% of our living expenses is coming off of our saving, and I thought, should I diversify and do some real estate? Should we do some more real estate, get some rental properties? Or the good thing is with our beach condo is before when we had it, it was in an area where we lived, and so we never used it. Well, now we live in Orlando and it’s across on the Gulf Coast, and so now we’ve actually used it. Every once in a while we’d go over there and do some stuff on the condo and then spend some time there. I thought, well, maybe I should buy another one somewhere else and do the same kind of thing. But we haven’t. I do look at the market and I look at our portfolio and say, okay, if it had taken another dip again, 40%, would that really be a major impact on us?
Or now our pot is a lot bigger than it was initially, so hopefully that’s not going to be as much of a problem. So I do get concerned about it. And I guess worst case, and here’s a good comment. When we first decided to do this at that point, like I said, our kids are adults now. Now they have been adults for a while. They were young, and I said, dad and I are going to leave our jobs. We’re going to retire early. We should have enough money to last until we’re into our nineties or a hundred or whatever, but if we run out of money, would you take care of us? So that was a funny comment and they chuckled and stuff, but then when we started sharing with them a little bit about where we’re at and stuff, they’re like, well, then you need to start spending more money. So hopefully we should be okay. But I’ve always known, and I’ve kind of looked at it this way, that if things did really get bad and if we did run out of money or if it was starting to look like we were heading that direction, I said to my husband, worst case is I could be a Walmart greeter and you could work at Home Depot, so we could do something. But of course, if you’re really old and frail, then that might be bad too.

Mindy:
But also you are keeping an eye on your finances. You’re not just fingers crossed, oh, I hope we have money. And I think I was having a conversation with a friend and this subject came up and he said, it’s not like we get to a point of financial independence by being frugal and saving and investing on purpose and then stop looking at our finances. We continue checking it. My husband checks every day. It gives him pleasure or whatever. I don’t check because he checks so I don’t have to check. And we talk about it all day every day.

Diana:
And sometimes, especially when things are as crazy as they are, it’s better not to check. I know my husband, he’ll say, oh my gosh, the stock market’s down a thousand points or whatever. And I’m like, I don’t want to be looking, but I do. And I know, okay, we’re down some, but it’s not as bad as we were before and we’ll be all right. We will be all right. So yeah, we just have to stay the course and not sell when things are low and use it as a buying opportunity when you can. And our portfolio is invested pretty aggressively because that’s how we got to where we were by being pretty aggressive. My husband tends to be a little bit more conservative. So we have our two buckets, our two IRA buckets, his and mine. So his is invested a little more conservative. Mine’s a little more aggressive, and so mine’s doing better than his in general, but overall it’s doing all right. So I do keep an eye, but try not to panic. And I also try to look and see are there things that are just not doing well that I need to get rid of that’s not going to come back or what do we need to do?

Mindy:
Okay, we have to take one final ad break. We’ll be back with Diana with more after this. Thanks for sticking with us. How does fire change your perception of work and life?

Diana:
I think we got into it because we wanted to have balance and do the things we wanted to do by living the fire life as far as being financially independent, we can do those things that we want to do. My priority is I want to travel, see as much of the world as I can and spend time with my family and my friends. And so if I can do them both together, that’s an added bonus. So a lot of times we will travel with our kids, with our grandkids, and then sometimes we’ll travel with friends. And that’s always fun because then when you spend a week or more with some friends, you really get to know them at a whole deeper level than just a little visit here, a little visit there. So yeah, so it’s been fun. It’s been great. And a lot of our travels too are because we’ve lived a lot of different places throughout our careers, is going back to some of the areas and spending time with friends. And so visiting new areas, visiting old friends, and so that’s all good.

Mindy:
Last question, what was the biggest mistake you have made on your financial journey and what advice would you give to someone else to avoid that same mistake?

Diana:
A couple big mistakes. One is having too much of our money in 401k and then having to figure out how to navigate our way out of it. Again, how to roll it over or to move it into other accounts. So that was the biggest mistake. So now what I tell my kids is have some balance. When you can invest in your 401k, you can max that out, at least get your company matched. But then beyond that, if you can’t put money in a Roth otherwise, then put it in that. Or as my daughter, I think she’s doing backdoor Roths now, even conversions. She’s putting it into her 401k and then coming back and taking it out in higher income bracket so that she can’t do it by the Roth individually. So not have too much of your eggs in one basket in, like I said, in this case here in the 401k is the number one biggest mistake.
The second biggest mistake is really understanding the tax implications on your money. So it’s not just understanding, okay, I paid this much last year, I paid this much this year, but what’s the big picture on your overall money and the tax implications of that money? So kind of doing tax planning. And that’s not something that most people do. And unfortunately it wasn’t until recently that I’ve realized that if we would’ve done a better job of tax planning, like I said before, when we had our small business, that’s when we should have been doing the 72 T or doing Roth conversions. We should have looked at it when we had the opportunity because our income was lower or it was we could manage our income.

Mindy:
I think that’s really key. And I’ve heard people say, don’t let the tax tail wag the dog and that, that’s great too. It’s kind of a fine line, but I love the comment about tax planning. There are just so many things to know and you don’t know what you don’t know. So you can’t just Google, what am I missing in my tax planning? And then Google be like, Hey, here’s Mindy, here’s what you’re missing. They’re going to be like, Hey, sorry, no results found. Common tax mistakes might catch a couple, but it’s not going to catch it all. You need somebody who can see all of your numbers, all of your scenarios, all of your situations and say, oh, you could do this. You might be able to do this, and if you do this, then this would apply. I think that’s a great tip.

Diana:
No, definitely, definitely. And I think that’s one of the things that most people probably, they overlook it.

Mindy:
Don’t let your frugal text tail wag your dog. Alright, Diana, this was such a fun conversation. I am so thankful for your time today. I really appreciate it

Diana:
And it was great to talk to you and I feel really good about it. I’m hoping that I can help somebody else not fall in the same traps that we did, so yeah,

Mindy:
I hope so too. Yeah, if you’re listening, this is the voice of experience, listen to Diana because everything she said is 100% true.

Diana:
Alright, Diana,

Mindy:
Is there any place that our audience can find you online?

Diana:
Well, I’m on Facebook, but there I mostly post things, pictures of my travels and my grandkids. And then I’m on LinkedIn and then I’m also on BiggerPockets platform as well too. Yeah, so I’ve got an account there too.

Mindy:
Connect with her on BiggerPockets. Are you in the BiggerPockets money Facebook group?

Diana:
No, I’m not. I probably need to get in there. Yeah.

Mindy:
Oh, okay. Yes, please go join. It’s facebook.com/groups/bp money.

Diana:
Okay, I’ll get on there.

Mindy:
Okay. Diana, this is so awesome. Thank you so much.

Diana:
Yeah, thanks. It was great talking to you and I’ll, I’ll be hearing you I’m sure, again tomorrow during my morning walk.

Mindy:
Alright, that wraps up this episode of the BiggerPockets Money podcast. I truly love these conversations with people who have retired before. It was cool before anybody wrote a blog post about it and I love Diana’s story. Thank you so much for joining me. My name is Mindy Jensen saying out I zoom, bloom.

 

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I Bought My First Rental in 2021, Now I Have 19 and Replaced My Salary!

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This high school football coach grew a real estate side hustle over the past four years that now replaces his W2 income. He did it making a median salary, all while working his full-time job and raising his family. He didn’t use flashy methods, risky strategies, or constant cold calling. Starting with around $30,000, Lamontis Gardner went from zero to 19 rental units in just four years and is STILL growing!

After pandemic lockdowns left Lamontis with extra time and little work, he knew he needed to stop solely relying on his W2 income to fuel his life. Of course, Rich Dad Poor Dad found its way into his hands, and the real estate bug began. From there, Lamontis turned a lost deal into an opportunity to buy three duplexes from one owner. The problem? He only had a third of the money. It was time to partner up!

After a home run first real estate deal that gave him a six-figure equity upside, Lamontis knew this was the path for him. Since then, he’s been buying rentals, flipping houses, and doing whatever he can to reinvest in real estate, all while working his W2 job. Now, he’s replaced his W2 income but is STILL growing his portfolio even in 2025’s high-rate, “tough” housing market. Want to do the same? Copy Lamontis’s strategy!

Henry:
This investor bought his first property just a few years ago in 2021, working with two partners to find the cash he needed, but by the end of 2024, he’d accumulated a portfolio of cash flowing rental properties in Mobile, Alabama, and he had flipped five houses in a single year On the show Today, we’ll hear just how he did it. What’s going on everybody? Welcome back to the BiggerPockets podcast, where we teach you how to achieve financial freedom through real estate investing. I am Henry Washington filling in for Dave Meyer. Today’s guest in the show is Lamonts Gardner. He’s a formal college football player who started his investing career by buying a single rental property in his first year. Over the next two years, he bought four more rentals and flipped a house. By 2024, he was able to do 14 deals, including five flips. We’re going to hear from Lamonts on how he’s been able to scale up his business sustainably and without taking on too much risk, how he found and finance deals in the mobile Alabama market, and what motivates him to continue growing his real estate business while working a full-time W2 as a teacher and coach.
It’s a great story. I’m sure you’ll be able to learn from. So here’s me speaking with Lamontis Gardner Lamonts, welcome to the show, my man.

Lamontis:
Thank you. I’m grateful to be here.

Henry:
Awesome man. So give us a little bit of background. What were you doing before you got into real estate?

Lamontis:
I was coaching actually right after I finished playing ball in college. I went straight into coaching, did that up until about 2020. The Covid shutdown season got canceled and eventually the school shut down with a lack of income and a lot of time on my hands. I just decided to journey into real estate. I just dove into every podcast I could, every book I could get my hands on, and even the BiggerPockets webinars that were weekly.

Henry:
Okay, so 2020 hit, your income just stopped because the school shut down and that kind of made you realize you needed something that you could depend on versus just depending on somebody else for your income?

Lamontis:
Yeah, I just realized I was under control of my job and I no longer wanted that. So just wanted a different

Henry:
Lifestyle. I think a lot of people face that challenge. In 2020, they realized that they really weren’t in control, but not a lot of people just decided to jump into real estate. So why did real estate become the thing? I mean, a lot of people were selling stuff online. They moved to investing in the stock market. It was all pretty easy to do from home. Why real estate?

Lamontis:
So prior to then, maybe about two years earlier, I read Rich Dad, poor Dad.

Henry:
There it is.

Lamontis:
That sparked that light in me to eventually want to get into it and 2020 was just the perfect time.

Henry:
Okay, so you kind of had the seed planted from when you read Rich Dad, poor Dad, and you were like, all right, this is the time. So when did you buy your first deal?

Lamontis:
I bought my first deal in 2021. I decided I wanted to invest in my hometown,

Henry:
Which is where

Lamontis:
Mobile, Alabama. So we eventually moved from Atlanta and came back home where I took a local job here at a high school where I’m still currently working, which provided me a more stable income to be able to invest.

Henry:
Okay. Well let’s talk about that. What was your first deal? How’d you find it? How did you end up financing it?

Lamontis:
Prior to my first deal, I made an offer on a duplex. I lost out on that duplex due to a cash buy investor. So at that point it’s kind of like, well, I’m not going to be able to compete. So what I did was this particular street is full of duplexes, so I pulled up a map and I wrote down every address on that street and I skipped, traced every owner and called and I ran into a guy who actually had three, he had three duplexes on this street in particular and took that down. I couldn’t do it by myself, so I had to bring in a partner, but we used a local bank, had to put 20% down and been going ever since.

Henry:
Man, I mean that’s cool. That’s just straight hustling, like a straight hustle lead. So you looked up every owner, skip traced them and then started making phone calls. How many phone calls did you make before you found this owner?

Lamontis:
Probably would be about 25 to 30 calls.

Henry:
I mean, that’s really not that many before you actually land a deal, that’s pretty cool. But I like that style and that hustle because I think a lot of investors want to get into this business, but they don’t really want to put in the work. They want to just find a deal online. And you went and you just made the calls until you found one. Now I’m not saying everybody’s going to make 30 calls and get a deal, but you don’t know that until you put in the work. So you got on the phone with the seller, he wanted to sell three duplexes and you realized you didn’t have enough money. So the bank said you needed to put 20% down. About how much money was that 20% that you had to put down?

Lamontis:
It was about 76,000.

Henry:
Okay. So the total purchase price was how much?

Lamontis:
It was 380,000,

Henry:
Three 80 for three duplexes. How much of that 76,000 did you actually have?

Lamontis:
I had about 28,000.

Henry:
Okay, so you had a little less than half, right? So you had to raise the rest and you decided to do that through a partnership. How’d you find that partner?

Lamontis:
He was actually my college football coach, my position coach. So prior to bringing him on, I was trying to talk to the owners like, Hey, could you just allow me to buy one duplex or maybe two? And he was like, no, you got to take all three or I have to sell to someone else. So I was talking to my coach one day and I ran a deal by him and he was like, Hey, does he still have it? I’m like, sure. And we worked out a deal from there.

Henry:
Okay. Did you guys 50 50 partners since he was putting down more money or how’d you structure that?

Lamontis:
Well, we actually split it three ways with someone that he’s close to. We all went in three ways and took that deal down.

Henry:
So essentially you all kind of got a property out of it?

Lamontis:
Yeah, essentially. And the good thing about that deal was we bought it for three 80 and it appraised for four 70.

Henry:
Oh, nice. And did you have to renovate these properties or were they all rent ready in good shape?

Lamontis:
No, they were all rent ready in good shape and cash flowing.

Henry:
Oh man, that sounds like a great deal. So hustled and found your first deal. And what I like about this deal story is a lot of people would have stopped, they would’ve quit. They would’ve said, I can’t afford three properties, I can only afford one.
Or they would’ve said, I can’t afford to do this deal. But instead of you saying that, you said, how can I go get this deal done? And you were able to find a partner who then brought in another partner and you split the deal three ways. So I like that hustle. I think a lot of people talk themselves out of wealth. I think people oftentimes will just decide that they can’t do something given whatever circumstances are directly in front of them. But with real estate, what’s so powerful is there’s a whole lot of ways to get a deal done and you have to remain open-minded and you have to keep trying to structure something that makes sense. And I’m not saying everybody should just take on random partners, but I am saying that there are ways to take deals down and you have to have a mindset of how can I get this done versus I can’t get this done, which is one of the principles in rich step for that.

Lamontis:
And that deal got even better. So that next year we got and they appraised for 5 25 at that time, I refi it and I was able to pull the down payment back out, which set me up to continue to invest.

Henry:
Oh, so you did a whole burr on that property.

Lamontis:
It wasn’t planned, but that’s how it happened. And that’s been a foundation to my investment journey for sure.

Henry:
That’s amazing, man. So now that you had that experience buying that long-term rental, what did you do next? How did that deal help you transition into doing more deals?

Lamontis:
So that was in 2021. My next deal was in January of 22, so I guess I took the time off, but I did a flip in January of 22. I partnered on that as well with a local partner here. We bought a home for 1 38 and we put about 70 ish in there and we sold that for two 90. I think we netted about 70 k if I’m not mistaken. So we split it two ways by 35 a piece.

Henry:
I mean, that’s a fantastic flip in terms of numbers. How did you find that deal? You said you took some time off. So it’s not like you had just deals cooking

Lamontis:
And at the time I was still trying to search on the market for everything. I wasn’t as experienced, but this house in particular was sitting on the market for months, but the thing about it was listed as a two one, but it was 1700 square feet.

Henry:
I love this.

Lamontis:
And so I kept hearing about these type of deals and I’m like, Hey, well let’s go see it. Went to see it and it was basically a three bedroom and all you had to do was add a closet to make it the third bedroom. And we added a bathroom in one of the bedrooms. It was a crawl space home. So it was pretty easy to do. And basically we had a three two,

Henry:
Which obviously increased the a RV of the property, which allowed you to make more profit. Man, this is one of my favorite strategies for finding opportunities to make money. This is something like you guys can be doing, people can be doing this right now. You can look on the market, this exact strategy, look on the market for properties that have been sitting for longer than the average days on market in your market. So if the average days on market is 30 days, look for things that have been sitting longer than 30 days. But what you really want to look for is houses that the square footage number is bigger than what the bedroom and bathroom count would suggest. So if you have a two one that’s 1800, 1500, 2000 square feet, there’s space in there where you can add a bedroom and a bathroom fairly inexpensively, especially just like you said, if that house is on a crawlspace because the cost to add a plumbing in a bathroom on a crawlspace house is significantly less expensive than having to add plumbing to a house that’s on a concrete foundation. Now you don’t have to tear up concrete and floors.
And so you can literally put this criteria into the MLS or into Zillow or into Redfin, and you could have a list of potential opportunities. And why you want to do it for houses that are on the market longer than the average days on market is because those sellers might be motivated to take a lower offer. And so if you can find a property that’s been sitting for 30, 60, 90 days, 120 days, that has you look for a three two with 2000 plus square feet, a two one with 1500 plus square feet, that lets you know that there’s potential value that you can add there and then go look at those properties and make offers, you could potentially find yourself a deal where you know can add value. I love that strategy, man.

Lamontis:
Right? I still have that search criteria set until this day I got it set at two bedrooms that are more than 1200 square feet. So anytime I see a house that fits that criteria, it’s something that I definitely check out.

Henry:
Alright, we have to take a quick break, but when we come back, we’ll talk to Latis about how he started to accelerate his portfolio growth. We’ll be back.

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Henry:
Alright, we’re back with Lamonts. Alright, so you did your first buy and hold deal, you did your first flip. So how did you start to shape or accelerate your business from that point?

Lamontis:
During that 2023 year, I just started to study marketing and direct mail and I started to incorporate that into my business and that’s when I kind of took off. I was able to produce my own leads and my own deals versus waiting on something to hit the MLS and competing with everyone on that. So it just kind of took off from there.

Henry:
Okay, cool. So I think a lot of people find themselves in this boat where you do a deal or two and then you realize you get the bug right? You realize you want to increase that volume, and in order to do that you need some sort of systems, processes and procedures. And what you’re saying is you chose the route of focusing on lead generation that you can control and the more leads you can generate, the more deals you can do. But typically to do deals, you need leads and you need money. So how did you find the money to buy the deals that you were finding

Lamontis:
Financially? Personally, I tried to set myself up because I was working my W2 the whole time. So I was saving up money and I met a local hard money lender. He would lend to me at a hundred percent of the renovation and purchase price. So that significantly took my investing to another level just because I was able to take down deals without putting any money down.

Henry:
I mean, obviously finding a lender that’ll lend to you at a hundred percent is great. I assume it’s like a hundred percent as long as your LTV is at a certain point, right?

Lamontis:
For sure. Yeah. So I typically try to stay under 70% loan to

Henry:
Value

Lamontis:
Of that after repair value.

Henry:
In other words, what Lamont is saying is that as long as he is all in at 70% of the after repair value, meaning if you’re buying a property for ease of number sake, if you’re buying a property and the ARV is a hundred thousand dollars, his lender was willing to loan him up to $70,000. So Lamont would then know as long as I’m buying that property and the money I need to renovate, it falls at 70 grand or less and he wouldn’t have to bring any money. So if he was buying a property for 50 and he needed 20 to renovate it, he’s all in at 70, therefore he can get a hundred percent financing. If you were going to buy a property for 50 and you needed 30, you’d be all in at 80. That would probably mean you need to bring 10 grand to closing. Correct? Correct. Awesome. So finding a lender like that is amazing and a lot of people are going to say that’s cool for you. But how did you find that lender?

Lamontis:
Through a buddy that I have here that is a local investor as well. He introduced me to the guy and I sat down with him. I took him a folder of deals that I’ve done, showed him some before and after pictures, went over the numbers with him and just got to the point where he felt like he could trust me and felt like I was experienced enough and he decided he wanted to lend to me. Man, this is like the playbook for real estate

Henry:
Investing. What’s cool about this is really something anybody can do, right? You hustled to find your first deal. So you didn’t use money to find the lead, you just hustled, skip trace, called a bunch of people, you found your first deal, you then found your second deal on the MLS through the means that we talked about by looking for opportunity on the MLS, and you were able to be profitable there. And then you kind of documented each deal to show that you had some track record. And then when you were ready to start expanding your business, you were networking, looking for resources, and when you found a resource that might be interested in lending, you were able to basically show him, Hey, this is the kinds of deals that I’ve done. These are the kinds of returns I’ve been able to produce, so I have opportunities for you if you are looking to make a return on your investment. These are things that literally anyone can do. And I love how you have been able to kind of execute this, and I’m sure it was scary, the idea of talking to somebody and asking for money is probably scary, but how do you feel like that went for you?

Lamontis:
It went well. It was definitely scary, but it was something I knew I needed to do. I needed to find another lender if I wanted to accelerate and move at a faster rate. Before that, I was just using local banks, which is okay, but you have to bring money and it’s a slower process. So once I met with him, now I could take deals down cash.

Henry:
Man, that’s super cool. So the marketing was generating the leads, you knew you had the money coming in, so it was really just a matter of how many leads could you generate. So kind of tell us about where you are now. Tell us about your last year with investing. What does your business look like? Because it sounds like you put the pieces in place to level up. So what did that turn into for you?

Lamontis:
So the last year, I think I did 12 deals, just flips or rentals, both. I kept more than I sold. I mainly tried to buy and hold, but I started realizing fast that I couldn’t live off of that cash flow. So as of late, I got into more flipping.

Henry:
Yeah, man, a lot of the time this business is portrayed in a way that lets people believe I’m going to buy a bunch of rental properties and then I’m going to live off the cashflow and I’m going to quit my job. That can be done. It just takes a long time and a lot of properties because when you have debt on these properties, your net cashflow isn’t always super great and it depends on your market. There are some markets where you can get amazing net cashflow even now, but in most markets a hundred to $200 net cashflow per property, it’s going to take you a whole lot of properties before you can do that. And then we all realize that sometimes that gets blown out of the water when an HVAC goes out for the year or something like that. And so if you’ve got a property producing five to $7,000 a year net cashflow and then you have an unexpected expense that wasn’t budgeted for, your cashflow is gone. And so I think we all at some point realize, okay, the cashflow is great, but I don’t want to depend on that to live off of. I would much rather depend on something like flipping. And I think that’s why I got into flipping houses. And so you started doing some flips, you did about 12 deals last year. Give us a breakdown. What’s your portfolio look like?

Lamontis:
Right now? I’m at, I want to say 19 total units.

Henry:
And then about how many flips a year are you doing?

Lamontis:
I think last year I did five flips this year. I’m trying to up that to at least 10.

Henry:
Okay. So it sounds like you really did scale your business and start to level up from just doing onesie twosie deals to where now you have a consistent lead flow. Is there a deal that stands out in the last year that was kind of especially good for you?

Lamontis:
Definitely. So that was this deal that is actually in the neighborhood that I live in. And it’s something I had my eye on for a while and probably for about two years, man, I was communicating with the owner. He had a renter in there, but I would probably occasionally just pop up on his porch maybe once a month. Once a month. And he finally let me take that deal down. I purchased it at 55,000, put about 75,000 in there, and I sold that for 230,000 bucks.

Henry:
So you were all in for 1 25 and you sold it for two 30?

Lamontis:
Yes.

Henry:
Man. So what’s that about 50, 60 net profit?

Lamontis:
It was actually a little bit more because I didn’t have to put out any closing costs to the seller. It was just pure deal. I just had to pay the agent. So I actually came out around like 80,000.

Henry:
Man. I mean, that’s a solid flip folks. I mean, I’m averaging on my flips. I average about 40 to $50,000 net profit, which is pretty good. Most people are averaging around $30,000 net profit on a flip. So to make 80 plus man, lemme borrow $20, man.

Lamontis:
Yeah, man, that was my best deal. I haven’t ran into one like it since, but that was my best deal last year. And I have one more that was very similar. I purchased it for 53 and I put about 47 in there and I sold that one for 190,000 bucks.

Henry:
Okay, so the one you made 80 on that one you found just because you had been in this neighborhood seeing this guy and been working on him for a while. The second deal you talked about, was that a mail deal or was that another hustle lead?

Lamontis:
It was a mailer and it actually took me a little bit longer to take that deal down. There was some probate issues, so we had to go through court to get the deal approved. So it took us about two to three months to get it, but at the end of the day, it was worth it. It was worth the time and I was able to help her out a lot. She just wanted to be able to get off of it. So I was able to help her out a lot and it worked out for us. Bo.

Henry:
All right. We have to take another quick break, but when we come back, I’ve got some questions for Latis about other marketing strategies he’s using to find deals and how he decides if he’s going to flip a property or keep it as a rental. We’ll be right back. All right, we’re back with Latis. Let’s jump back in. Alright, so a lot of people are always interested in knowing when you get a lead, how do you determine if you’re going to keep that lead as a rental property or if you’re going to flip that property? Because that internal debate can sometimes be challenging.

Lamontis:
Sometimes that can be one of the hardest decisions to make, but ultimately it just came down to the spread that I would make if I was to flip it. Plus things like the layout of the house and the neighborhood that it’s in. So if it has a iffy layout or the neighborhood is iffy, I would just keep that. I would keep it and I would just refile out of it and just put that on the rental market. But if it say just a slam dunk and the layout is good or I could knock out a wall or just add a bedroom or bathroom or something like that, I probably would flip it.

Henry:
So essentially what you’re saying is properties that have unusual layouts, they’re harder to sell and when they do sell, sometimes you don’t sell it for as much money, but they’re not necessarily harder to rent. So sometimes it makes more sense for you to keep them when they have an unusual layout. And then the properties where you feel like you can create big value, you can maximize your profits, then you flip those because that’ll give you more cash to buy more rentals down the road.

Lamontis:
For sure, for sure. And I love the rentals because I look at those as wealth builders down the road and I’m still working. So in the beginning I wasn’t as focused on flipping and I do a lot of section eight rentals. I wanted to do something that fulfilled me and gave me purpose in this investing journey. I focus on single parents. My mom was a single mother, so these rentals, man, they just a step down from the flips that I’m doing, not the same finishes and everything, but I’m going in and I’m putting new roofs, gutting the bathrooms and renovating those new flooring and everything. So just providing a quality place to stay for those moms.

Henry:
Man, I love that man. I’m passionate about the same thing. I call it revitalization instead of gentrification. So being able to fix something up nice and provide a place with maybe nicer finishes than they would expect to have from another landlord because it gives them pride, a sense of pride living there, pride of ownership. People deserve nice finishes. Just because you’re in section eight, it doesn’t mean you don’t deserve to have a beautiful place to live. Man, I love that

Lamontis:
And I think it works. It is a win-win for me and the tenants, just providing ’em a quality place to live, someone that they’re proud of, I think it minimizes my turnover. The renovation on the front end also minimizes my repair, so I don’t have a lot of late nights maintenance calls just due to the time I took to renovate it on the front end. And also my tenants take pride in the units that they’re renting. So it is a win-win for us both.

Henry:
Man, that’s super cool, man. That’s super cool. I’m super proud of you for doing that. And a lot of people have a bad impression of section eight and a lot of the times it’s just unjust. They’ve never really done it themselves, it’s just what they hear. So I love to hear when somebody is doing it and is taking care of the tenants because I don’t care who you are, man, there are bad tenants at every price point. It’s not just that there’s bad tenants. I’ve had terrible tenants that were paying me $2,000 a month. There’s this stigma that Section eight has bad tenants. It’s not that Section eight has bad tenants, is that landlords are bad at tenant selection. And if you can get good at tenant selection, no matter what price point your rental is at, then you can have quality tenants who take care of your properties and you can provide great housing to great people,

Lamontis:
Right? Right. Yes. And that’s one thing that I studied before getting into the rental world. I wanted to know how to screen to find the best tenants possible. So I have a detailed screening process from background to credit check, income verification, even driving by and talking to old landlords. So I’m just making sure that I put the right person in there, but once they’re in there, I make sure I take care of them and the unit.

Henry:
Awesome, man. It sounds like you do a lot of direct mail. Are there any other marketing sources you’re using that seem to be working that people could take a look at?

Lamontis:
Not right now. I mainly do direct mail. In the beginning I did some cold calling just due to the lack of funds, but I figured out really quick that don’t like cold calling. The cold calling, it increases the chances of me getting cursed out or what have

Henry:
You. Yeah, that’s

Lamontis:
Fair. So I like the direct mail because it doesn’t take a lot of time and I just bring the leads to me and majority of the people that call me actually want to sell their home. So that’s my favorite B marketing.

Henry:
So it looks like you’ve been able to build a really impressive business over the last few years, and that’s inspiring for many people. So what’s driving you now? What are you moving your business towards in the next year? Are you keeping things kind of the way they’re going? What’s the future look like for you?

Lamontis:
I’m just trying to keep it around 20 deals a year. So like I said, last year I did 12, but I want to up that into 20, and that’s something that I want to do from year to year moving forward. That’s kind of around hover around that 20 point. And right now what keeps me going, like I said, is providing quality place to live for the tenants and also my family. I want to just be able to provide a quality lifestyle for my wife and my kids. So those two things right now driving. But I would also say as far as the business goes, I think right now it’s just kind of focused on the stabilization of it and just becoming more organized and developing more systems. Hired a va, so been helpful for me tremendously. So that’s kind of where I’m at, just stabilizing it, getting a grip on everything and just maintaining the amount of deals that I’m doing year to year.

Henry:
Yeah, that’s cool, man. One thing I learned this past year in 2024 was that I didn’t want to have some massive flipping business doing 50 to a hundred flips a year. I kind of realized I like the spot of about 20 flips a year, plus acquiring enough rentals to help me offset my capital gains. And that’s what I need and want just for me and my family. And I think it’s good because scaling is great, but you got to figure out how far you want to scale because big portfolios have big portfolio problems. And if you’re not prepared to handle those big portfolio problems, then this business goes from being fun to being terrifying real fast.

Lamontis:
For sure, man, I’m big on being purposeful with what I do. I like to have a purpose and I like to be fulfilled. So I knew a while ago that I didn’t just want to have this a hundred flips a year business because I didn’t want to create another job for myself. I wanted something that was manageable and that I enjoy doing on a day-to-day basis.

Henry:
And speaking of jobs, I heard you say that you still work your W2. Is that something you plan to continue to do? Are you looking to get out of it?

Lamontis:
Yeah, I’m looking to get out of it. I think this probably would be my last year there. I think I’ve gotten to the point where my cashflow from my rentals has exceeded my W2 month to month income. So along with that and the flipping, I think I’m able to pull away after this school year.

Henry:
Okay, that’s awesome. Well, I hope they’re not listening to

Lamontis:
BiggerPockets

Henry:
Before you get to tell. But no, I mean it’s super cool that you kind of took the time to build your business the right way and it gives you the opportunity, the freedom to be able to choose to leave at the right time because I’m sure having the job helps you stay bankable, which helps you be able to continue to grow your business. One last question. I heard you say you have a va. What does your team look like if you’re doing 10 flips, you want to scale to 20, do you have a big team around you?

Lamontis:
It is mainly just me. I made that one hire in the va, but I have a pretty decent construction crew that does most of my houses. So just having those and not having to search for contractors from deal to deal, man, they’ve been really, really good. If I had to get the MVP to anybody within my business, it would be those

Henry:
Guys. You tell ’em a good contracting crew is literally the missing link in this. If you have that, you can go pretty far. So I assume that these contractors are third party, so they’re on a contract basis, they’re not hired.

Lamontis:
No, no, no. They’re 10 99. And so that’s another thing that motivates you as well, because when you have these contractors, you have to keep them busy. Yes, you do. So I’m having to make sure I’m keeping deals constantly coming, because if not, they’re going to go find work elsewhere. So that’s another thing that just motivates me to keep buying. Man, that’s amazing.

Henry:
Well, Lamont is, I think your story is truly inspiring. I love what you’re doing for your family. I love that you’ve created a business that fits your lifestyle. I think that’s important for people to see because I think sometimes people feel like they need to build this business and just scale it to the moon, and that’s not necessary. You can build a business that fits and provides the lifestyle that you want and you can just try to maintain that going forward. So I love how you’ve done that. I love how you’ve done it fairly quickly, and thank you so much for sharing this inspiring journey with people.

Lamontis:
No, I appreciate you for having me, man. Just grateful again to be here.

Henry:
Thank you, Latis for joining the show today. If you think the BiggerPockets audience could learn from your own investing journey, you can apply to share your story just like Lamont did at biggerpockets.com/guest. I’m Henry Washington, and we’ll be back with another episode of the BiggerPockets podcast in just a few days. Thanks for listening.

 

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$5,000/Month Cash Flow from 3 Small Multifamily Properties in JUST 5 Years

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Making $65,000 in yearly cash flow from three rental properties?! Today’s guests are on a mission to create generational wealth, and they’re doing it with an investing strategy YOU can use to scale your real estate portfolio fast, too—small multifamily properties!

Welcome back to the Real Estate Rookie podcast! Daniel and Rebeca Hawthorne didn’t come from money, but they’re looking to reverse that trend and give their family a much better life. In just FIVE years, they have built a small multifamily portfolio of 32 rental units. How did they do it? In this episode, they’ll share how they leveraged home equity to buy their first, second, AND third rental property!

Of course, it hasn’t all been smooth sailing. Daniel and Rebeca have had a few tenant horror stories, including one that involves a fraudulent caretaker and over $30,000 in property damage. But despite all the hurdles and growing pains, they’re building massive wealth by amassing units and slowly converting long-term rentals into medium-term rentals for higher cash flow. Stay tuned to hear their full story from childhood poverty to financial freedom!

Ashley:
We’ve said it before, but real estate is one of the best wealth building strategies the beginner investor can engage in.

Tony:
And today’s guest, Daniel and Becca Hawthorne are the embodiment of that principle from growing up with housing instability as a young person building a 32 unit portfolio in just five years, it’s literally a blueprint for how ordinary everyday people can create extraordinary wealth through strategic real estate in investing.

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

Tony:
And I’m Tony j Robinson. And let’s give a big warm welcome to Daniel and Becca. Guys, thank you so much for joining us today. Absolutely. Thank you.

Ashley:
Well welcome to the show. I want to start off with Daniel, could you walk us through on kind of a high level your journey of getting your first multifamily property?

Daniel:
I had heard about real estate investing, had a number of friends who either had parents who got into it or they themselves did, and it seemed somewhat impossible for me. But nevertheless, I started looking at the BiggerPockets podcast. Really, I think what happened for us was that I ended up in the spot where we had some good capital coming in, and then I started to take a deeper look at the BiggerPockets forum in particular because I realized I had a lot of questions despite all the research I had done. And the forum allowed me to tailor the questions towards whatever it was that we were looking for, whether it was, hey, we need to have insurance, or how do we find an agent? How do we even identify what the right market is? Do we invest in the city we live in or elsewhere? And just got a bunch of information through that and was able to really leverage the forum to validate some of the things that I had.
And then of course, we pursued our first property, which was an eight family unit and not the best part of St. Louis. So we did decide to invest in the city we live in. And it wasn’t the best property, but the investment, the listing price and things like that, it allowed us to get into it. And it was also, it was turnkey, so it was an easy lift, so to speak. And then we had property management set up and things like that. And so I would say it was not a part of our portfolio today, but it was certainly the exact multifamily unit that we needed to get started.

Tony:
Daniel, I want to go back to something you said said it seemed impossible. And I think that’s such a big statement, but I resonate with it because I know for me it seemed like a reach when I first got started. And I’m sure for a lot of rookies that are listening, it can almost feel impossible. But for you specifically, why did it feel impossible and at what point did you realize it actually was a possibility?

Daniel:
So outside of the capital component, so this was a $300,000 eight family multifamily building. And when I say that, some people in other markets may be like, wow, 300,000, and with that many units, that’s quite the steal, but it is still quite a bit of money, especially for a new investor. But outside of that was just the fact that you’re stepping into something you’re unfamiliar with, don’t have any experience with. At the time, this was in 2020, our youngest was just 18 months I believe, and our oldest was three at the time. So two young kids bouncing off the walls. At some points, I felt like even our marriage was at risk just because that’s what happens when you have young kids. So let alone now we’re stepping into investing in something that’s going to provide housing for other people and all the sort of things that come along with that, even with property management. So it was, when I say impossible, it was because of just all the other things we had that we were juggling that was going to make this less likely to succeed in theory. But in actuality, that’s far from what we experienced.

Ashley:
Becca, why did you both decide to end up going towards multifamily as your strategy? There’s short-term rentals, there’s flipping, there’s all these different strategies. Why did you end up deciding on multifamily?

Rebeca:
So for multifamily, we sort of felt like just getting more units at once and being able to take care of them altogether at the same time seemed easier than just a door, A door all in different places. And even I have two midterm rentals in our fourplex and just being able to always be there and flip there, flip ’em about every three months, it’s just easier just to have everything under one roof.

Ashley:
I have to agree with that. When I worked for a 40 unit apartment complex, just having everything under one roof, it was you have one roof to take care of. Everything’s in the same place for one handyman to come take care of that property instead of having 40 single family homes located all around the city, there is that huge advantage. I do want to get into more of your story, but first we’re going to take a quick break and we’ll be right back after this and we’ll hear more about your investment strategy and how you guys have been able to increase your cashflow in just the last couple of years. So we’ll be right back.

Tony:
Our quotes. We are back here with Becca and Daniel, and I know for both of you, like many real estate investors, part of the motivation to get started is the desire to build generational wealth. And everyone I think strives for that for different reasons. But what does it mean to you or why is it important for you all to have that given the circumstances you guys grew up with?

Daniel:
I was born in Los Angeles, born in South Central in the eighties, which was really, really tough time to live in that part of the country. And not only that, but there was a period of time where myself, two older brothers and my mom, we were homeless and I was a little boy, but my mom would share stories with me around what that was like living in shelters and things like that. Having three boys, three little boys at the time, and being a young mom herself. And so those stories throughout my life have been motivation for me. Whenever I feel like I can’t do something or something’s impossible like I shared earlier, those are the things that I kind of look to bring out the inspiration and really to say, you know what? This was also impossible to be a black boy in South Central in the eighties to make it out to be where I am today.
At that point in time, that was also impossible. So I just have defied the odds in a lot of areas of my life. And this real estate is just another way to do that and to bring some value to our kids and the family that we’re building so that they don’t have to experience that. Certainly there are other challenges that then come with how do you not have entitled kids and all those sorts of things that come with this, but making sure that from the foundation that we’re creating, we don’t have to be in a situation. They don’t have to be in a situation where they aren’t experiencing lack of housing or situations like that.

Tony:
Yeah, and I appreciate you, Daniel, being candid with your experiences growing up because I think a lot of the challenges that we face as people shape who we become, and there are different ways to respond to challenges. You can either use them as excuses to not get better or you can use them as a motivation to find a better situation for yourself. And it sounds like you focused on the latter, but I think the question that I want to ask you that really applies to everyone that’s listening, and for all of our rookies that are listening, even if they’re not growing up in a tough neighborhood, there’s still probably people around them who don’t see real estate investing as a path to go down or who have negative ideas or limiting beliefs around what’s possible. So the question that I want to ask you, Daniel, is what do you think it was that you did differently to push out the noise, focus on what’s important and actually put yourself in a position to experience all the success that you found so far today?

Daniel:
I think once we realized that real estate was the path we felt we wanted to go down surrounding myself with individuals that had already established some level of success, individuals who were in the same stage that we were in where they’re, and then also seeking out within those groups, seeking out people who were maybe in similar stages, so maybe young parents, interracial couples, others that people of color and things like that. And what that did for us is to again, validate that, hey, this is possible. And it’s not just someone who’s been doing this for 20 years and they’ve got billions of dollars of assets. These are people who again, don’t either haven’t gotten their first deal or maybe earlier in their journey. And that I think it creates again this mindset that this is doable, this is something I can achieve. And then from there you become that person for someone else down the road.

Ashley:
That’s such great advice right there. And I’ve seen a lot of other really successful investors talk about that, how they are pretty open about how they’ve dropped friends because they don’t fit into what their goals are and they’re like as awful and as mean as that sounds, they want to surround themselves with other successful people. And there’s also that saying of you never want to be the smartest person in the room. You always want to be the person that’s trying to achieve where these other people are at and surround yourself and will help you 10 x your life, 10 x your goals, 10 x your success being around other people that you have these kind of lifestyle skills and things in common that will be able to help you achieve the success that you’re looking for. And that’s not necessarily using these people for the resources they have.
This is really just being around people who are like-minded can just change what you’re capable of. When I first started real estate investing, I didn’t know a single investor except the guy that I worked for and he didn’t even know anything about investing, he just did it as a side hustle to his regular business. And when I found just like you and I found BiggerPockets, I was in the forum every day. I’m like, oh my gosh, I can do seller financing, I can do all of these things. And it was life-changing, just being able to talk and interact with other investors. But you guys have been able to grow your portfolio over this time from three properties to 32 units altogether. So what have you been able to do to be able to create this really impressive portfolio?

Daniel:
I think to start the first property we acquired, we did do, we had a property manager. We said that hey, if we purchased anything over four units that our lifestyle was too busy and too consumed already that trying to manage that ourselves would be a failure. So that pm, although very costly, a lot of things we talk about where it’s not their property, so not necessarily bargain shopping for maintenance and things like that, whenever things have to happen or even capital expenditures and things like that, it’s not their property. So they have certainly allowed us the capacity to do more. And even with dealing with some of the tenants early on, even when we were doing some showings, we had some tenants that were asking us, Hey, are you going to be the new owner? And I got this thing that I’ve been waiting on and already trying to pull us into some of their personal things.
And that moment for the very first unit, the property manager, the projected property manager was like, see, this is exactly why you need us kind of thing. And it certainly resonated, but I think just this was also during the time where there was the eviction moratorium. So we purchased in late 2020, and so that in 2021 it was full on covid and you couldn’t evict tenants. And so tenants are very savvy, they’re very informed with some of these laws. And so tenants weren’t paying rent and they knew that they didn’t have to and they weren’t going to get evicted. Our property manager knew about the different ways to navigate that and get tenants access to funding that would cover their rent and basically filled out these forms for them and just had them sign. That’s stuff we would’ve been able to do ourselves that through that relationship with our pm, we felt like, okay, this is going well.
Next time we get some more capital to invest, let’s do it again and let’s do it again. And so we’ve scaled up quickly through leveraging, I’d say the property manager having established insurance, having a playbook for our lease agreements and attorneys and all that sort of stuff. And to the point where now we’re doing some things which Becker can share around long-term versus midterm, but also being able to take on some of this more ourselves. So in areas where we can, because of the profile of tenants or the area location of the property, it’s maybe not as busy. And so we are currently doing some self-management as well as leveraging PM for some of the others.

Tony:
And I think that’s normal to kind of see Ricky’s go from hiring a manager to do it initially to eventually bringing on a PM to help. And I want to get into some of the strategies that you guys are leveraging to really juice some of your cashflow here. But before we jump in, I think the question that might be on every rookie’s mind right now is 32 units. That’s a lot of scale in a relatively short period of time. So it sounds like guys that you just saved up for that first property, but just give us the quick overview of how you funded those subsequent transactions. I think most people can wrap their head around the first deal, but the second or the third and beyond I think is where people start to get a little fuzzy. So how did you actually fund the subsequent transactions?

Daniel:
We leveraged HELOCs throughout the entire process. Essentially. We did a HELOC on our primary residence. We had enough equity built in, so we did a HELOC on our primary residence, and we’re able to just continue paying that down through some of the cashflow and some of the commission we made from just our corporate jobs, our day-to-day jobs.

Ashley:
And when you did this, when you worked with the bank, what type of loan did you do with them? Was it just a conventional investment property? Was it 20% down, 30% down? What were the terms of the loan?

Daniel:
Yeah, so we did the first one. And so we’ve done four deals total. We did a 10 31 exchange for one of the buildings. So we’ve done a total four deals. Three of those deals have been with five year arms. And so after five years you have the big balloon payment. We haven’t hit five years for any of the ones we own today, but the interest rate, the first one was 3.7, somewhere around there. And this last one we did last year, the interest rate’s 6.2, but it’s also a five-year arm.

Ashley:
Did you do these on the commercial side of lending instead of with the residential?

Daniel:
All except one. So we have of the bill. So we had the eight family, two 14 families, and then one four family, which that one was more of the conventional. That’s a 3.26% interest. So 30 year for that one.

Ashley:
I would love for you guys to explain what you mean with a five year arm and maybe some of the differences you’ve experienced going with the commercial side of lending compared to residential side,

Daniel:
We’ve done all three of the bigger units, the commercial multifamily through US Bank. We’ve probably interviewed 15 to 20 different lenders out there. And US Bank just for us has worked and it’s come back with the best packages. And really what we look for is paying the least amount down as we can, but then obviously balancing that with interest, which then drives those monthly mortgage payments. We’ve had scenarios where maybe we don’t pay as much down, but that interest rate’s rather high and therefore the mortgage payment’s high US Bank has been really good from that perspective for us to where they have basically we take, it’s been about 20%, I’d say the first deal, 20% of the listing price was what we had to put down, but as the markets have tightened, they’ve, and also the value of where we’re going is increased. They have different limitations around how much they can lend. So the property we just bought last year was 1.4 million. The max they could do for a loan was 900 K, so it’s well above the 20% benchmark previously. But that through the interest rate that they had and the mortgage payment and everything else, it made the most sense for us.

Tony:
One of the other strategies you mentioned to help you scale was a 10 31 exchange, and I’ve done one of those as well to help move from one property to the next. But can you just give a quick overview of what a 10 31 exchange is and what did you guys sell and what did you end up purchasing with it?

Daniel:
Yeah, for sure. So essentially it’s a vehicle to, if you have some capital gains meaning, so what you’re all in on the property for what at least the IRS sees as you all in on the property for if you sell the property for something above that, then that’s considered earnings and you get taxed for that. So with the 10 31 exchange, you can put all or some of that money in a vehicle, a third party sponsor that basically allows you to sit that fund, those monies there until you find something. And I believe you have 180 days to go under contract on something, and there’s another limitation around when you have to close, but essentially you’re saying, Hey, I don’t want to pay taxes on this. I’d rather reinvest this somewhere else.

Ashley:
And how much did you pay for your 10 31 exchange? Because in my experience, they’re not relatively expensive to do and it’s worth the cost to save on those taxes.

Daniel:
So we’ve done one and it was a few hundred bucks, very inexpensive.

Ashley:
So let’s talk about cashflow. Can you guys break down some of the numbers? How were the properties performing and kind of give us a little insight into that.

Daniel:
I think with our strategy changing, which I think we’re going to get to probably here in a second, we’ve realized some different things. Basically if we’ve continued to operate the way we are or had been, which is all long-term tenants, the cash flow, it is going to take us a little bit longer to get to the cashflow goals that we have. And essentially we were about the first year for all properties, and this is kind of one of the expectations sometimes people set is don’t expect to make a lot. There’s taking over a property, there’s some learnings that you have, tenants are going to go maybe because different things, different management, all that kind of stuff. And so just being patient. So because we’ve purchased the property over the past four years, once one property every year, that’s kind of continued to have that situation where at least our recent acquisition we see a loss for. And once you get more mature, we’ve seen about a hundred to 125 per door on what our long-term units. So multiply that by 32 units per month, and then we’ve shifted recently to furnished midterm units. That’s allowed us to really magnify our cashflow and really optimize a lot at the same time.

Ashley:
So now that you have these properties and you’ve built up this successful portfolio, it seems like Daniel, you kind of took the lead as to being the person that wanted to start in real estate. So Becca, how have you been able to integrate yourself into helping build this portfolio?

Rebeca:
I was working in healthcare during Covid, just the regular hours. And then we had our two daughters and well, actually I was pregnant, so I left the hospital and whenever I did that, our CPA was like, Becca, if you’re interested, it would really help you guys if you would get your real estate license. The first year I wasn’t able to get it in time. We ended up just calculating my hours and logging everything, which was sort of difficult. And then the next year I was able to get my license, which was helpful. And then it also is very helpful because whenever we’re looking at properties, just cutting the middleman out and being able to just do all the things, having direct contact with people selling the properties and such was very nice. And then my broker, I actually ended up asking our property management that broker, and he’s like, oh yeah, I’ll hold your license.
I’m like, okay, well, I’m just doing this for us. I’m not going to be doing it for I other people in homes, but it’s a nice little group of investors. So it’s fun and I learn a lot from all of them. But then, yeah, so then after I got my license, I became a little bit more involved. And what were we you doing to where your friend mentioned I wanted to do midterm, I wanted to furnish, I really wanted to furnish some stuff. And he said, yeah, you can list it on Furnish Finder. So we renovated and furnished our first unit in a fourplex listed it, and I had so many healthcare providers from covid, it was just nonstop. I think we were charging a thousand for a unit, and then I listed it for 2000 and for two years with barely any vacancies, maybe two weeks in between if that, sometimes I would have ’em the next tenant moving in the next day.
But yeah, I even had one that was three month, and then they kept resigning for a year and they had their baby in there, and I saw the little baby become 1-year-old. I’m like, oh, wow, that’s a long time that you guys have been here. And so that was pretty awesome. And then we did it again and kept him busy and filled. I dropped it down a little bit just once Covid sort of leveled out because the nurses and, well, not just nurses, all the healthcare travelers were getting paid a little bit less. And I joined Facebook groups and would talk to traveling nurses and sort of just sort of see from the outside in and look at what was going on, if they were getting paid more, what they wanted in their units and that kind of stuff. But really they were on there just to look for furnished places. So yeah, I would get my leads from Finder. And then most recently we switched over and started using apartments.com and I still get my leads from Furnish Finder, and then we sort of use apartments.com to manage and collect rent and all that. It just makes it easier to have it all together, but oh yeah. And then I just did another one. So I furnished another unit in January.
So now we have three midterm rentals that are doing pretty well. I really like to do all the handy stuff myself. I sort of grew up doing it. My dad was a contractor, and so that’s been fun. And my first one, I actually flipped completely myself with my little cousin on winter break. He helped me out and I gave him some cash and gave him an extra set of hands. And we did that in eight weeks and we gutted it.

Tony:
I love that, and I love that you guys are experimenting with different strategies. And again, I feel like that’s a hot button topic right now for rookies is asking the question, well, where can we get the best returns? And Daniel, you mentioned earlier, one 20 to 1 25, somewhere in that ballpark per door on the long-term side. And if you can exponentially increase that number with a little bit more work furnishing the place, getting it renovated, it may be worthwhile. Do you guys anticipate, because you said right now Beckett’s three out of the 32, do you guys anticipate converting more of your current long-term over to the furnish to midterm?

Rebeca:
Yeah, I think so. I think also from what I’m seeing, a lot of young professionals, they don’t really have the cash to put down furniture, but they want to live in that really cute space and make it feel like home. And I think not only just traveling healthcare providers, but just people wanting furnished property, they’re liking. And with the healthcare providers too, it’s like the pretty low key tenants. They just sleep or work and pretty respectful of our stuff. And I mean, after several years, I don’t really have to fix, nothing’s really been broken, and I really try to get furniture and textiles that we will stand the test of time to sort of help with that, but I think we’ll keep doing it if we can.

Daniel:
Yeah, we looked at short term, the whole Airbnb, VRBO style, and then with all of the uncertainty around that market, but then just hearing different things go on in some of those units knowing that you’d have to potentially turn over a unit or clean the unit daily, all those things really turned us away. And so meanwhile, St. Louis is a pretty big hub with traveling healthcare professionals. There’s a shortage of them, and so they’ll bring ’em in and looking for a place to stay. And so what better place to stay than what we have to offer? And I think in addition to that, Becca loves to bargain shop, and so she’s going to Restoration Hardware or Pottery Barn

Rebeca:
Outlet, pottery Barn outlet

Daniel:
Finding stuff and saying, oh, this would be good for a future unit now. I’ll be like, I’m numbers guy. I’m like, well, we don’t have that unit right now, so even though it’s 90% off, we don’t need that furniture. And so it’ll just sit in our basement until we’re ready to use it,

Rebeca:
Or we switch out furniture in our house a lot. I’ll buy furniture and we’ll put it in our house and be like, eh, well we don’t need that anymore, so we’ll push it off to the unit. So that’s fun.

Tony:
I’m laughing because we have the same conversation in my household, and it’s like my wife will buy things for properties that don’t yet exist, and then they just live in our garage for months at a time. And we actually, we just cleaned out the garage not too long ago. We ended up giving away blinds that only fit a certain specific window, and it’s like, yeah, we got to get rid of some of this stuff. But I want to go back to one thing you mentioned was like, Hey, it was your tax professional that encouraged you guys to, or for at least one of you to go out and get your real estate license for Ricky’s that are kind of unfamiliar with why your tax professional encouraged that. What was the benefit of you guys doing that

Rebeca:
For the tax cuts? Pretty much she said, well, Rebecca, if you can make this your job, your career, then we can give you more tax breaks, which is great. Whenever you see it on the paper before we turn in our taxes, it’s like, oh, wow, okay, this is really helpful.

Daniel:
So I have a full-time corporate job. And essentially she said, Hey, Rebecca stopped working before we had our second daughter, and she’s been doing some stuff on the side, started her own design business, which ties back into what we’re doing here. But essentially because of that, our CPA said, Hey, you know that you could be a real estate professional. You just got to demonstrate 750 hours a year, which not having a full-time job you can do, obviously me having a full-time job, that would be a little red flag, right? Like, Hey, this person’s not doing that. And so that first year we heard about it, our CPA basically said you could save $20,000 in taxes if Becca was a real estate professional. And so think probably the next week Becca’s signing up to get into that program.

Ashley:
Well, we have to take our last ad break, but we’ll be back with more after this. Okay. Welcome back from our break. So I did hear that you guys had a very unfortunate tenant situation that cost you $30,000 on one of your recent acquisitions. How did you handle that and what actually happened with this tenant?

Daniel:
Yeah, so we bought what is by far our best property so far. And this was one that we were very excited about. The day after we closed, I get a call from the seller that said, Hey, we need to talk, got some just information I want to share you. Nothing big but just got to update you. And what he shared was that there’s a tenant that had basically a fraudulent caretaker in the unit, someone who was supposed to be taking care of this elderly tenant but didn’t have the credentials. Ended up being someone who was more of a nuisance and had been doing drugs in the unit, had been threatening other tenants, and all sorts of things had been going on. They had a right to possession with an attorney that it was supposed to happen within weeks of us taking over the property. That didn’t happen because there’s just so much that has to go into actually taking possession over property and also depends on the state that you’re in. And so two or three months of multiple calls with the attorney going to the unit ourselves, multiple calls with the police

Rebeca:
And the tenants always keeping us updated too. They were always letting us know what was happening around with that guy.

Daniel:
Tenants moving out because of it, they just couldn’t deal with it anymore. And essentially it was just someone who said, Hey, I don’t have the credentials to get paid for taking care of this tenant, so I’m just going to destroy this tenant’s unit to get my money’s worth. That was effectively what he told the tenant. And the tenant was sort of hostage. They were not fully disabled, but this person actually nailed a two by four on the other side of the single door that got you into the unit. And they also nailed the windows so that way no one could get in. And if they needed to get out, they could drill unscrew the two by four that was on the window and they would climb through the window. But this elderly guy couldn’t really do that. So it was just a very,

Rebeca:
Yeah, he was actually in a wheelchair and one night sent us a video of the wheelchair that was down the basement steps. So that was sort of scary for us. We were worried about our tenant. So

Daniel:
Yeah, so it was months of these stories tenants moving out, and it was definitely not the highlight of our investment at that time. And so finally we got past it. The individual ended up being out of the unit, threatened someone, had some drugs on him, and that resulted in that the police coming out. And because of the drugs, they actually booked him, they took him him to jail, and they said, Hey, he’s probably going to be released in the morning. This was late at night, 11:00 PM I believe he’s probably going to be released in the morning. Whatever you need to do, do it now. And so myself, and we did have the previous property management, they were kind of helping out as they transitioned. And so myself and that, the lead guy over there, we went to the actual tenant and said, Hey, what’s going on?
Got his side of the story and just we’re like, Hey, do you want this person in here? He said, no. So we had him file a restraining order, and that ultimately is what allowed us to keep this guy who was the fraudulent caretaker away. And from that point on, we still had to go to court to make it official. And then that was sort of our finally, at least them in the unit. They both transitioned out, but then we had a bunch of damage to address, and that’s where Becca’s handy, handy woman work came in. And we spent another, I’d say basically turning, there was

Rebeca:
A motorcycle in the kitchen and diapers were shoved in the wall. For some reason we don’t.

Daniel:
Yeah, it was, they had street signs. They had

Rebeca:
Oh yeah, street signs they stole, which the police couldn’t prove that he stole. Yeah,

Tony:
It was a lot. We’ve heard some interesting stories, but that’s got to be one of the more interesting, it’s not even a tenant issue, it’s someone that the tenant

Rebeca:
Hired this

Tony:
Issue, which is all the more interesting. Just one other question, just from my own understanding. The lease was signed with the disabled person in the wheelchair, not this caretaker, right? Correct.

Rebeca:
Yeah,

Tony:
It’s interesting.

Rebeca:
Pretty much a squatter, the other guy.

Tony:
Oh, okay. Is that how they would handle it? It’s interesting that they could squat in a unit that someone else has assigned lease for, and it wouldn’t be easier for you guys to get ’em out. I’ve never experienced anything like that. Ash, I don’t know if you have, but I guess just going through that experience, guys, I mean, I don’t know if there is a way that you could have avoided that or handled that differently, but I guess were there any lessons you learned going through that experience that you would apply to any future deals or transactions?

Daniel:
Yeah, fortunately, it’s one of those things where there’s some protections you can do. One is extra, extra due diligence, making sure you check every unit, getting the leases up front, all this. But even with that, so in this case, and they don’t necessarily, they don’t call ’em squatters because squatters someone who took possession of a property that they didn’t have necessarily, and then they established residency over time, whereas this case, they were invited by the tenant to be there. They kind of had a key. So they’re considered a tenant at that point. And so in the state of Missouri, there’s just not a lot of laws around that. I know Texas recently passed something that in these types of scenarios, there’s more protection, but that doesn’t exist in Missouri.

Tony:
We talked about this in the podcast, gosh, I dunno, maybe 18 months ago, give or take, but there’s a guy, I think he was a previous bounty hunter. Do you remember this? Ashley? And he started this service?

Ashley:
Yeah, he has a really cool name. What is it? It’s like flash or something, I dunno.

Tony:
Yeah. Some name that you would assume would do a job like this, right? Just like a real cool guy name. But he would basically squat on squatters so landlords could pay him. And then he and his team, they were all, again, they were like bounty hunters, ex-military, some sort of field like that. They would observe, get to know when they go in, when they go out. And when the squatter would leave the property, they would go in, break in and squat on top of him and just live there until the person moved out. And he had done it multiple times with multiple different squatters, and the success rate was like 100%. So I guess for anyone that’s listening, that needs a, I wouldn’t say a nuclear solution, but if you’re looking for maybe a creative way to get a squatter out, go find someone who’s a better squatter than they are to kind of invade their space.

Daniel:
Oh, that’s great. I wish we had known the ideas we came up with that we didn’t go through with were put a snake in the unit.

Ashley:
Well, you definitely had a tricky situation where there was an actual tenant in there that wasn’t giving you problems, and then it was just the caretaker. But thank you guys so much for joining us today and sharing your story. Can you let us know where everyone can reach out to you and find out more information?

Daniel:
Yeah, absolutely. So my email is Hawthorne d [email protected]. Facebook is Daniel Hawthorne. I am off all other social media, but those are the ones that I have right now on LinkedIn is the other social media.

Rebeca:
Oh, I don’t really look at my email that much, so just connect him and then he’ll let me know if you need me.

Ashley:
We really appreciate you both taking the time to come and share your experiences here with us on the Real Estate Rookie podcast. I’m Ashley. And he’s Tony. And we’ll see you guys next time.

Help us reach new listeners on iTunes by leaving us a rating and review! It takes just 30 seconds and instructions can be found here. Thanks! We really appreciate it!

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When it comes to real estate investing, knowing the true value of a property is everything. Overpaying for a deal can destroy your returns while undervaluing a potential investment could mean missing out on profitable opportunities. The best way to ensure you make data-driven decisions is by running accurate real estate comps (comparable sales).

While many investors rely on free tools or outdated MLS listings, serious investors turn to PropStream—a platform designed to provide real-time property data, nationwide MLS-level comps, and deep market insights. 

In this guide, we’ll break down how to analyze property values accurately, avoid risky deals, and maximize your profits.

What Are Real Estate Comps, and Why Do They Matter?

Comps (short for “comparables”) are recently sold properties similar to the one you’re evaluating. By comparing your target property to similar properties in the same area, you can determine its fair market value, estimate potential resale or rental income, and avoid overpaying.

However, not all comps are created equal. The key to an accurate valuation is ensuring your comparables:

  • Are similar in size, age, and condition to the property you’re evaluating.
  • Have sold recently (ideally within the last three to six months).
  • Are in the same neighborhood (avoiding different school districts, ZIP codes, or major streets).
  • Have similar amenities and upgrades (a fully remodeled home versus a fixer-upper won’t be an apples-to-apples comparison).

Why PropStream Provides the Most Accurate Comps

Many investors rely on Zillow, Redfin, or county records for comps, but these sources often lack key data points, miss off-market sales, or have outdated property details. This can lead to bad investment decisions based on incomplete or inaccurate information.

Here’s why PropStream is the best tool for analyzing property values:

1. MLS-level comps without needing an agent

PropStream gives investors direct access to MLS sales data, allowing you to pull comps just like a real estate agent would—without needing a license. This includes:

  • Active, pending, and sold listings for a full market view.
  • Off-market sales (which platforms like Zillow don’t always capture).
  • Adjustable filters to refine your comps and exclude irrelevant properties.

2. Nationwide data for any market

Unlike many MLS tools that only provide local data, PropStream lets you analyze property values in any market nationwide. Whether investing in your backyard or looking at out-of-state deals, you can evaluate properties with the same level of detail anywhere in the U.S.

3. Automated comping features for faster, smarter decisions

Manually sorting through comps can be time consuming and prone to human error. PropStream’s built-in comping tool allows you to:

  • Automatically pull the best-matching comps based on location, recency, and similarity.
  • Adjust property features (like square footage or lot size) to fine-tune values.
  • Overlay market trends and pricing insights to predict future values.

With these tools, you eliminate guesswork and ensure valuations are accurate before making an offer.

How to Use PropStream to Analyze Property Values

Step 1: Search for your target property

Enter the property address in PropStream to access instant details such as ownership history, mortgage information, tax assessments, and previous sale prices.

Step 2: Access the “Comps & Nearby Listings” tool

Navigate to the Comparables & Nearby Listings section to find:

  • MLS sales data (including closed, active, and pending sales).
  • Public record sales (to capture off-market transactions).
  • Rental comps (for BRRRR investors and rental property analysis).

Step 3: Filter and adjust comps for accuracy

Use PropStream’s filters to refine your comps based on:

  • Sale date (prioritizing the last three to six months).
  • Distance from the subject property (within half to 1 mile for urban areas; slightly wider for rural areas).
  • Property type, square footage, bed/bath count, and condition.

Step 4: Analyze trends and adjust for market conditions

PropStream provides market trend overlays, showing how prices have shifted over time. If the market is cooling, you might need to adjust your valuation downward. If demand is rising, the property may appreciate faster than expected.

Step 5: Make a data-backed offer

Once you’ve determined the property’s fair market value, you can calculate your maximum offer based on your investing strategy. Whether you’re flipping, wholesaling, or holding as a rental, PropStream helps ensure you never overpay.

How Accurate Valuations Save You Thousands

Without accurate comps, investors risk:

  • Overpaying for a property and losing profit on resale.
  • Underestimating renovation costs by comparing to higher-end homes.
  • Using outdated or irrelevant data that skews market value.
  • Missing out on deals by not seeing hidden opportunities in off-market transactions.

Using MLS-level comps and nationwide data, you can confidently analyze deals and ensure you invest in properties with the highest profit potential.

Data-Driven Investing Wins Every Time

In real estate, guessing leads to losses—data leads to profits. Leveraging advanced comping tools allows investors to eliminate uncertainty, analyze property values precisely, and secure the best deals without overpaying.

If you’re serious about avoiding bad investments and maximizing returns, PropStream is the ultimate tool for making intelligent, informed decisions every time.



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If you’ve been watching the markets and wondering why mortgage rates remain stubbornly high—despite whispers of economic softening—you’re not alone. It’s mid-April and many expected mortgage rate relief by now. After all, inflation has cooled, and there’s been talk of eventual interest rate cuts.

And yet here we are. The 30-year fixed mortgage rate continues to hover near 6.5% to 7%, remaining well above where many anticipated it would be by spring. It’s tempting to point to President Trump’s tariffs as the primary driver, but is that really the full story? 

Even before yesterday’s Treasury sell-off, upward pressure on 10-year yields was already building. The events of April 9 simply accelerated a trend that was already underway.

It turns out that part of the answer may lie in the intricate—and risky—world of hedge fund trading, specifically a strategy known as the basis trade. While this might sound like something pulled from an episode of Billions, it has very real consequences for real estate investors like you.

Let’s break down what’s happening and how you can navigate the uncertainty.

The Scene: Hedge Funds, Leverage, and the Basis Trade

Imagine a hedge fund borrows billions through the repo market—a short-term lending market backed by securities—to buy U.S. Treasury bonds. Simultaneously, they sell Treasury futures to lock in a small price differential. The idea? Pocket the difference between the cash bond and the futures contract.

But here’s the catch: These trades are highly leveraged, often by a factor of 15 to 20. According to the Treasury Borrowing Advisory Committee (TBAC), as cited in ZeroHedge’s April 8, 2025, article “Absolutely Spectacular Meltdown,” “20x appears to be a good approximation of leverage typically used in these trades.”

When markets are calm, this can generate modest gains. But when things shift? Losses are magnified. That’s what happened in early April, when the 10-year U.S. Treasury yield, after dipping to a low of 3.89% on April 6, 2025, at 7:30 p.m., reversed course and spiked sharply higher, according to the Federal Reserve Bank of St. Louis (FRED Series DGS10).

Act One: Bond Dump Sparks Rate Surge

In just two days, the 10-year Treasury yield surged from 3.89% to 4.38%—a 49-basis-point swing. This rapid rise in yields triggered significant losses on these basis trades. Since bond prices move inversely to yields, leveraged hedge funds were suddenly underwater. To meet margin calls, many began liquidating large positions in Treasuries, creating further selling pressure.

That’s where real estate investors start to feel the pain.

Mortgage rates are closely tied to the 10-year Treasury yield, typically with a spread of about 1.5 to 2 percentage points. With yields above 4.3%, mortgage rates remain elevated. Instead of dropping toward 5%—which many hoped would improve affordability and stimulate activity—we remain locked in at levels that continue to sideline potential buyers.

According to Altos Research’s April 4, 2025, Weekly Market Report, the national median list price sits at $449,000, up 5% year over year. But homes are lingering on the market longer—averaging 111 days, a 4% increase from last year. Elevated mortgage rates are a key reason buyers are hesitant to pull the trigger.

Act Two: Sentiment Slips and Price Cuts Rise

The market doesn’t like surprises—especially when headlines reference “Investors Fear Another Big Blowup of Basis Trade as Treasuries Lose Haven Status.” As hedge funds rush to unload Treasuries and trading liquidity dries up, buyer confidence in the housing market can take a hit.

Per the same Altos report, inventory has grown to 691,171 active listings, a 39% increase year over year. Pending sales are up 23% YoY, totaling 72,191. 

But the real signal of hesitation? Price cuts. Roughly 35% of listings have seen reductions—17% more than this time last year.

Uncertainty breeds caution. Buyers see volatility in financial markets and take a wait-and-see approach. For you as an investor, this could mean longer holding times, fewer offers, and increased competition among sellers. It’s not a collapse—it’s a cooling-off period, with some investors considering strategy adjustments.

Will the Fed Step In?

This isn’t the first time a basis trade shakeout has disrupted the market. We saw similar episodes in 2019 and 2020, which prompted the Federal Reserve to intervene through emergency lending and market stabilization tools. The April 8 ZeroHedge article suggests the scale of the current situation—estimated at $1.8 trillion to $1.9 trillion in leveraged positions—could justify another round of support, possibly via the Standing Repo Facility or a variation of Operation Twist.

But until that happens, Treasury yields—and, by extension, mortgage rates—may remain elevated. For real estate investors, that means staying alert and data-driven.

What Can You Do as a Real Estate Investor?

In a market shaped by forces beyond the usual supply-and-demand dynamics, self-directed investors must stay informed and agile. Here are a few steps you can take.

Track key indicators daily

Keep an eye on the 10-year Treasury yield (FRED DGS10) and SOFR swap spreads (available via the New York Fed or trusted financial data providers). These offer real-time insights into rate movement and market liquidity.

Leverage real estate market data

Altos Research shows inventory is up, and price cuts are becoming more common. That could be an opportunity to find motivated sellers, negotiate better terms, and enter the market in a stronger position.

Explore tax-advantaged strategies like 1031 exchanges

If you’re navigating today’s market with appreciated property, you may consider a 1031 exchange to defer capital gains taxes and reallocate into income-producing real estate. Equity Trust Company, a leading self-directed IRA custodian, has resources to help you understand options for your broader investment goals. You can learn more at GetEquity1031.com or through trusted sources like BiggerPockets.

Final Thoughts

Mortgage rates haven’t come down because real-world hedge fund activity—particularly the unwinding of risky basis trades—is driving Treasury yields higher than economic conditions alone would suggest. What looked like a small drop to 3.89% on April 6 quickly reversed, due in large part to aggressive bond sales in a fragile market.

But as an investor, you’re not powerless. By staying informed, you can continue building your portfolio—even amid volatility.

Here’s to navigating wisely, investing intentionally, and staying ready for opportunity—no matter what Wall Street throws your way.

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. 

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.

The role of Equity 1031 Exchange, LLC (formerly Midland 1031, LLC) as Qualified Intermediary is limited to acting as qualified intermediary within the meaning of Regulations section 1.1031(k)-1(g)(4) for Federal and state income tax purposes. In this regard, Equity 1031 Exchange is not providing other legal, investment, or due diligence services. The taxpayer/exchanger must direct all investment transactions and choose the investment(s) for the exchange. Nothing contained herein shall be construed as investment, legal, tax, or financial advice or as a guarantee, endorsement, or certification of any investments, legal effect, or tax consequences of the transfer, conveyance and exchange of the Relinquished Property, and/or the Replacement Property.



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