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Home prices are falling fast in some prime real estate markets across the country while others remain stubbornly stuck. What’s the defining factor between a stable housing market and one where sellers are actively cutting prices? Housing inventory! This metric defined the 2020 – 2022 run-up in home prices, but the rubber band of demand is snapping back as buyer power grows, housing inventory rises, and investors get even better buying opportunities.

Remember when people said, “I’ll buy when prices drop”? Well, now might be the time.

ResiClub’s Lance Lambert joins us to provide a holistic view of housing inventory, prices, demand, and emerging opportunities. Lance walks through the most up-to-date data on where housing inventory is rising fast, where prices are quickly declining, and which markets are holding on as sellers remain in control.

We’ll also talk about why homebuilding costs are about to JUMP and the reason Warren Buffett sold his homebuilding stocks shortly after buying them. Will construction slow down, limiting new inventory and leading us back into ultra-low supply? If so, this could push home prices higher, creating a prime opportunity for real estate investors.

Dave:
After years of a very tight housing market, more homes are finally coming up for sale, which means that anyone looking to buy a rental property or a primary home has more options to choose from and may be able to find better prices. We’ll get into all the reasons behind this emerging trend and how you can leverage it to benefit your own portfolio on today’s show. Welcome back to the BiggerPockets podcast. I’m Dave Meyer, head of real estate investing at BiggerPockets. My guest today on the show is Lance Lambert. Lance is co-founder and editor in chief of Resi Club, a really cool media company that tracks the US housing market, and Lance specializes in research and data. So I want to break down a few of the trends he’s seeing in the housing market right now that may indicate whether it’s a good time to buy real estate.
We’re going to talk about inventory trends, which I personally think are really the key to understanding the whole housing market because how many homes are available to buy is going to go a long way towards dictating whether you can find good deals or not. But the current inventory situation is a little bit confusing because it’s very different in different regions. What we’re seeing in Florida and Texas is almost entirely different than what we’re seeing in the Midwest and northeast. So we’re going to dig into the data with Lance. He brought all his charts with him and we’ll use those to identify which cities and states across the US might be better buyer’s markets than you’re probably hearing about in the headlines. Then later in the show we’ll discuss a few other topics Lance has written about at Resi Club. He recently put out an article about the shrinking margins for home builders, which could have huge implications on the future of single family, home construction and subsequent inventory. And we’ll also talk about the rising age of the median home buyer in America. Let’s bring on Lance. Lance, welcome to the BiggerPockets podcast. Thanks for joining us.

Lance:
Thank you for having me, Dave. Housing, housing, housing. There is always so much going on in the US housing market.

Dave:
There is so much going on and you do such a good job of summarizing and visualizing everything that’s going on. I am a charts geek and you put out some of the best charts, some of the best heat maps, everything out there. I’m excited to have you here.

Lance:
Yeah, and really excited too. I think BiggerPockets, you have a huge audience and in particular, Dave, I think you put out really good smart content.

Dave:
Oh, thank you. I really appreciate it. Well, let’s jump into some of the inventory trends you’re seeing right now and just for our audience, if you’re new to this concept of inventory, it’s one of the more useful metrics in the housing market, at least in my mind because it sort of measures the balance between supply and demand. There’s tons of different ways you can look at it, but generally speaking, when inventory is stable, you have equal or relatively equal amounts of buyers and sellers in the market. When inventory is going up, that typically means that you have more sellers than buyers and inventory has gone down. The reverse is true. So just wanted to provide a little bit of context there, but Lance, tell us a little bit about what trends you’re seeing in inventory right now.

Lance:
So that’s exactly it is that active inventory, not new listings, active inventory, it’s the equilibrium of supply and demand in the market. So actives can rise active inventory even if the number of listings coming on the market is very low. And the reason that it can rise is because demand could pull back so much. And that’s kind of what we’ve seen in a lot of these Sunbelt markets, these pandemic boom darlings, these remote work booms, the short-term rental booms where there was a lot of people going into these markets to buy during the pandemic housing boom, there was a lot of migration in, and what that did is it drove up home prices even more than a lot of other markets saw. So once rates moved up and the pandemic housing boom fizzled out, these markets were a little more strained relative to local fundamentals.
And because the migration in, let’s take a place like Florida, they were going from between summer of 21 and summer of 22, seeing over 300,000 people on a net basis moving into the state. Now it’s only around 60 k plus, so it’s still positive, but it’s not as much as before. And so what that means is the market has to rely more on local comes to support where prices got to, that becomes a little bit of a trouble. And so it creates a greater demand shock on the market, pushes active inventory up more. Now the other factor is a lot of these Sunbelt markets are more of what economists would call supply elastic, right? Where they have more home building levels, more multifamily home building levels. And so when you’re in this constrained affordability environment and you still have that supply coming in, what has to be moved?
And so builders do a little bit of the affordability adjustments, these mortgage rate buy downs. And so instead of people having to get a 7% rate, 6.5% average 30 year fixed mortgage rate, they could go to a builder, maybe get four and a half, maybe get even three something from some of these builders, some of the deals they’re running. And so what that does is it pulls the attention of some of the buyers who would’ve otherwise wanted to buy an existing or resale home, and it pulls them to the new market. And so the existing and resale market has a harder time selling. And so the active inventory builds. And so this active inventory is really a great metric for the supply demand equilibrium. And if you see active inventory move down quickly, that’s suggesting a market that’s heating up greater competition sellers gaining power. And if you see a market where active inventory is moving up beyond the normal seasonality, that’s just a market where buyers are gaining power. And if it happens very quickly, buyers are gaining a lot of power. And so I’m going to share my screen and actually show some of the data across the country. And for everyone who’s

Dave:
Listening to this on audio, we will describe it to you in great detail.

Lance:
So this is active inventory across the country now versus the same month in 2019. And so the same month in 2019, I kind of use as a proxy for the previous norm for the housing market. And so the housing market went through the boom where active inventory across the country was down 60, 50, 70, 80%, and a lot of markets very quickly from pre pandemic 2019 levels. And then once rates shot up, active inventory on a national level has been building, but some markets have gotten back and above parts of Texas, parts of Florida, parts of the mountain west. And then there’s also this big swath still of Minnesota, Wisconsin, Illinois, Michigan, Indiana, Ohio, and then almost all the northeast, including also West Virginia and Virginia that are still very tight for active inventory. And those are the markets where sellers have the most power. So if you look at this map and you see the dark brown, that’s where sellers have the most power.
And if you see the green, that’s where buyers have the most power. On a state level, you’ll see that four states, Texas, Florida, Colorado, and Tennessee are now above pre pandemic levels. Utah, Arizona, Idaho, Nebraska, Hawaii, Washington State, they’re almost pretty much there. And then you have some other markets that are kind of getting close. But if you go down, you look at a place like Connecticut where there are 3,100 homes for sale at the end of February. And if you go back to February, 2019, there were 14,000. So right now there are 3000 homes for sale and the whole state of Connecticut, and there were 14,000 homes for sale pre pandemic. And so places like New Jersey, Connecticut, Rhode Island, Illinois, Vermont sellers just in New Hampshire and Maine as well, sellers still have a lot of power. And there’s still a lot of other states like that. Virginia, Massachusetts, Virginia, Pennsylvania, Wisconsin, where things are still very tight.

Dave:
So Lance, tell me, approaching pre pandemic levels of inventory, which makes sense to me as a metric, but should that be seen as a good thing or a scary thing for, and I guess it depends on your perspective, but how do you interpret that?

Lance:
So I think the first thing to note is that we were in a very unhealthy housing market during the pandemic housing boom, home prices went up 21% in 2021 alone, which is the most ever in US history for one single, even more than any of the years during the inflationary spike of the 1970s on a nominal basis. And so that’s not healthy, that’s not sustainable, that’s not how the world should operate. And so the market we’re in is a market that is normalizing from an unsustainable increase in housing demand during the pandemic, during the pandemic housing boom, the Federal Reserve estimates that those first two years housing demand went up so much that to match it home construction housing starts would’ve needed to increase 300%. That’s not possible. Housing starts cannot go from 1.4 to then 2.8 million, and that’s only a hundred percent increase then up to 4 million and then over 5 million.
You can’t go from 1.4 million housing starts over 5 million housing starts in a short period of time. There are hard constraints on the market for supply, right? The labor force, only so many people know how to do windows, carpet construction, the foundation, all of that, right? And then there’s the supply chain dynamics where it takes years to build a supply chain for lumber, for windows, for concrete, all of that. And so housing starts moving up 10, 20, 30% is a lot, let alone to go up 300%. And so housing supply, the actual number of units in the country is not elastic like demand is. Housing demand can move very quickly. And so during the pandemic housing boom, housing demand surges, that’s all the stimulus, the ultra low rates, of course the work from home arbitrage effect all of that at play. And so as that occurs, the market cannot absorb all of that demand.
And so the demand that got to transact was the demand that paid the most, right? And so prices overheated and that’s how the market decided who got to actually purchase. And so coming out of that, we’re in this period where the housing market is trying to normalize. And so that normalization in some markets like Austin normalization means correction, home prices actually coming down and some other parts of the country. It hasn’t quite been that it’s just been active inventory starting to build. But to answer your question, I think zoomed out. We don’t want to stay where we were in 2021 long term, but in the short term, for some people in the industry, different stakeholders, it can be jarring.

Dave:
Lance, thank you so much for this explanation. I do want to ask you how all of this will impact housing prices, but first we have to take a quick break and before we go to break, just wanted to say that this week’s bigger news is brought to you by the Fundrise Flagship Fund, invest in private market real estate with the Fundrise Flagship Fund. You could check it out at fundrise.com/pockets to learn more. We’ll be right back. Hey everyone, welcome back to the BiggerPockets podcast. I’m here with Lance Lambert. We are talking all about the, what I think is fascinating topic of real estate inventory. We’ve been talking about some of the overall trends and how inventory has been shifting upward over the last couple of years, and that there’s basically four states right now that have inventory above pre pandemic levels with another couple of states getting close. Lance, I’m curious, do you think that these markets where inventory is either close or above 2019 levels have a risk of price declines? I mean, some of ’em are already seeing price declines, but do you think that’s sort of a trend that’s going to continue?

Lance:
Yeah, so my view of active inventory is that when you see big increases in active inventory, especially if they happen quickly, that is a market where the absorption usually has shifted, where homes are having a harder time selling, and so they’re beginning to pile up on the market. It’s not necessarily that there’s a lot of people in Florida right now who are selling, but it’s that people who are selling in Florida are having a harder time selling. And so the active inventory, what is available in any given month is rising. And so as that has occurred, we’ve already seen pricing weakness in Florida. And so here I have the markets that have enough condos to be measured for condo prices. And you can see that condo prices are pretty much down across the state, and you can go through a lot of these markets down eight, 10, 9%, 13%, and it’s had the most impact on older condo buildings.
So condo buildings built in the OTTs are weaker for pricing than condos built in. The 2000 and tens condos built in the 1990s are seeing bigger price drops than condos built in. The aughts. Condos built in the eighties are seeing bigger price drops than condos built in the nineties, and you can just keep going back every decade. And then for the single family market for Florida, it’s a little more resilient in some pockets, especially in some of the northern Florida markets, it’s been a little bit more stable or it’s been a little bit more balanced as a market. But in southwest Florida, places like Sarasota, Cape Coral, Fort Myers, pun goda, we’ve seen price declines outright for single family as well. A part of that is that South Florida saw a bigger pullback and net domestic migration once the pandemic housing boom ended. And actually some of the pockets of southwest Florida temporarily saw net out migration. Some of the people who moved in during the pandemic moved out. So that created a greater demand shock. And so we’re seeing prices fall in some pockets of Florida, but if you go across the country, most of the country is still seeing prices either go sideways or a little bit up, and a lot of that is the Northeast and the Midwest, but it’s definitely not anything close to what you saw during the pandemic housing boom.

Dave:
So I just want to rehash some of what Lance showed us here in case you’re listening. Basically, Lance, the condo market, when you pulled that up, he was showing a map in Florida all red. There was basically only Miami and the Miami area was showing blue. And then when you look at the single family homes, it was mostly southwest Florida, that was red. There was pockets of growth there in Tallahassee, Gainesville, Orlando, that sort of thing. How closely do you think this map correlates to the inventory question that we were talking about earlier? If you overlay these, would they look almost exactly the same where you could sort of use inventory to predict these future price declines?

Lance:
Here is a map of where inventory is back to or above pre pandemic levels, and that’s the green areas. And then this is how home prices have shifted since their respected peak in 2022. And you will see that the markets where inventory is back to or above pre pandemic levels correlates with where prices have declined from their peak and that the places where things have stayed very tight active inventory has not built up much. Those are the places where prices have actually moved up a little bit more since their 2022 peak.

Dave:
One last question here on inventory, Lance. I am like anyone else, I see these constant headlines that are like inventory is up 80% or 70% in any given market and it’s looking over maybe the last year. How important do you think that recent trend is? Because as you said, inventory is down so far during the pandemic, does it matter if it’s shifting from last year to this year or is the comparison to right now to 2019 really what matters?

Lance:
I do think that 2019 is a really great reference point, and it’s not necessarily that a market today that gets back to 2019 is back to being a 2019 market because what took them to getting back to 2019 was the fact that the market was so unhealthy and that a lot of the homes for sale couldn’t transact. So I’m not saying that a market that is back to pre pandemic levels today is the same as a 2019 normal market, but it is a market that has seen softening and weakness to get back to that level. And so the interpretation of inventory over time is going to change and that this 2019 reference point, if you interpret it a year, 2, 3, 4 years down the road could shift. But I do think it is a really good reference point. And what I would be looking at in my market is pretty much this, looking at the actual number of inventory for sale and seeing how it shifted and if it’s moving very quickly, especially in a local market that’s telling you there’s weakness there. But if you’re in a market where it’s like, let’s take Kansas, this is like a slow grind back up, well, that’s probably a market where sellers still have more power than what you’re hearing about in these headlines. Even given that the percentage change for inventory might rank kind of high,

Dave:
That’s super helpful and a really important takeaway for everyone in our audience right now as we’ve been talking about inventory is super important. If there’s one metric honestly that you’re going to track to understand what’s going on in your market, this is the one I look at. And as Lance said, comparing it to 2019 to 2025, if you’re going to do just one thing, that might be the thing for you to do to understand your market health. Lance and his company Resi Club do a great job of doing that. But there’s tons of other places where you can also just look up this data for free. We talk about them a lot on the show, but you can also just Google this and check this out. It’s a great, great thing for you to do for yourself.

Lance:
And if they sign up for the Resi Club newsletter, go to resi club analytics.com. In my free list, I send out the state inventory. Datas like this every month to people.

Dave:
Awesome. All right. We do need to take a quick break, but when we come back, I want to ask you, Lance, about a couple other articles unrelated to inventory that you wrote about construction costs and first time home buyers. We’ll be right back. Welcome back to the BiggerPockets podcast. I’m here with Resi clubs, Lance Lambert. We’re talking all sorts of different things in the housing market. We just had a long great conversation about inventory, but I want to shift gears here a little bit. Lance, talk about two different articles you wrote about construction in general. The first one was about cost breakdowns for single family homes and just the general cost of construction, which to me is so important with the future long-term trajectory of the housing market. So can you just fill us in a little bit about construction costs and trends in that industry?

Lance:
Yes. So construction costs, just like home prices went up a lot during the pandemic housing boom, and there hasn’t been much relief for construction costs. The one area of relief is like framing lumber, but the problem there is that while it’s coming off those peaks that it’s all in 21 and 2022, is that there is a tariff scare, right? And it’s not just what Trump’s talking about doing. It’s also the fact that we have this system for softwood lumber coming from Canada that goes through an automatic review for duties. And the duties this year are expected to double, and that’s without anything else that Trump does. So if Trump were to actually put tariffs on Canada, that would put even more pressure upward on lumber. And even if he doesn’t, there’s still going to be upward pressure on lumber. And that’s been one of the few areas of relief. And so in terms of construction costs up 40, 50% for most categories that you look at.

Dave:
Yeah. So do you have any expectation or idea of how tariffs will impact this further? I mean, do you think it will be exactly equal to the amount of the tariff if it’s a 20% increase on appliances, let’s just say, do you think that will correspond almost one to one?

Lance:
It’s hard to say, and it’s also hard to say what actually is going to incur with the tariffs, right?

Dave:
Yeah. We just don’t know at this point

Lance:
Exactly. I think a lot of what’s been talked about for China, I think that’s probably going to go into effect. But what Trump is talking about with Mexico and Canada, those might be bargaining chips for other types of deals that we reach with them. Maybe it’s getting Canada and Mexico to actually also put on tariffs on China. So it is really hard to tell what would actually happen, but if it does occur, it would be a shock for different categories. And even if it doesn’t, I think there is still a shock coming for lumber and for wood over the next year. So if you look at the breakdowns from builders, and this is over the past two years, the biggest category is framing, including the roof, and a lot of that is the lumber. And so you can see that’s been one of the few areas they’ve actually seen relief, but now that’s one of the ones that they’re going to get some upward pressure on.

Dave:
All right, so we’re looking here at Lance’s chart and what we’re seeing is that lumber, yeah, was one of the places that there was actually some relief from 2022 to 2024, but we’re looking at electricals up plumbing, hvac, wall finishing cabinets, roofing. And so this just really makes me wonder about trends in construction right now because if rates stay high, right, isn’t there a reasonable case that construction’s going to slow down again, even for single family?

Lance:
So one of the challenges here is that when inflation was roaring in 21 into 22, builders had a lot of pricing power. And so as things were running up, they could just pass it to the consumer. There was an unlimited number amount of housing demand out there essentially is what it felt like to builders. But now that shifted, builders don’t have all the pricing power, but on the other side they’re getting squeezed by some of these higher components. And what’s occurring here is that between some of these markets like Texas and Florida where they’re having to spend more on incentives and maybe bring down net effective prices, and then these increase on the inputs, it’s compressing the margins. And so it could in some of these markets begin to have an impact on activity for single family.

Dave:
So that actually reminds me of another article of yours that I read about builders margins shrinking. Can you just tell us a little bit more about that?

Lance:
Yeah, so what’s been happening to builders is that during the pandemic housing boom, they had pretty much unlimited pricing power and their margins soared. A lot of these builders, if you go look at their earnings reports, had the greatest ever profit margins during the pandemic housing boom as they just had so much pricing power, even though a lot of these costs were rising. But what we’ve seen since then is margin compression from a lot of the builders is they’ve done affordability adjustments to kind of meet the market, but now we’re starting to see a little bit of another leg down for some of these margins at some of these builders. And so Lennar, their forecast is that Q1 will be their lowest gross margin in a decade. And then even the most resilient builder out there, the publicly traded, which is Toll Brothers, and their typical home is around a million dollars even they are seeing a bit more margin compression than was expected. This is what Toll Brothers CEO said the other day. While demand has been solid in our first quarter, we’ve seen mixed results so far for the spring season. And when I talk to a lot of the people in my network, spring’s not necessarily as good as they were hoping for. It doesn’t necessarily mean that it’s a terrible spring, but it’s not necessarily as good as they were hoping for so far as of the end of February into early March. Got it.

Dave:
Okay.

Lance:
And so what does this mean from a home buyer perspective this year? It means that in builder communities where the builders are set on trying to maintain sales, so they’ll do adjustments to meet the market in these places, like in pockets of Florida and Texas where there’s a lot of spec inventory and they got to move, it means that the retail buyer could see some deals from some of these builders in the markets where they have more spec inventory. Then from a seller’s perspective, if you’re in these markets where builders have a lot of spec inventory that they’re trying to sell at discounts, it’s going to create some pressure for you and greater cooling and softening in your own market as some of those buyers who would’ve otherwise looked at the resale and existing market turn their attention to the new market.

Dave:
Last topic I wanted to cover today on your reporting is just about the median age of a first time home buyer. I thought this was super interesting. Can you just give us the headline here?

Lance:
Yeah. So over the past three decades, we’ve seen the median first time home buyer age go from 28 years in 1991 to now as of 2020 4, 38. So back in 1991, the typical first time home buyer in the US was 28 years old. In 2024, the typical first time home buyer is 38. So over three decades it’s went up 10 years. I’ve had some people message me after I put this out that, oh Lance, that’s only because life expectancies went up so much. I pulled numbers for life expectancy. It’s only went up less than two years during this 30 year period. And so it’s not all because of life expectancy. And I think what’s occurring is a few factors. One is we have a secular shift happening not just in the US but across developed worlds where people are going to school longer, they are marrying later, they are having kids later, and when they do have kids, they’re having fewer kids and then they’re buying homes later.
And then the other factor is that people are also living longer, and this is more for the distribution of household size, which we’re seeing an increase in one household sizes and two household sizes, and everything else is decreasing, but the composition of the homeowner is getting shifted out as people live longer as well. And so what we’re seeing here is that the typical age of repeat buyers has gone up from 42 to 61, and all home buyers has gone up from 35 to 56. And the other factor of course, as well, which has kind of pushed this up over the past two years has been the deterioration in affordability. And so a lot of the people who are older, they have a lot of equity, 40% of the US homeowners their primary residence, they don’t have a mortgage, it’s paid off. And so for those folks, they don’t have a lock and effective rates If they want to sell and buy something else, more of them are doing it. But on the first time side, the people who are financing it more likely to finance it, more of them have pulled back from the market than the all cash buyers because of where rates have gone to. And that’s put additional upward pressure on the median first time home buyer age, sending it from just a couple years ago at 33 up to now 38.

Dave:
It’s just so interesting, these big cultural dynamics. And I think for anyone listening who doesn’t yet own a home, you get it right? Affordability is low and that’s making it really challenging to buy a home. I’m curious, Lance, from an investor’s perspective, do you think this changes in any way the makeup, the make up, the demand for rental properties? If people are waiting longer to buy a home, does this mean we’re going to have more families renting single family homes or apartments? That’s been sort of on my mind about my own investing decisions.

Lance:
It’s tough to say. I think there was that assumption by some when rates kind of went up a lot in 22, and it’s like, well, a lot of people are not going to be able to afford now, and so they’ll have to rent. But then there was the factor of often historically when the purchase market softens, the rental market also softens because some of the dynamics that led to the softening in purchase led to the softening and rentals. And of course there was a lot of the supply that was financed a lot of the multifamily projects that were financed during the period of ultra low rates. And so as that kind of rolled in and all those completions came in, that kind of softened the market for rentals and kind of negated some of the effects that some people were hoping from the softening of the purchase market.
But as we look out, I think the biggest thing is if we see the completions for multifamily roll over and in some markets roll over harder, I think that will begin to put some positive momentum into the rental market. And maybe some of these other effects that we’re talking about here could have some impact. I think the biggest impact is really the secular impact, which is a lot of people rented in their twenties. That’s been historically true for a long time, and a lot of that product was multifamily, but as people were spending more of their thirties and forties renting, that’s creating greater opportunities for the single family rental market and for also kind of that mixed product, some of these townhomes. And I think that’s why we’ve seen so much expansion over the past decade in the build to rent side of the business.

Dave:
That’s super. Yeah. Thank you for explaining that, Lance, because if you all have heard me talk about the upside era and sort of the different ways to look at investing right now and evaluating deals, one of my theses is about future rent growth. And although I’m not saying it’s a good thing that housing prices are unaffordable and people are going to be renting longer, it does just seem that the data is pointing that way. And it does make me wonder, and I think as investors, it’s something to think about what type of housing units might be more in demand in the future based on some of these trends. So that’s sort of why I wanted to get at that. And thank you for explaining that to us, Lance. Alright, well that is what we got for today’s show. Lance, thank you so much. There’s three really interesting topics. You covered them all in great detail, really great explanations. Thank you for sharing your reporting and information with us here today.

Lance:
Yeah, thank you for having me Dave. And if people want to follow my work, get some of my stories in their inbox, they can go to resi club analytics.com, just put in their email and they’ll start getting these data stories.

Dave:
Awesome. And thank you all so much for listening. We’ll see you next time.

 

 

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Many “experts” say you need a real estate LLC once you buy a rental property, but are they right? They also say you need money and great credit to invest in real estate, but we know of other creative ways to get started. Stick around to learn how!

Welcome back to another Rookie Reply! Ashley and Tony have pulled more of your recent questions from the BiggerPockets Forums, and today’s first question comes from an investor who just bought their first rental property. Do they need to set up a limited liability company (LLC) right off the bat, or can they hold off until they grow their real estate portfolio? We’ll show them the best ways to protect their personal assets!

We’ll also hear from an investor who wants to get into house hacking. The only problem? They live in an expensive market, and the deal they’re looking at doesn’t pencil out. Could pivoting to another investing strategy make it profitable? Finally, a lack of money keeps many beginners from breaking into real estate, but it doesn’t have to. We’ll share some creative ways to kickstart your investing journey if you don’t have a ton of money or credit!

Looking to invest? Need answers? Ask your question here!

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Ashley:
Creating your own LLC is talked about constantly on YouTube. Everyone says you need it as an entrepreneur, but is it maybe overkill for a rookie investor?

Tony:
In this episode, we’ll also cover house hacking and expensive real estate markets and how it can be done. We’ll cover strategy and to give you some actionable advice if you’re new to the world of real estate investing.

Ashley:
I am Ashley Kehr.

Tony:
And I’m Tony j Robinson

Ashley:
And welcome to the Real Estate Rookie Podcast.

Tony:
Alright, so our first question today and today’s rookie reply, this question says, hi y’all. I’m new to real estate investing and recently bought my first property a few months ago and got it rented out. I’m thinking about the future and how I will purchase properties in the future. I often hear you should get an LLC to protect yourself in case something goes wrong. Is that only useful if you have a large portfolio? Is that worth looking into right now as I’m only at the beginning of my journey open to any suggestions, insights, or past experiences? So I couldn’t agree more actually. I feel like we hear a lot about the LLCs and I feel like a lot of the real estate influencers have viral videos saying, here’s how I structure all my different properties. Everyone’s doing the same video with the right board, but I’ll give a quick anecdote and I want to get your take on it as well.
But we actually interviewed Brian Bradley and he’s an attorney that specializes in asset protection and I heard him tell this anecdote once about asset protection, kind of being getting dressed for a winter storm and depending on how bad the weather is, that dictates how many layers of protection you need as you go out on a nice warm, sunny day. You don’t need that much, right? You got shorts and a t-shirt. But if Ashley’s getting snowed out in Buffalo, maybe she’s got on long Johns and then she’s got her clothes and she’s got a light jacket, then her overcoat, then whatever else, I don’t know, it doesn’t snow in California, so I’m making things up right now. But you get what I’m saying, right? You need more layers as things get more intense. And he said building protection around your real estate portfolio is the same thing as your risk exposure gets bigger so too should your asset protection. But he’s seen people who kind of jump too deep at the beginning and they’re wearing parkas when it’s 80 degrees and sunny outside. So just keep that metaphor in the back of your mind that what you do today doesn’t necessarily have to be what you have five or 10 or 15 years down the road. So Ash, what’s just your initial take on this question?

Ashley:
Yeah, so I actually just interviewed Brian Bradley again on the BiggerPockets podcast. So Dave Meyer is having a baby. So I took over one episode while he’s on his paternity leave and I brought Brian Bradley on and his recommendation was at least an LLC. So he went through the layers of protection. So if you have a high net worth and you have a lot of assets and you have a lot to lose, that’s where you really need to go into holding companies and trust and really layer those things. If you don’t a lot to lose. So maybe you rent your apartment, you drive or ride a bicycle, you don’t even own a car, or maybe you don’t have any equity in your car and your underwater on it. You have just enough in savings for your reserves, for your rental property and you really don’t have that much that if somebody came to sue you, they could take it.
So then it’s not as important to have all these layers of protection. But Brian’s recommendation was that you definitely should have an LLC that you should run your numbers, making sure that you can afford the cost of an LLC. I don’t know how much I agree with that. For your first rental property, I did several rentals upfront with just having them in my personal name and I went the umbrella policy route, but obviously Brian’s an attorney and he knows a lot better as to how to actually protect yourself. So I guess there’s that risk I was taking in the very beginning by putting the properties in my personal name, but you can get the umbrella policy to kind of cover if you were to get sued. And there are the two differences. So the LLC is giving you protection against getting sued that they can’t come up after your personal assets. The umbrella policy is giving you money to pay for attorneys or pay for a settlement. So there are two different types of protection. So kind of keep that in mind as you’re deciding which route you should go.

Tony:
You could make this so much more complicated than it needs to be. And much like you Ashley, I bought my first several properties without an LLC and again, we just didn’t have a whole heck of a lot that we were at risk of losing. The portfolio wasn’t that big at the time. So for us, I think we were okay with the kind of risk reward there. But I think where I see a lot of rookies getting caught up is that they put the cart before the horse and they try and set up, Hey, I need my holding company, I need my Delaware LLC, I need my trust, I need this, I need that. And then we ask, okay, well how many properties are you trying to protect? Like, oh, I don’t have any yet. And to me it’s such a backwards way of doing things.
Get the asset to protect first put your focus on protecting the asset and then on acquiring the asset, I should say, put your focus on acquiring the asset, then you can go back and make sure you dial in the protection piece. But I see a lot of people who do the incorrect way. I also think, and this is from the conversation I’ve actually had with Brian and you just talked to him recently, so I’m sure you’ve got the same insight, Ashley, but LLCs also aren’t like the end all be all for asset protection and there are still ways, or even if you have an LLC, someone could still come after you personally. It depended on the severity of what happened or how you structured things or how you run your LLC. So there are still ways to kind of brand called it like piercing the corporate veil where you might still be at risk. So I also don’t want people to have this maybe false sense of security that just the LLC by itself is the thing that’s going to save everything because it is called a limited liability company, not the foolproof liability company. It’s called a limited liability company.

Ashley:
So we have to take our first ad break, but we’ll be right back after this. Okay, welcome back. We’re here with our second question on today’s rookie reply. So this question is we are looking at a property in the 600 thousands and up to do a house hack in a great and popular location with rising rents and upside on price with renovations, but also that will cost in the short term to improve the property. However, with interest rates in the high sixes, it would probably not cashflow after moving out with 5% down mortgage all in would be 4,700, 10% down would be 4,500 per month, 15% down 4,300 per month, 20% down 4,000 per month. The upstairs rental expectation is $2,500. The downstairs 1600, which would equal 4,100. Long story short, probably a negative cash flowing property seems house hacking or even a duplex in Denver is difficult to find positive cashflow.
Our first property we are living in now would have positive cashflow if we moved out, but that’s because we had a lower rate. Should we stay away from this property or is there a reason to consider buying this property? So Tony, I think the first thing is that they have a property now they could move out of and it’s going to be a cashflowing rental. Great start right there. Now their dilemma is they can’t find another house to move into that is going to cashflow if they move out. So my consideration here is how long would you want to stay in this house hack? So is this going to be two years, one year? Could it be five years? In five years you may have the option to refinance. Hopefully rents have gone up on the property where now you’re getting some wiggle room. I’ve definitely seen rent at my properties increase over five years.
So I guess that would kind of be an unknown as to what would be your time commitment to moving into this property. Because if you were going to house hack had half of your mortgage payment made for you, that’s cheaper than going and living in a single family house and paying your full mortgage. So you’re saving on your cost of living and then how long would you want to live there until could rent out the property? Or maybe it doesn’t make sense to actually live in the property for two years and to not rent it out after you leave, but to actually sell the property. So is there a value add that you can put into the property where it now becomes a live and flip and you can sell it for tax-free gains at the end of two years?

Tony:
Yeah, Ash, you read my mind exactly on the live and flip strategy. I think that’s what it comes down to, right? It’s like I think a lot of times as investors we kind of take a black and white approach to the deals that are presented to us not realizing there’s really a spectrum of opportunities that we can go after. And in this question, they very clearly said that the property they’re looking at is in a great and popular location with rising rents and upside on price with renovations. So it sounds like that you’re potentially getting this for a good deal and that yeah, if you made those renovations that you would have some equity being kind of forced, some forced appreciation with this deal. So I think your comment, Ashley, of doing this as a live-in flip could make a ton of sense and now they’ve built up a bunch of cash maybe two years or three years down the road and just transfer in a better place.
They can go out, deploy that capital, maybe get another house hack the cash flow is a little bit better. I think the second piece to this though is, and again this goes back to the kind of black and white, is they’re looking at this just from a strict traditional long-term rental basis. And I wonder are there maybe some other strategies that you could leverage to improve the cashflow on this deal? Now I know Denver short-term rental laws are a little strict. However, I do know, I believe, and someone can check me if I’m wrong, but I believe that there are certain pockets of Denver, like certain neighborhoods where you can short-term rent. And I also believe that I think if you’re living in it, I think there’s a little bit of flexibility there as well. I could be wrong on that piece, but even if traditional short term isn’t an option for you, could you midterm one of these units, does that give you more than the $4,100 per month in rental revenue?
Could you do something like renting by the room where you’re finding local, everyone’s always moving to Denver and when they get there, they typically need somewhere to stay. Could you be that resource for the person that’s moving to Denver to say, Hey, here’s a furnace room rental with a bunch of other people who are transplanted to Denver. They’ve got a little bit of a community there as well. So I think I would try and see if there are other options aside from a traditional long-term rental to see if maybe you can get the rents up above that or $5,000 per month where you get a little bit more cashflow.

Ashley:
Yeah, I love the idea of renting out by the room. I know the midterm rental space is big in Denver, but renting out the room I think is a great idea. We’ve had a couple of guests come on and talk about the advantages of co-living and we’ve heard their cashflow numbers, which are amazing. So I think while you’re living in the property, you could kind of experiment with that unit as to let’s try this, let’s try this, let’s try this and see how that goes. And then when you move out of the property, you could also have one unit doing midterm rentals and the other unit doing rent by the room or long-term rentals for just one family. So I like the option that you’re going to move into a two unit so that you have that flexibility to maybe have a long-term rental in there to stabilize the property knowing that you’re at least locked in for a year of rental payments and then maybe try short-term rental with the other one.

Tony:
And I think just one last thing to call out here too is just the numbers that we have, where did you actually land on those numbers for your rental income? Did you talk to a property manager and they kind of provided those numbers to you? Was it you doing your own homework? And if so, where did you go to get the data? I think just validating those to ensure that you’ve actually got the right projections. Because what if you’re saying that the total rents are only 4,100, but if you actually go out and talk to a property manager like, man, I can rent this place out for like six grand a month, now you’re off by quite a big amount. So I think going back and validating those numbers will also maybe give you some confidence on what strategy, if any, makes the most sense for you to go forward with buying this property.

Ashley:
Okay. We’re going to take a quick add break here, but we’ll be right back after this. Alright, let’s jump back in and before we get to our next question, make sure you guys head over to the Real Estate Ricky YouTube channel if you’re not already watching here and make sure that you are subscribed to our channel. We are trying to hit 100,000 subscribers, so it’d be really exciting for us. We would love it if you guys would be able to go ahead and do that if you’re not already subscribed and make sure you’re following us on your favorite podcast platform. Okay, so onto our last question today. This question says I am 18 years old with very little credit history and little capital. I am eager to start but can’t get around the glaring issue of not having initial capital. So I was wondering if there are any methods you guys would use to raise capital if you were in my shoes, or is it just time to put my head down and put in long hours? This is a great question.

Tony:
Yeah. First, can we just give this person asking this question a big round of applause for being 18, posting in the BiggerPockets forms and looking for support. It’s like I think if Ash and I have both started at 18, we would be, I can’t imagine where our portfolios would be today if we had that much of a head start. So kudos to this person for being eager to get started.

Ashley:
Yeah, God, 18 man, going off to college definitely was not thinking about buying a hollows, real estate investing, any kind of investing at that time.

Tony:
The question says, what are some methods to raise capital? Or is it just time to put my head down and put in long hours? I think the answer is yes, it is time to put your head down and put in long hours, but it’s like how are you going to leverage those long hours? What kind of work is actually going into that to make the most value from it? Now, obviously at 18, yeah, no one’s going to expect you to have a ton of capital, a ton of credit to be able to go out there and do those things. I think that the best thing that you can do right now is leverage what you have in abundance, which is your time and your energy. And if you were to come to a place like BP Con, which has happened this year in Vegas, so make sure you guys are out there, but if this person were to come to Vegas and they were at BP Con and they just shared their story, I can only imagine how many seasoned investors or new investors with capital would say, man, I would love to work with this kid.
So take what you have in abundance, which is your time, which is your energy, and leverage that to start providing value to the people who do have the capital, who do have the credit, who can get approved for the mortgage. You can cover the down payments and there’s so many different things you can do. Can you underwrite all their deals for them? You say, Hey, Mr. And Mrs. Tony and Ashley, I’m going to sit down and I’m going to underwrite deals in your chosen market every single day in life. Find one that makes sense for you. But all I ask is that when we do this deal, kind of get a small sliver of equity, can you door knock? Hey Mr. Tony, Mrs. Ashley, I got this list of properties that you’re looking at in Buffalo that you’re looking at in SoCal. I’m going to go knock on the doors of every single one of these homeowners and see what I can do for you. Those are the things that take a lot of time that don’t require any capital. So I would really, really put a big premium on trying to identify how can I provide value to the people that have what it is that I need and how can I give them what it is that they need and make it a win-win.

Ashley:
One thing that I would do is get a job in real estate, if you can. Tony mentioned some of the things is to going and working for another investor, be a material runners. I got, Daryl would love it if somebody came and said, I’ll go to Lowe’s. I’ll pick up your materials. I’ll deliver them to the job site. Wait, you need a screw, I’m on it. I’m going to go and do it. So there’s plenty of different ways to get involved on the real real estate side of things, manage a real estate investors, social media, things like that. Look at your job right now, what your W2 job is or what is your skillset? Is there any way that that can kind of translate into real estate? I’ll never forget me and Tony at a meetup and somebody said, I just have no skills that I can add value to partner with someone.
And Tony is already smiling. He knows exactly what I’m going to say. And we said, okay, well what do you do for your job? And he says, I’m a project manager. The next thing we said was, who here would love someone to manage their rehab projects? And all these hands shot up? So there’s so many skill sets that can translate into real estate. But if I was this person and I want to gain more capital, I would be looking for partners. I would be putting it out there saying, Hey, I want to get invested in real estate. I would figure out exactly what strategy I want to do. So is it actually in house hack your first property, which is a wonderful way to get started. You need low money down. You can get roommates, you rent by the room, you could rent out another unit.
But I would hustle. I would be working night and day. I think about when I was in high school, I didn’t work a lot in college unfortunately. So I’ve basically spent anything I’ve made in high school, but I just remember how much money I would’ve make being a hostess and a waitress. And I just wish that I would’ve continued that hustle throughout college and it would’ve set me up even better in life if I would’ve done that. So I think when you’re 18 or anytime as to what can you gain from a W2 job, what can you gain from side hustles? What can you gain from being a DoorDash delivery person? The one thing that I would not do, if your goal is to invest in real estate, I would not start a business. I would not dump money into building a brand marketing all these expenses.
A lot of businesses don’t make money for a while because they put so much energy and effort into getting their materials, getting their supplies. Unless this is something that is going to take you very low effort, low cost. So maybe it’s mowing lawns in your neighborhood where you already have clientele. You don’t have to spend a lot of money on marketing. You don’t have to hire other people to work for you and pay payroll taxes. And now you’re so busy doing the bookkeeping for this lawn care business that you created that you don’t even have time to think about real estate. So that’s where I would put in a word of caution. Like if you’re going to go on Etsy and sell some things on Etsy, make sure that this is actually going to be an income generating thing from day one. And it’s not going to be something you have to build up and put a ton of time and effort in to actually make income off of it. If your true goal is to actually invest in real estate and build capital for real estate, I would do something that is more quick and more effective to get that fast cash.

Tony:
I love, love, love that advice. Ash. I couldn’t agree with you more. Like if I were giving advice to my younger self, two things I would focus on. Number one, speed of acquiring knowledge, which it feels like this person’s already doing because they’re submitting questions in the forums that I would read as many books as I can, listen to, as many podcasts as I can, watch as many YouTube videos, talk to as many investors as I can, build your knowledge base and the sooner and faster and more quickly you can do that, the better. But the second thing I would focus on, which is what you touched on, is my ability to earn income. And I love your idea of getting into real estate related fields, but honestly, the one thing I think I would focus on at this age, I would get into a sales position.
And the reason I say that is because that gives you the highest earning potential, unless you’re going to be like a doctor or lawyer, whatever it may be. But a lot of times your ability to earn income is directly tied to your effort that you put into the position. And at 18 years old, you don’t have to worry about having a down sales month because you don’t have a mortgage, you don’t have kids, you don’t have someone else that’s depending on you. So you can take those kind of ups and downs to come along with building a sales career, but that is going to give you, I think, the biggest income opportunity. And then you start taking that money, you can start funneling it back into your real estate business. So building your income potential, focusing on that while also building your knowledge, those two things together, I think will put you in the best spot over the next 24, 36, 5 years to really get that first deal done.

Ashley:
So Tony, if you were 18 right now and you took your own advice and you were going to go into sales, what would be the thing you were selling? What would you try and go get a job selling for?

Tony:
I would honestly probably go into some sort of B2B sales business to business sales. And the reason I say that is because a contract are typically bigger and bigger contracts means bigger commissions. That’s what I would try and try and focus on selling. So yeah, what company? I don’t know, but just in general, selling to businesses typically means higher cost per client or more revenue per client than going business to consumer.

Ashley:
No, no, that’s great. I was just curious, was it like, oh, I would go into car sales because I feel like there’s huge potential there or whatever, but yeah, I was just curious on your thought for that. But yeah, that’s a great point. Going business to business is going to bring you more volume and higher dollar.

Tony:
I have a friend who runs an HVAC company here in SoCal, and he and his dad had been running it for, I dunno, close to 10 years now probably, but they started off like most small businesses taking whatever jobs that they could. And a lot of that was just residential stuff. Someone calls and says, Hey, my heater’s on the fritz, or my thing’s not working, whatever it may be. And now they’ve shipped it completely to commercial and they do all the grocery stores that are in their neighborhood now are their customers. And he’s like, dude, the businesses they want their HVAC system fixed yesterday and they’re going to pay a premium to get it done. Whereas when we were doing residential stuff, they’re going to nickel and dime us for a job that’s like 1% of what we get for the commercial businesses. So I think going after some kind of commercial sales would be super, super beneficial at that age.

Ashley:
Okay. So Tony, one of the things you did say also is that you would fast track your knowledge and learning. So do you have any book recommendations for this person?

Tony:
I do actually two books. One that I just reread, another one that I read for the first time. But I would read Millionaire Next Door, great book about just living frugally and what true wealth looks like because it’s not what we typically associate it with. And the second book, and this is one that I just recently read for the first time, but it’s called The Psychology of Money, and that book is exactly what it sounds like. It is just about the mindset around money. And I think if you can take those two mindsets and let that kind of grow with you as your income starts to grow, as your knowledge base starts to grow, that’s going to give you the best foundation to really maximize on all the money that you’ve been able to make.

Ashley:
Well, are you guys enjoying our podcast? Your support means the world to us. Taking just 30 seconds to leave a review on Apple Podcast can make a huge difference. Your feedback not only motivates our team, but helps us reach more awesome listeners like you. Thank you so much for being part of our podcast community,

Tony:
And we just want to give a special shout out to someone who recently left us in Honest Review on Apple Podcast and it says, this is from Geer Dew. I just hope I’m saying that name the right way. But it says, great podcast, five stars. I love how Tony and Ashley follow up with questions targeted for Ricky’s. Keep doing what you’re doing. Great job. So we appreciate all the Ricky’s that are listening and like Ashley said, took a few quick moments to leave that review. If you’re enjoying the show,

Ashley:
I’m Ashley. And he’s Tony. Thank you so much for joining us on this episode of Real Estate Ricky Reply.

 

 

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In This Episode We Cover:

  • Whether you need a limited liability company (LLC) for your first rental property
  • The differences between umbrella policies and LLCs (and which one YOU need)
  • How to create more cash flow from a house hack (even in a pricey market!)
  • How to start your real estate investing journey without much money or great credit
  • Learning the industry and making extra money with real estate side hustles
  • And So Much More!

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Buying real estate with friends or business partners often seems like a good idea, but it can be an exasperating experience when it goes wrong. With homeownership and investing becoming increasingly difficult amid high interest rates and property prices, more people are turning to “friends with benefits” to get on the property ladder.

According to the National Association of Realtors, the average age of first-time homebuyers has increased from 35 to 38 over the last year. NAR data shows that first-time buyers had a median household income of $97,000, up from $95,900 the prior year and reflecting an increase of $26,000 in the last two years. Repeat buyers had a median household income of $114,300, up from $111,700 the previous year. 

It’s important to remember that those numbers represent a national demographic. Buying is even more prohibitive in pricier neighborhoods.

Co-Buyers Make Up 30% of U.S. Home Sales

According to cobuy.io, a specialized app that helps co-buyers with documents and information for a $270 flat fee, co-buyers today make up 30% of all U.S. home sales.

Half the co-buyers in 2024 bought with a spouse or partner, 9% bought with a relative, and 7% with a friend, per Zillow research. The overriding reason people co-bought houses was financial. According to Bankrate’s 2024 Down Payment Survey, over 50% of respondents said that finding the cash for a down payment was out of reach. 

“We became co-owners of a brownstone in New York with three friends, where we still live,” Nick Allardice, 38, who co-bought his home with friends in 2021, told Business Insider. “The brownstone was easier for us all to afford because we pulled together and saved on all the costs associated with buying a property.”

“There’s been a ripple effect, too,” Allardice continued. “In 2022, three other friends replicated our exact model a few blocks away in their own three-unit brownstone.”

Non-Spousal Co-Buying Is on the Rise

Unsurprisingly, co-buying is most common in pricier states such as New York, California, and Washington. Non-spousal co-buying is particularly on the rise in these states. Co-buy.io and Nestment.com focus on helping buyers navigate this arrangement’s legal and logistical aspects.

“For the past 50 years, property prices have way outpaced wage growth, and that’s created an incredibly large gap,” Nestment founder Niles Lichtenstein told CBS News.

Though co-buying has some similarities to syndication, co-buying usually applies to small multifamilies (of two to four units) or sometimes larger single-family homes with multiple floors, and more buyers are generally on an equal footing investment-wise, putting these properties in a class by themselves.

“It was important that everybody understood we were not roommates, but had two distinct units connected in a home,” Harlem, New York, brownstone co-buyer Claire Breedlove told the New York Times. “We plan to live as neighbors, not roommates.” She and her co-buyer and friend, Charlotte Renfield-Miller, invested in a two-family brownstone that was a former art gallery and cost $2.795 million, with annual taxes of about $8,500.

“We tend to see eye to eye, but we wanted some sort of legal structure to make sure our friendship was never going to suffer because of a co-purchase,”  Renfield-Miller explained.

The agreement covered future possibilities, such as one person wanting to move or sell. “If anything does arise, we already know what the plan is without having to come up with it on the spot,” Renfield-Miller said.

Advantages of Co-owning Investment Properties

  • Easier to qualify for mortgages: This is the main reason for co-buying. Qualifying for loans has become increasingly difficult in recent years.
  • FHA mortgage compliant: One of the attractions for co-buyers is the ability to purchase a home with an FHA mortgage and enjoy tax benefits based on the percentage owned. 
  • Scale faster: Co-buying allows investors to scale faster, moving from one house to another using FHA loans and renting the home out after a period of living in it to satisfy FHA requirements. Or, you can simply buy a rental property with an investment partner.
  • Divided costs: This allows co-owners to split costs and share household responsibilities. However, as with any investment, it relies on trust and each partner being responsible for their side of the partnership. 

Disadvantages of Co-Buying

  • Risk of conflict: As anyone with a roommate can attest, the risk of conflict when you live in the same space is heightened. If owner-occupants are co-buying using an FHA model, delineating each owner’s personal space and responsibilities is paramount. For non-owner-occupant investors, each must carry their weight and be responsible when financial issues arise.
  • One buyer might want to sell or refinance: Both co-buyers need to be on the same page regarding their exit strategy with agreements.
  • Financial stability: Job loss is sometimes unavoidable, but contingencies should be discussed and, if possible, put in writing should one partner suffer a loss in income and not be able to pay their share of the expenses. This could include allowing their other partners the option of buying them out. 
  • Risk of differing goals and expectations: Goals and expectations can change over time. When one partner wants to go in a different direction, an agreement should be drawn up ahead of time to account for this.

Cash Flow and Equity

Owning rental properties offers advantages in cash flow and equity. In a co-buying partnership, there should be a clear agreement on how the cash flow is spent and the equity utilized. Vacations and fast cars should not be prioritized when building a real estate portfolio. 

Final Thoughts

Co-buying is easier when unrelated investors do not live in the same house. That said, co-buying and cohabitating can work if there is a specific game plan to sell or rent and move once an FHA or prespecified investment period has elapsed, so you are not stuck with one another if you do not wish to be. 

Business partnerships are nothing new. Many real estate investors have formed LLCs and embarked on money-making endeavors with the best intentions—only for the wheels to come off once things got tough, i.e., tenants stopped paying, and repairs were needed

No one likes dipping into their pockets when they don’t expect to. Entering into co-buying ventures requires both partners to have their eyes wide open, with an agreement that spells out each partner’s responsibilities, with consequences if they do not fulfill them, and easy exit strategies. Paying for unnecessary legal fees in a lawsuit between co-buyers is a scenario to avoid at all costs.

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For homeowners and real estate investors, accessing home equity has traditionally been a long and tedious process—until now. With new digital lending solutions, tapping into home equity is faster and more accessible than ever. 

Whether you want to renovate your home, consolidate debt, or expand your real estate portfolio, more streamlined options are now available to help you unlock your equity efficiently. Figure, the No. 1 nonbank HELOC lender in the U.S., is here to help you along the way.

Benefits of a HELOC Over a Cash-Out Refinance

A HELOC (home equity line of credit) and a cash-out refinance both allow homeowners to access their home equity, but they have different purposes and distinct advantages. Here’s how a HELOC compares to a cash-out refinance.

Keep your existing mortgage rate

  • A HELOC is a separate line of credit from your mortgage, allowing you to keep your current low-interest mortgage rate if you’ve locked in a favorable one.
  • A cash-out refinance, on the other hand, replaces your existing mortgage with a new loan at today’s rates, which may be higher than what you’re currently paying.

Flexible access to funds

  • A HELOC works like a credit card, letting you borrow and repay as needed during the draw period, only paying interest on the amount you use.
  • A cash-out refinance gives you a lump sum upfront, meaning you’ll start paying interest on the full amount immediately, even if you don’t need all the cash at once.

Lower upfront costs

  • HELOCs often have lower closing costs than a full cash-out refinance, making them a more cost-effective option for borrowers who don’t want to pay for a full mortgage reset.
  • Cash-out refinances often come with higher fees, appraisal costs, and other closing expenses.

Faster approval & funding

  • Many HELOC providers, like Figure, offer digital applications with funding in as little as five days,* making it an excellent option for those needing quick cash access.
  • A cash-out refinance typically takes several weeks due to the underwriting, appraisal, and closing procedures.

When a Cash-Out Refinance Might Be Better

  • If you want to secure a lower mortgage rate than your current loan
  • If you need a large lump sum upfront for a significant purchase
  • If you prefer a fixed loan structure instead of a revolving credit line

Why Consider a HELOC With Figure?

1. Fast and simple digital process

Unlike traditional lenders, Figure now offers a fully online HELOC application and funding process. Homeowners can apply in minutes, receive funding in as little as five days,* and avoid the cumbersome paperwork often required by banks.

2. Competitive fixed rates

HELOCs are typically known for variable rates that fluctuate over time, but some providers, like Figure, offer competitive fixed rates* to provide stability and predictable payments. This allows borrowers to plan long-term without worrying about sudden interest rate hikes.

3. High borrowing limits

Borrowing limits up to $400,000* give homeowners and investors the financial flexibility to take on major renovations, real estate investments, and high-interest debt consolidation.

4. Ideal for real estate investors

For those looking to scale their investment portfolio, HELOCs offer quick access to capital without selling assets or dealing with traditional financing hurdles. Investors can find lending solutions that allow them to leverage their home equity to purchase additional properties, fund rehab projects, or make strategic improvements to increase rental income.

5. Transparent terms and no hidden fees

A good HELOC provider ensures a transparent, fair, and upfront process. There should be no hidden fees, prepayment penalties, or surprises—just a straightforward way to access your home’s equity on your terms.

Who Can Benefit From a HELOC?

  • Homeowners looking to finance home renovations or significant expenses
  • Real estate investors needing capital for new acquisitions or property improvements
  • Debt-conscious borrowers consolidating high-interest credit card debt into lower, fixed payments
  • Entrepreneurs tapping into equity to fund business growth

Exploring Your Options

Tapping into your home equity has never been easier. With a fully digital application process, competitive rates, and fast funding, securing financing on your schedule is more convenient than ever. Figure is one of the leading nonbank HELOC providers offering innovative solutions to help homeowners and investors make the most of their equity.

Interested in learning more? Visit Figure.com to explore your options.

Figure Lending LLC dba Figure. NMLS 1717824. *Terms apply. Visit Figure.com for more information. Equal Housing Opportunity



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Could hiring a financial advisor help you reach financial independence and retire early? This isn’t a popular move in the FIRE community, but it gave today’s guest peace of mind, preserved her wealth, and helped her save on taxes in retirement. Stick around to learn if it’s the right choice for you, too!

Welcome to another episode of “Life After FIRE”! Today, we’re chatting with Amy, who was dealt a set of circumstances that altered her life and retirement plans. Amy and her late husband, Phil, arrived at their FIRE number in 2020. Just as they were preparing for early retirement, Phil tragically passed, and Amy was left to not only navigate a new normal but also take control of her finances. Still reeling from the loss of her husband, Amy hired a financial advisor, which turned out to be one of the best decisions she ever made.

In this episode, Amy shares how she used money check-ins and a year of “experimental deprivation” to speed up her path to retirement. She also discusses the pros and cons of using financial advisors, the differences between the assets-under-management and fee-only models, and how to properly vet an advisor to ensure you’re getting your money’s worth!

Mindy:
Hello, hello, hello my dear listeners, as you may or may not know, my husband Carl and I have a new series on YouTube on the BiggerPockets money channel called Life After Fire. And as a very special bonus, we are going to be airing episodes here on the podcast on Wednesdays. Today we’re talking with my friend Amy, about the taboo topic of hiring a financial advisor to help her with her finances and why she chose to go this route. We’ll also talk about her fire life as a single woman and how she reached financial independence in the first place. Hi there. I’m Mindy Jensen and there’s no Carl Jensen today. This is the Life After Fire Show, and we call it that because we’re talking about and talking to people who are living their best life after reaching financial independence. Amy, thank you so much for joining me today. Thank you for having me. Let’s first chat about how you reached Financial Independence.

Amy:
Sure. So back in 2015, I found Pete’s blog, Mr. Money Mustache. I don’t remember exactly how I got there, but I have a hunch. It was probably through Get Rich Slowly because Get Rich Slowly. And JD Roth were the very first finance blog I ever started reading and I’d been checking in on him for years and sometimes I think he would talk about Pete or he would link to Pete. And so eventually I ended up on Pete’s site and I read that very pivotal article, the Shockingly Simple Math Behind Early Retirement, the one that explains, okay, if you can save 25 times your expenses, then guess what? You can retire. And I remember just being kind of skeptical, but very, very intrigued by this. I’m like, wow, this is really interesting. Okay, so I had a full-time work from home job at the time, which meant yes, I was spending some of that time browsing blogs and reading the internet and not being 100% productive.
And I made my way down the list of every single post that had ever been made on Pete’s blog. And especially in those early days, it was all about face punches and very, you should not be spending money on these things. And it was an interesting sort of space to mentally marinate in. At the time I was married to my now late husband Phil, and I would bring these topics up at dinner or whatever, I’d be like, I’ve been reading this blog and this guy’s talking about retiring really, really young and what do you think about this? And at first Phil was pretty dismissive about it. He was like, no, that’s not possible. No way. And then I started talking about it more. I got him to look at that article. We started kind of getting excited doing the math until we were like, Hey, we could do this. We could make this happen. So that was kind of the beginning that that was in 2015, the sort of reading the blog and getting on the wagon and 2016 was when we truly, truly kicked it off. We liked that symmetry of like, okay, January 1st, this is what we’re doing. We set a timeline. At that time, we were expecting that it would actually take us about eight years to reach our goals. In the end, it took us significantly less than that. So that’s kind of the origin story of how financial independence came into my life.

Mindy:
So what kind of changes did you make to your spending and your financial life in general once you discovered this? Once you convinced Phil to join you, did you make any kind of changes to your spending or your savings?

Amy:
Yeah, we made a lot of changes. So we were actually doing a really good job. I thought of saving before this. We were maxing out our 4 0 1 Ks and our IRAs. We were saving on top of that. And because all of those kind of ducks were in a row, we were like, well, we can spend the rest of this money. We had very good salaries, so we were like, we could spend this. We don’t have to feel bad about traveling, a lot about dining out at our favorite places about, we were also in the process of totally gutting and renovating our home. So we were like, okay, we can choose nicer finishes or whatever. Nothing plated in gold, but we weren’t, we were not holding ourselves to the bare minimum where we weren’t trying to source things from the Habitat Restore or from Craigslist. We were like, let’s just buy it at Lowe’s.
Let’s go to Lowe’s eight times a day during those construction weekends. So we were coming into this from a pretty good spot and then latching on this financial independence stream just made us really kick it into high gear. That’s when we did scale all those sorts of extras back. We stopped going out to eat, we stopped traveling for the most part except for very minimalist road trips. We did start sourcing things from Craigslist and the Restore. We just kind of pulled back on all the extras. I stopped buying books as a super lifelong reader and writer. I was always buying books In the end, I actually wasn’t keeping all that many of them. I have an aversion to clutter. I was constantly weeding through my collection. But what that meant was every time the library said, oh, we’re having a book sale, come donate your books.
I would be dropping off grocery bags that I had bought most of those books off of Amazon at whatever Amazon prices were at the time, probably 20 or 30% off. So it was not very efficient. So I switched to using the library. So there were all these ways that we cut things back. For sure. We were definitely, that first year was one of, I would say, a sort of experimental deprivation. We were not freely spending in any category. It was all like, do we really need that? Even if it was like a 99 cent chapstick at the checkout at Target.

Mindy:
Okay. So you said experimental deprivation. I love that phrase. And you said it was that first year. Did that change after a year?

Amy:
It did, and I’m so glad in retrospect, it changed for many, many reasons, but it changed because it was not very fun, and it turns out mentally it’s kind of hard to see your balances go up and up and up and up and still be telling yourself no all the time, you’re not experiencing any of those rewards. You’re watching the numbers tick up, but you’re just like, Nope, can’t do anything fun. We’re not going on vacation. We’re not going out to a nice restaurant with our friends. So it was kind of too much. So after that first year, we did accounting together regularly, a minimum of once a month, and then in December it was sort of a larger review of how the year had gone and we were like, how did this go for you? How did this go for you? Oh yeah, we found out, we were on the same page about how it wasn’t super fun and we wanted to loosen the purse strings a little bit. And so that’s what we did the following years after that, I would say kind of progressively more so we just experienced more freedom in spending and it enhanced our life in many ways.

Mindy:
I think it’s funny that you were able to go and I think it’s great, not funny. Great. That you were able to go an entire year with this experimental deprivation, my new favorite phrase and then make the change. Did you have any sort of check-in meetings during that first year, or did you just plow ahead and then get to the year and say, ah, this isn’t working?

Amy:
Yeah, we had check-in meetings every month, but also probably more so we had sort of more formal ones Every month when we would update our spreadsheets, we would pull all of our balances across like, oh, okay, you’ve got that 401k over here, I’ve got this one over here. What’s this account doing? What’s this account doing? And the market was also doing pretty well. So that was really boosting us and it was fun. Those meetings were super fun. It was like, look at the progress we made. Look how much money we saved this month. This is so great. Oh my gosh. And it was very gamified. It was like, oh, we can look at our data and see that. Last year at this time, we were spending $400 a month on dining out, but this year we spent $13 on dining out because twice we ate at the Costco food court. Crazy things inside of a month, crazy changes. That did make it fun because the numbers really did stack up, but we were, I’d say there was some fatigue as the year went on. Okay, we’re getting past the first few super exciting months and maybe we’re in July or August and we’re like, okay, wow, we haven’t been out to dinner in seven months. This is sort of sad, but okay, let’s go to the Costco Food court, whatever. So there were regular check-ins for sure.

Mindy:
Dear listeners, we are so excited to announce that we now have a BiggerPockets Money newsletter. If you want to subscribe to our newsletter, please go to biggerpockets.com/money newsletter. Alright, we’ll be right back after this. Welcome back to the show. I love that you had these monthly, I love that you said that they were fun. That makes my heart sing because I know a lot of people who don’t currently have monthly check-ins are like, Ooh, I don’t want to have a monthly. Then I have to see all the things I did wrong. Well, you could also see the things that you did, and sometimes things just go wrong in a whole month. I publicly tracked my spending tracked hour spending in 2022, the first six months of 2022 and month one, I went way over on almost every category because I had a big car bill that I wasn’t anticipating because I wasn’t anticipating sliding into a snowbank and breaking the ball joint on the car. So that was way over, and I didn’t know how much I was spending on groceries, so I guessed really low and all of these other things. It can be really difficult to get to the end of the month and be like, wow, nothing went right this month. And there’s always something that’s going to go right. It’s not like you’re always going to be wrong, but focusing on the positive is really important and it can help you continue on the path and just even both of you being on the same page,

Amy:
That feeling of being on the same team definitely strengthened us in our financial independence journey so much because those meetings were not about like, oh, I bought a new sweater this month. I’m kind of going to be in trouble when we have this meeting. It wasn’t like that at all. It was like, let’s see how awesome we did this month. And that just sort of changed the whole tenor.

Mindy:
Oh, that’s a really great way to reframe it, Amy. You’re so positive. I love it. Once heard somebody say, it’s not me against you, it’s us against the world. And I love that phrase so much. I’m just going to keep saying it. So Amy, did Ramit’s philosophy of live your rich life influence you, or did you kind of come to this, incorporate the things you like by yourself?

Amy:
I think it was more organic. It was just kind of something we came to in looking and evaluating our quality of life. I was familiar with Ramit back then, but not the rich Life stuff. I don’t remember when exactly that came about for him, but my early memories of Ramit actually came from also reading Get Rich Slowly, because JD Roth would link to Ramit and I remember Ramit’s anecdote about how when he was in his twenties and going out to party and bars, but he didn’t want to pay for drinks, he would bring a flask of rum and he would order a Coke or a Diet Coke and he would put his own liquor in it. So at the time, that was my primary association with Ramit’s philosophy. It was not what it is today. I don’t know exactly when he made that evolution, but if you had asked me back then like, oh, would you say that what you and Phil are doing is something that could be called living your rich life? I might’ve said yes to that question because that is how it felt. We were very specifically kind of curating the choices we wanted to make. Where was it worth it to us to spend, and where was it really easy to not spend? And that was an ongoing conversation, but one that we were pretty much always on the same page about.

Mindy:
I love that you were on the same page. I did not read Ramit’s book. I will Teach You To Be Rich until I think the first time I interviewed him on the BiggerPockets Money podcast, and the reason I didn’t read it is because it’s called I Will Teach You to Be Rich. And I’m like, well, I already know how to get rich. You just save, save, save. I didn’t realize that what it meant was I will teach you how to live a rich life. So I thought it was going to be like, invest in your 401k and invest in your Roth ira. And I’m like, well, I already know how to do that, so I’m not even going to bother reading this book. It was definitely different than what I expected it to be, and I think that I did myself a disservice by not reading it much closer to the beginning of my journey. But we all have our shoulda Whata Couldas,

Amy:
Yeah, hindsight 2020 as they say.

Mindy:
So I love that your story was woman led. In most couples in this space, the man is trying to convince her to do this financial independence thing, this weird thing. Given that you were the driving force behind this in the beginning, why did you decide to hire a financial advisor?

Amy:
This is going to lead us down into a bigger and sadder story to be frank. So that beginning of that financial independence journey, as I mentioned, was back in 20 15, 20 16. A lot of things changed in Phil’s in my life over the years as it does for everyone. We had been living in a very low cost of living place at the time that we started this journey, and we at a certain point made the decision to move out to San Francisco for various career related reasons. And so we did that and there’s kind of a lot in the mix. And then the pandemic came, and that is when we decided to get out of San Francisco where we literally, there was one time when we didn’t leave our apartment for 14 days. It was very early days before vaccines, before testing was even readily available, and it was scary to literally be out on the street.
You were keeping this six foot wide ber around you. You didn’t know a lot of things that we now know about that disease. So anyway, we wanted to leave and we did. We moved out to Colorado at that time, and that was in May of 2020, about five years ago, in June of 2020, very shortly after we moved here, we met our financial independence goal. We hit our fine number and we’re like, oh my gosh, okay, here we are after all this time and there’s this worldwide pandemic going on and nobody’s leaving their houses. It was a very weird time to meet this number, but we were happy about it of course. And that of course also led to a discussion like, okay, what now? What are we going to do now? So Phil decided that he wanted to keep working because he was super happy with where he was.
He had sort of finally found the kind of dream setup at work that he had been looking for, and it was just something that he wasn’t ready to give up quite yet. So I fully supported that. I was like, okay, great. You want to do the one more year syndrome? That’s totally fine, whatever you want. Because there was so little social life at that time. It made sense. It’s like, okay, well if you did retire now, you’d be stuck in your house just like you are now. So it made sense. I decided to go back to school, which was something I had been toying with for a while, and I did, I enrolled and I started going full-time to the local community college. So that was in June of 2020. And then in September of 2021, Phil was still working. I was still in school. We had bought a house here in Colorado and he had gone out for a bike ride. No, I’m sorry, not a ride. He was away on a bike camping trip in the mountains for one night with a friend and there was an accident on his way home and he died.
So this is obviously a part of the story that’s not going to apply to most people. This was a shocking, completely out of left field, tragic circumstance that enveloped my entire life, not just my financial life, but it absolutely did include my financial life. So that kind of threw everything into a turmoil. And within that turmoil, I knew very quickly that I was going to need help managing the money aspects because those are things that Phil had done. Yes, I had brought us to financial independence. I was the driver of that whole shebang, but he was the one, he had the software brain, the math brain. He was doing the trades and figuring out our account balancing and what are we in stocks and what are we in bonds and what’s our risk tolerance? And he did all the mathy stuff, which was not my forte.
Absolutely. It was not let alone in the wake of this horrible tragedy when I could not remember to lock my door or run the dishwasher. I was in no position to be like, well, let’s dive in and let me learn all this stuff so that I can manage my financial future. That just was not going to happen at that time. So I started trying to figure out, okay, how am I going to do this? And I got connected with somebody at Charles Schwab, which is where we did the bulk of our banking. There was a representative at sort of my local branch who reached out and was basically just like, Hey, I know you guys are new to the area, whatever, but I’m introducing myself and if you need anything, let me know. And I wrote that person back and I was like, yes, I need help. Can we talk? And I went and met with him and he was super great and supportive, and he explained that Schwab often referred people, their customers, their clients. They referred them out to financial advisement firms or wealth management firms. There’s different terms. So he kind of was like, okay, this is a path we can go down. Is that something you want to try? And I was like, yes, please. So that was the beginning of how that got started.

Mindy:
Do you have a traditional financial advisor who takes assets under management or do you have more of a fee only financial advisor or an advice only financial advisor that you’re using?

Amy:
This is very controversial in the PHI space. It sure is. We know that financial advisors at all are kind of controversial. If you have one, it’s often kind of frowned upon. It’s that face punchy like, no, no, no. This isn’t how smart people do money. If you do it, you’re an idiot. There’s kind of that vibe around advisement at all. So I just want to acknowledge that, and then you take that even a step further if you’re going to have one. It’s like, okay, well if you have to use the fee only ones for God’s sakes, don’t even consider these asset under management ones. They’re just totally ripping you off. There’s nothing they could possibly do that could help you to that extent, and you’re just so dumb if you even consider it. So that’s the water we’re swimming in, right? Would you agree with that?

Mindy:
I would absolutely agree that that is the water that we’re swimming in. Another great phrase, Amy, the queen of phrases.

Amy:
Today’s my phrase day Friday phrase day. Anyway, so to actually answer your question, the advisor that I use is an assets under management advisement firm.

Mindy:
And are you happy with the service that you’re getting from them and the cost that it is to you?

Amy:
I am super happy with the service that I’m getting from them, and there’s a few reasons for that. So obviously my situation is somewhat unique in that I kind of had to do this all at once during a crisis time. So the fact that I could sort of be linked with a professional outfit who does this all the time, who spends all of their time, the people who I work with, they got their degrees in this. This is what they do full time around the clock, yada yada. That made me feel very, very safe. It made me feel like my money was safe. It made me feel like, okay, despite the fact that my life has just exploded around me, there is a way that I can still be taken care of. I can still be financially independent. I will still be okay. I can get through this financial aspect, the rest of it TBD, but at least my money will be all right.
That was valuable. I know that that’s not the case for everyone, but I would also argue that there are lots of ways that relationships end. Usually it’s not in death. Most of them end in divorce or in breakups, the ones that end in those ways. I think a lot of these issues are still at play. There’s usually somebody who is responsible for the nitty gritty money stuff and another person who maybe had no idea what was going on, who maybe had some idea what was going on, but is maybe not super equipped to handle it on their own. So for those folks, I would just say that a financial advisor can be a godsend. I know they have been for me and there’s been many aspects of life that they have helped me with beyond just the money stuff. So yes, they manage my money.
They also did this super comprehensive audit of all of my insurances. They were like, okay, look, you have these assets. You need to have an appropriate level of insurance so that if somebody slips and falls on your sidewalk or whatever, you have some coverage for that. So that was an umbrella policy. Okay, how much do I need that policy for la, la, la? Let’s do that. What’s the appropriate level of auto insurance and home insurance? I should have, how about health insurance? So that was a big aspect. They were also super helpful with estate planning. That was kind of included in their services. So because my husband had died and we had sort of been caught kind of red-handed with not having any end of life plans in place, I knew for myself that I did not ever want that to happen to my next of kin.
So it was like, okay, it was a priority that I had from the very beginning. They helped me set up a trust. I worked with an attorney of theirs. I now have all these ducks in a row that were not in a row before or not even close to a row. They were in an S shape, all of a pond. There have been many additional ways that working with an advisor has enhanced and improved my life beyond just the money part, but specifically regarding the money part. I would say that they allow me to sleep at night. I’m not worried that I’m going to make a wrong move. We talk about everything, every financial goal, everything about earning income or spending money. I have somebody to talk to about that. My spouse is gone, right? Money is an intimate subject that we generally don’t go around talking about this stuff out in the world. It’s kind of like taboo. People have all different levels of comfort around it. But because I’m now a single person, a single woman, I have this professional outfit who is working with me to make sure that I’m successful in the financial longterm. Like yes, I can put a price on that because there is a specific price in my percentage that I’m paying them every year. But I also kind want to say, you can’t put a price on that. It’s very difficult to put a price on peace of mind.

Mindy:
We have to take one final add break. We’ll be back with more after this. Thanks for sticking with us. I could not agree more, Amy, and you said a couple of things that really made me understand where you’re coming from. So I want to stop right there and just let everybody know. Amy and I have known each other for five years. I would categorize, categorize us as very close friends. I understand all, I’m glossing over the story of how her husband passed because for this particular show, it’s not that he passed is important, but all of the goings on with that is not necessarily so important. It was covered brilliantly by Brad from Choose Fi on episode 4 76. And if you’d like to know a little bit more about Amy’s financial journey after her husband passed away, Brad did a really, really great job with her story. But I want to get back. So I don’t want people to think, wow, Mindy, you totally just jumped over the fact that her husband died.

Amy:
If you knew the hours you and I have spent talking about the fact that my husband died and all the repercussions people would understand, it’s a lot of hours.

Mindy:
I’m intimately familiar with that part of the story, but I also don’t want people to be like, wow, she’s so mean. So a couple of things that you said. You said, my financial advisor makes me feel safe. Where’s the price tag on safety? And they allow me to sleep at night. Where’s the price tag on sleep? Money is an intimate topic. Yeah, you could go and talk to a lot of people about this topic. We do have several friends in common in the PHI space and we all talk about money. You could ask these questions, but it’s also you don’t really want to just share your entire financial life with somebody necessarily, whereas you could do this with the financial advisor. And I think I almost said, I think for your circumstance, it’s okay. That is so snotty. So I’m not going to say that I’m going to leave it into the show, but I’m not going to say that I think that anybody who wants help managing their finances has a lot of options.
You have the advice only financial planner who will look at what you’re saying and just give you some advice. I think that might also be called the fee only financial advisor. You give them a specific dollar amount, they trade it for advice. There’s the assets under management, kind of like the full service. Amy and I actually spoke at an event a couple of years ago called Camp Widow, and we were talking about money and how to transition from he does it all to now I have to do it. And how do you kind of figure that out? And we spoke with multiple widows over that weekend, and it seems like about the two year mark after your partner passes is when the widow brain, the fog finally lifts and you can sort of start feeling like yourself again. And that’s not true for everybody. But that seemed, would you characterize that as kind of two years is when you start to be able to function at the same capacity that you were while your partner was still alive?

Amy:
I agree that two years is a very common milestone to be like, okay, I can be back in the world, but I wouldn’t go so far as to say that I have regained the capacity that I had before Phil died because I haven’t. And that feels very clear to me, and I don’t know if I ever will. And I’ve read other widow accounts who have mentioned that as well. So I want to make that distinction. But I do think, yes, two years is a reasonable point at which many widows that I have known and I have known a lot by this point do come out of the midst and are ready to be maybe a little bit more proactive, is how I would put it.

Mindy:
So in two years, your bank is not going to wait. Your investments are not going to wait. Your bills are not going to wait for you to be able to function again at a higher level. I don’t know how to say this without sounding terrible, but like you said, two years is about where it’s at, but you had two years worth of sometimes I don’t remember to lock the door. Sometimes I don’t remember to turn on the dishwasher. Did I brush my teeth today? When was the last time I took a shower? I’m pulling from my days of having an infant, which is in no way comparable except the lack of sleep and the lack of being able to focus. So having somebody to help you through all of those times, I mean, anybody listening who is like, wow, Amy, you could have done that yourself.
You know what, Amy? You could build a whole house by yourself. Why don’t you could build a car from scratch? Why did you buy one that was already done? There’s so many things that you could do for yourself that you don’t do. Everybody listening. You could grow your own vegetables. Do you do that? No. You go to the grocery store and you buy them ready grown. There’s lots of things that you could do. You hire people because they’re either better than you at it or you don’t want to do it. And I think that financial advising is just exactly the same thing. You hire somebody because they’re either better at it or you don’t want to do it.

Amy:
I agree. And I think that brings up a sort of similar but related point around how, if we think about the sort of template that we all became aware of, the retired person, the PHI person, what is the archetype here? If you think of like, oh, what’s the typical person in the PHI space? I think that answer has changed over time. But if you go back to when I first got into reading the PHI stuff, it was pretty clear and pretty narrow. It was a man, he was in software, he DIY tons of stuff, his house, his car, very into stoicism, an atheist. Does this sound about right? And I’m not trying to pick on Pete or Carl or any of the other people who have given us so much wonderful content, but I want to say that those terms for some of us, not everyone, but for some of us including me, they do not fit. That is not a box I’m ever going to fit into. My husband was very much of that ilk. I respect it, I understand it, but I do not function in that way. So I want to give an example about this.
Like I said, I was in school before and I have been chipping away at this degree that I’m working on. And right now I’m enrolled in the last class that’s required. I left it to the very last minute. I didn’t want to take a science class with a lab, but I had to take a science class with a lab. So I had to choose which one it was going to be. And in sort of a sentimental nod to Phil, even though he has now been gone for more than three years, I decided to take physics because Phil loved physics. And I’m like, there are limited ways that I can connect with him in the present day. And maybe this is one, I’m going to take a physics class. I’m going to see what the fuss is about. What did he love about all this? So right now, I’m at the slightly more than halfway point of the semester, and this class is killing me.
This class is so hard. I have, I have an A student, but in this class right now, the last time I checked I had an 89.94%, which to me, to some people that’s like, oh, that’s so great to me. That’s my other classes, my English, my communications classes. I’m at 98 or higher. I have always been historically this one I’m like, oh my gosh, I don’t think I can hold an A until the end of the semester. Every assignment, every lecture, every lab, I dread it. I procrastinate about it. I put it off. This is not how my brain works. This is how Phil’s brain worked. And I respect that and I loved that about him, but it is not how my brain works and the finances are not that different. That was really good for his brain. His emotional intelligence was a fraction of what mine is.
So there were push pull things and that’s fine. I loved him, I chose him. I can say these things, it’s totally fine. But within the PHI space, I think we have these defaults of what’s allowed and what’s not. And using an advisor at an assets under management firm is a thing that is verboten. It is not allowed. People will laugh you off of a forum or whatever about that. But I have no qualms about it. It enhances my life. It is my version of a rich life to not have to worry about money. I have outsourced that worry and that planning and that care to people who are so much better at it than I am better. And therefore I can sleep at night. And I think more people should feel that this option is open to them.

Mindy:
I absolutely agree. If you don’t want to or you feel like you could hire somebody who knows more than you, then do it. And if somebody tells you, oh, you shouldn’t just say think you. I will live my life the way that I want to.

Amy:
There is a difference like you mentioned, between an assets under management fee structure versus a fee only financial advisor. And so part of my thinking, and I was thinking about this just going into this conversation, knowing that we’d be talking about this, I thought, okay, why didn’t I pursue a fee only? Or even if I couldn’t do it, then I’m in a much better mental place now. Why don’t I do that now? Why don’t I make the switch? I would save a lot of money. It’s true, I would. But the reasons I came up with are, because when you do that, that person that you’re paying the fee to, they’re looking at your stuff, your numbers for what, an hour or two, maybe an hour before they have the meeting with you, and then maybe the hour during the meeting, and then that’s kind of it.
They’re not invested in your journey, metaphorically speaking. Whereas in my position, the kind of advisor I have, I can and have emailed him at any time, at any hour, Hey, I’m thinking about maybe finishing my basement. This is kind of what I think that budget would look like. What do you think this does to my long-term plan? And then he’ll write back and he’ll have charts and he’ll have very specific answers and he’ll say whether he thinks I should do it or not, he doesn’t tell me I can’t. He’ll just say, this is my professional advice essentially. Or if I have tax questions, we have this massive tax planning meeting every year that’s like, okay, we’re going to try to make your income fit into these brackets because of the a CA that you’re on. So this is how we’re going to do that. Did you make any money this year? Okay, we’re going to put this into the Roth la la. There are many aspects of my financial life that he and his firm are helping me manage that are not included in what a fee only advisor does. So I just want to delineate that relationship. That is the main difference in my mind. Between those two are that sort of like one-off support and advice and that ongoing thing where you know can reach out anytime, any day of the year and get fast answers.

Mindy:
It sounds like you have found a really great advisor. I want to encourage anybody who is considering hiring an advisor to interview them, talk to them and see what kind of services they provide, what kind of things you’re getting. You have somebody who is fitting all of your needs. If my listeners connect with an advisor and you’re like, wow, he really didn’t do anything for me, maybe an advisor isn’t for you, or maybe that advisor isn’t for you. If you want somebody to look over your numbers and just be like, yeah, you’re doing great. Or hey, don’t forget about this tax advantage or this tax obligation that could come up. If you do this, then going to a place like Hello Nectarine or the XY Planning Network and finding a fee only financial advisor could be what you’re looking for. But if you need somebody who is more in depth, who is looking at your numbers frequently, who you can reach out to at any time, somebody like Amy’s advisor might be a better fit for you. And it doesn’t matter what Bob down the street says or Joe Blow online says, if you like this person, if you’re comfortable, understand the fee structure. But if you’re comfortable with the fee structure, then you’re just paying for a service that you value. And anybody who tells you that you’re wrong, they’re wrong. Do you think that you will continue to use your financial advisor for the foreseeable future?

Amy:
Good question. Definitely. Right now I have zero plans to change. There are added benefits. So given my life stage, I am a single woman. But that could change one day. I could meet someone I could want to get married. If that happens, there will be many conversations that I will have with my advisor about, okay, what are we doing in terms of prenuptial agreements or how do we need to structure my assets in such a way that they’re safe no matter what happens in any future relationship or marriage. So that’s just another thing that they’re going to bring to the table that I will lean on them for if or when that time comes. I think it’s possible. I don’t know. Every time I think about should I consider doing this myself, I have all these friends who are just like, oh, index funds and set it and forget it.
But I know from working with my advisor on the backend for these last few years, there’s so much more to it. I do think I know enough to be like, okay, yes. Could I dump all of my money into an index fund if if my advisement firm went away and I didn’t have that as an option anymore, I think I could do okay, but okay isn’t really enough. If I can go back to my physics class analogy, okay, right now I’m getting a B or a high B in that class when normally I’m an A student, now a B in a physics class that I don’t really need and I’m never going to go into a STEM field, that’s fine. There are no stakes with that. But if I was to get the equivalent of a B grade in managing my own investments, I would be pretty catastrophic. I would be missing out on a lot of money if I was only doing as well as a B. So I really have no plans to change at this point. I’m not going to say never, but it is not in my immediate field of vision as like, oh, I want to cut costs and this is where I’m going to do it. Those costs are what allow the other costs to not bother me. So for now I’m letting it ride and I’m perfectly happy to do it.

Mindy:
Okay. Well, I think that’s great. I think that you have made a decision based on information and facts and not based on somebody else saying something that you should do or somebody saying something that you shouldn’t do and it works for you. You understand how much it’s going to cost. That’s it. My money, my choice. Exactly. Your money, your choice. Alright, Amy, I really appreciate your time today. This was a great conversation. I think that this is going to help a lot of people who are either using a financial advisor and feeling guilty about it or wanting to use a financial advisor. Having seen all these comments, you should never use a financial advisor and saying, oh, well then I guess I shouldn’t, but they’re not really managing their money. It should be managed. So if you want to hire a financial advisor, hire a financial advisor. Amy says it’s okay, and I do too. Amen. Alright, Amy, again, thank you for your time today and we’ll talk to you soon. Thank you so much. Talk soon. And if you’d like this video, please click thumbs up and don’t forget to subscribe to this channel for more inspiring fire videos, just like Amy’s. All right, that wraps up this episode of the BiggerPockets Money Podcast. My name is Mindy Jensen saying Later days sun rays.

 

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Florida property taxes could drop to 0%. As the state struggles with some of the lowest affordability in the country, with home insurance almost doubling in five years and home prices increasing by more than 50% compared to pre-pandemic pricing, Floridian homeowners have seen their housing costs explode. So, what if they could save thousands of dollars a year by ditching property taxes?

If Florida makes it work, this could open up the floodgates for many other states to pass similar bills. But WILL it work? A significant amount of Florida’s tax revenue comes from property taxes, so will they be efficient enough to work with a tighter budget, or will infrastructure break down due to the massive loss in government funding?

And, if property taxes are eliminated, boosting affordability, could buyer demand surge as well? We ran the numbers, and the potential savings on housing costs are substantial. If Florida proves a successful 0% property tax test case, other states (including yours) could be next.

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Dave:
Can a state just get rid of property taxes? Well, Florida is apparently testing the feasibility of this bold idea. And other states like Wyoming, Kansas, Montana, North Dakota, have also been exploring ideas to either limit or completely abolish property taxes. And if these things pass, they would of course have a huge impact on the way the housing market works. So today we’re going to explore this idea. Is it feasible? Why do it, what could the impacts be? And could this be coming to a state near you anytime soon? Hey everyone, it’s Dave Meyer, head of real Estate Investing at BiggerPockets, and today we’re talking about one of the hottest topics and one of the biggest challenges in real estate today, which is property taxes. If you own property already, you’ve probably noticed a big, potentially huge increase in property taxes in the last several years, and we don’t yet actually have 2024 tax data reminder.
Those are due soon, but we do have data up through 2023. And if you look at the change in property taxes between 2019 and 2023 across the whole us, the median property tax went from about 2300 bucks to 2,800 bucks. That’s a 24% increase in just four years. And while this isn’t the only reason, by any means that housing is getting less affordable, you also have to blame high mortgage rates, soaring insurance costs, higher property values, all contributing to lower affordability. But this tax issue is a significant component of higher housing costs in general. And as such, many state and local governments are looking for ways to improve home affordability. And property taxes is actually a very logical place for governments to start looking because it is the element of housing affordability that they actually have some control over. Insurance is private, mortgage rates are driven by big macroeconomic forces.
Supply quantities are really complex and they’re very slow moving taxes though those can actually be changed relatively quickly if there is a government willing to do that. And if the government does implement or change a policy, those changes can go into effect actually pretty quickly as well. So it makes sense that state and local governments are examining whether lowering or eliminating property taxes is a viable solution, and that’s why we’re here talking about it today. It’s also why Florida in particular has been in the news so much and why they’re introducing some pretty bold ideas to lower taxes. Now you probably know this, but Florida has been hit particularly hard in the housing affordability arena. It’s also experiencing one of the larger corrections in terms of prices across the country. Now I want to keep that in context. The state of Florida has declining home prices, but it’s one, two, 3%.
It’s nothing like a crash, but it is worth calling that out. Now, other states are experiencing similar dynamics, but I do want to just pick one state for this episode to just use as an example. And because Florida represents a lot of the issues and a lot of the potential solutions that we’re going to be talking about today, it sort of fits as a good example. So we’re going to be following Florida most closely. Now let’s just talk about what’s going on in Florida since the pandemic property values have just exploded. It was one of the fastest growing states in terms of appreciation. In fact, we saw 66 0% increases in home price value across the state from the end of 2019 to today. So that is just massive appreciation even relative to all of the appreciation that we saw during the pandemic. This was one of the fastest growing states.
This for people who already owned property, was great for your equity value and growth, right? But it is not good for housing affordability for people who are trying to buy homes now or maybe trade up to a different home or just move to a different part of the state, it’s not very good for that. In addition to property values, taxes went up in a corresponding way. Most property taxes are based on the value of properties, and so when properties are appreciation, taxes go up. For example, we’ve seen taxes in Tampa. One of the hottest markets in Florida have gone up 57% since 2019. In Miami, they’re up 48%. And you see similar numbers all across the state. One of the unique things that’s happening in Florida as well, that’s really just hammering housing affordability is home insurance. The premiums have just been going crazy. This is sort of this double whammy that’s happening in Florida because premiums have gone up 72% over the last five years.
So that’s even faster than home price appreciation, and that is more than most states. I think it’s actually the most out of any state. Alabama and Louisiana are also up there, but this is another reason why Florida is seeing such a big hit to housing affordability and why they are probably being aggressive in terms of exploring the idea of limiting or eliminating property taxes to help take some costs off the table for Florida homeowners. So just all in all, to me, it makes sense why they were looking into this because housing has gotten so expensive. It’s a key component to any state’s economy and GDP to quality of life, to the desirability for people to move there, for business to move there. There’s so much to the housing market. So it makes sense to me why Florida is actively looking into ways to make housing more affordable.
And I’m sure at least on paper, to anyone who owns property in Florida, this sounds like a great idea, less taxes, but we have to remember that there are a lot of trade-offs and considerations here. So we need to dive in a little bit deeper if this actually makes sense and if it’s actually feasible. The first thing we need to look at are how high are Florida property taxes in the first place? Now, it’s important to remember that it does vary locally. Different cities, different counties will have different property taxes, but when you look across the state in general, it averages 0.8% of home values. That probably means nothing to you, but just relative to other states, it’s right about in the middle. The highest states are in New Jersey, which is 2.2% Illinois, 2.1%. Then you have other states like Massachusetts, New York, and Texas all around 1.6%.
So those are all double or more than Florida’s property taxes. The lowest is Alabama with 0.38% property taxes. So actually, if you’re looking for the median, Florida is not that far off 0.81%. It’s about normal, and it’s important to note that this actually isn’t what changed. So you have to remember here that Florida didn’t increase its tax rate. That’s not why people’s taxes are going up. It’s just because property values appreciate so much. So it used to be 0.8% of a $200,000 house. Now it’s 0.8% of a $400,000 house. And so obviously that’s good for equity, but it hurts people’s cashflow, right? Or your savings rate because maybe you’re building equity in your property, but you might not have access that might not be liquid assets that you can use to pay those taxes or that increasing insurance costs. So that is what is going on with property taxes today in Florida. But I think there’s actually some bigger questions that we need to dive into. How much total tax is the state collecting and what different buckets do they collect those taxes in? Because property tax is just one of those buckets. There’s also sales tax, there’s also income tax, and you have to look at this bigger picture to figure out and realize is this actually feasible in any state? Is it a good idea? And which states might actually be able to pull something like this off? We’ll get into all that right after this break.
Welcome back to on the market. We’re here talking about capping or eliminating property taxes as is being discussed in Florida and a couple of other states right now. And before we left off, we talked about what was going on in property taxes in Florida, but I said that I think there’s sort of two other questions that we need to be talking about. The first is how much total revenue a state government is collecting. And then the second is the mixture, the bucket. The second is the mixture or buckets by which they collect that tax. It’s not just property tax, it’s also income tax, sales tax, corporate taxes, all that because at the end of the day states they need income, they need revenue, and they generate that through taxes. And I’m sorry, I know there are some people out there who say that tax is theft.
No, it is not. I fully disagree with that. Taxes are the price that you pay for living in a civilized society. Personally, I want roads. I want airports. I want schools, a strong military, a police department. I want hospitals and those things, they cost money and taxes are how you pay for them. Taxes to me are not theft. It is like you’re subscription free for society, right? If you want music without ads, you pay a subscription to Spotify or YouTube Premium, you want to civilized society, you pay a subscription in the form of taxes. Now, of course, don’t get me wrong, there are a lot of worthy debates about the right amount of taxes and the right sources of taxes, what taxes should be spent on how efficient the government uses those tax revenue. Those are all great questions and topics of debate. So I know there are those fringe folks that say all taxes, theft.
That makes no sense to me as one of our founding fathers, Benjamin Franklin said, in this world, nothing can be said to be certain except death and taxes. And I totally agree. So what we should be talking about is how much total revenue should they be collecting and what are the best ways to collect those taxes. So because taxes are inevitable, but there’s different philosophies on how much revenue you need to collect and how you should collect that. Revenue states have very different ways of collecting taxes. Like I said, the primary ways are property tax, income tax, sales, tax and corporate taxes. There are other things like permits and fees, but those tend to be smaller sources of revenue. So we’re just going to focus on the bigger buckets today. Now there’s actually a cool chart. I will link to this if you’re watching this on YouTube or we’ll put it in the show notes if you’re listening on a podcast, there’s a cool chart put together by the tax foundation that I was doing when I was researching the show that shows how each state collects taxes.
And it’s super interesting really to see how states do it really differently from one another. I just picked out two as examples. Kentucky and Oklahoma, they have a very balanced approach. They have about 25% from each bucket, from sales tax, income tax, property tax, and other taxes. Some states like Texas or New Hampshire, for example, are super weighted towards property taxes. Many states have no income tax at all states like Tennessee, Washington, Texas, Nevada, Wyoming, and of course the example we’re talking about today, Florida. So we need to consider this mix, how much revenue it generates and how it impacts an individual person’s total tax burden, right? Because a lot of people look at Florida and they say, Hey, there’s no income tax. It’s a low cost state. And that might be true, but it’s not necessarily true because maybe they have a low income tax, but super high property taxes, that’s true In Texas for example, they have a really high property tax or a state like Washington has no income tax, but they have a super high sales tax.
So they’re just getting you in different ways. It’s not necessarily a low tax state. So you actually have to look at what’s combined. The total tax burden for each state and where each state falls the lowest in the country is Alaska at 4.9%. That is very, very low. The highest is unsurprisingly New York at 12%. Then Hawaii, and I know California gets a really bad rap for having really high taxes, and it does have a super high income tax that actually goes up to 13% just for state income tax, which is wild. But that’s actually a tiered system. And the data I’m measuring with today is what the average person plays. So California is still high 10.4%, but it’s actually not the highest. So let’s get back to our discussion of Florida. Now, I said that Florida has no income tax, but that doesn’t necessarily mean it has a low overall tax burden, but it actually does it have a low overall tax burden?
In fact, it has the fourth lowest tax burden in the entire country. The average taxpayer in Florida just pays about 6.05% of their total income to state and local governments each and every year. Again, that’s about half of what the highest one is in New York. And one thing that I think is really interesting is that Florida, despite collecting relatively low amounts of tax from its taxpayers, seems to be relatively efficient with its taxes. Because if you look at the US News and World Report, it comes in 20th in terms of state rankings for total infrastructure for schools. It’s somewhere in the middle as well. There’s a lot of different sources for this, but it came somewhere between 15 and 25% for public schools. So it’s not at the top, but given that it has the fourth lowest tax burden, but it is in the middle in terms of infrastructure and education, I think you could easily argue that Florida is relatively efficient with taxes when it comes to education and infrastructure, which are two very important functions of the government.
But I think the thing here that really matters is going back to that sort of mix. So they don’t collect a ton of revenue, but 38% of the state’s total income comes from property taxes. So just off the bat, you have to think that that’s a little bit crazy. Eliminating nearly 40% of the state’s operating budget seems a little farfetched. But one thing that you need to know here is even though that they’re operating relatively efficiency, just based off a couple of different data points here, there’s tons of different ways to measure government efficiency. I’m just giving you some examples here. But the thing that you should know is despite collecting a relatively low amount of tax revenue per taxpayer, about 38% of the total revenue from the Florida budget comes from property taxes. So the question is, if Florida already has one of the lowest overall tax burdens and nearly 40% of their revenue comes from property taxes, does it actually have room to go lower?
Right? That seems to me to be the big question because they’re already pretty low, and that would be eliminating 40% of their revenue. And again, I get it. I know that a lot of Florida homeowners like this idea, but sort of the question becomes how low is too low? At what point do services and infrastructures start to decline because things obviously cost money, or might they just shift the tax burden? Maybe they keep that total 6% tax burden that we were talking about, but shift it away from property taxes and more towards an income tax or more towards a higher sales tax. Now, I feel like one of the things that has really made Florida a popular place for migration and businesses moving it is that they don’t have an income tax. So I am highly skeptical that they are going to introduce any towards some income tax.
Could they increase their sales tax? I mean, if they implemented a total ban on property taxes, which I’ll let you know in a little bit if I think that’s likely, but if they did that, I think they would have to increase sales tax. That is already the biggest piece of the pie. I actually found some data that breaks down Florida’s total revenue. And yes, they have seen increases in corporate tax revenue, which is great. It grew actually a huge percentage, 72% in just two years. But corporate taxes are still just sort of a drop in the bucket. Sales tax, at least according to the data I’ve seen, is 10 times more than corporate tax. So even though there are companies moving to Florida, it’s not going to be a big enough difference to offset just eliminating property taxes. I think it would probably have to go to an increase in sales taxes or just collect total revenue, but that would probably come with budget cuts. But could this actually take hold? And if so, what does it mean for the housing market? We’ve talked a lot about Florida, their revenue, how they collect taxes. Do I actually think that this is going to happen? And if so, how could this all play out? We’ll get into that right after this break.
Hey everyone, welcome back to On the Market. It’s Dave here talking about property taxes and some states’ efforts to limit or eliminate entirely property taxes. So far we’ve talked about how states collect revenue, what it means to them, what they do with those tax dollars, but now let’s shift our conversation to could this actually take hold and if so, what would happen to the housing market? So overall, and again, this is just my opinion, could this take hold? I think so. I think that when you look at what’s being discussed, there’s a very broad spectrum, right? Some states are talking about capping increases or lowering the percentage of property taxes relative to their value. I think those are going to gain steam in the next couple of years because frankly, I have a hard time believing that housing affordability is going to get a lot better anytime soon.
I think it will get better, but it’s going to be gradual. And caps on increases could help play into that. So those caps, I think that might come into play in certain states, the complete elimination of property taxes, I think that’s a little farfetched right now. Some people might propose it, but just think about that. Think of Florida as a business. If someone came in and said, we’re going to eliminate 40% of our revenue, that would be crazy. So maybe they would do that and they would shift the tax burden elsewhere. My guess, and this is just following housing policy for quite a long time, my guess is that they’ll start with more modest measures like caps on increases or putting more dollars into homeowner assistance programs. Because actually right now if you look at Florida, they put about 14 billion per year towards homeowner assistance programs.
And so they might just increase that or find other ways to improve housing affordability without completely eliminating property taxes. Now, what states and where could this happen? My guess is that they will be more popular in states where property taxes is already a smaller share of total tax revenue. So these are states like New Mexico, Delaware, Kentucky, Louisiana. We also have West Virginia, Tennessee, Alabama. Because a state like that, it’s not going to impact their revenue as much as a state like let’s say New Hampshire where 45% of their income comes from property tax. So if New Hampshire wants to limit or eliminate their property taxes, they’re going to have to basically rebuild their entire tax code, whereas a state like New Mexico or Kentucky can make modest adjustments to property taxes and not have it change their entire state budgeting. So that’s my estimation of what we’re going to see over the next couple of years is probably efforts by state and local governments to improve housing through revisions to their property tax policy.
I don’t think the complete elimination of property taxes across entire states is very likely, at least not yet. I think they’ll probably try more modest approaches before they go to that. What I think is sort of an extreme measure now in the states that I think that this could happen, and if they do happen, what does that actually mean? Well, for real estate investors, there are some potential things that you should be thinking about. First and foremost, I think for out-of-state investors, it could be a net potential benefit or actually for people who own multiple properties. But let’s start talking about out-of-state investors. Let’s just go back to our example of Florida. If you live, let’s just say in Ohio and you invest in Florida, that’s going to have a net benefit on your bottom line. That’s going to increase your cashflow each and every month.
But if the state decides just to shift the tax burden elsewhere, say to an income tax or a sales tax, by being an out-of-state investor, you’re not going to be impacted by that. I mean, I guess you would be impacted a little bit if there’s sales tax on repairs or maintenance, but not for everyday expenses, not when you go out to eat, like the sales tax isn’t going to impact you because you’re living in Ohio, but you’ll be disproportionately benefited by having a decrease in that property tax. And sort of that same line of thinking, at least for me goes through when owning multiple properties. Because even if you live in Florida, yeah, your sales tax might go up, but you would get a proportionate benefit because if you own multiple properties, right, you’re going to have your tax burden come down across those multiple properties.
And yeah, some of your everyday expenses will go up because a higher sales tax, but that might be offset or more than offset by the cumulative total reduction of property tax. So those are the two ways I could see this impacting investors and just strategy. So what would actually happen to the housing market in these areas where these things might get passed? Could they actually change supply and demand dynamics? I actually think that they might. I calculated an example just to look at this and start thinking this through. So just let’s just imagine that you bought a median price home of about $400,000. You take out a mortgage for 80%, that’s $320,000. If you had six and a half percent interest, and if your normal tax right now would be about $3,000 a year, insurance is about the same. Your monthly payments each and every month would come out to about $2,600 per month.
Now, let’s just say that they go full bore. They just completely eliminate property taxes. In this same scenario, all things being equal, other than property taxes, your payment would go down to $2,350 a month. That is a reduction of $250 a month. Or in other words, reducing your monthly payment by about 10%. That is a lot. That has a very measurable impact on affordability, and we’ve never really seen this done before, but I would have to think that this would get some demand into the market. If you look at corollaries, if you look at modest decreases in mortgage rates that improve affordability, you do see demand come back into the market. And so I would have to imagine if all of a sudden houses got 10% more affordable in terms of monthly payments because of an elimination of property tax, I think that could drive demand.
So this is something you definitely should be keeping an eye out for in your state and local government news because I do think it has real impacts for investors and the housing market in general. But again, as I said, I don’t think that total elimination is the most likely scenario. I think instead we’ll see some states introduce caps to increases. Maybe we’ll even see some reductions. We might see more affordability programs. Like I said, Florida has a lot of programs to improve homeowner affordability. We see that across a lot of states and states might, instead of eliminating or eliminating revenue, just offer more tax credits as an example. Those measures, all of them could help affordability, but probably not to that 10% tune I was just talking about before. So I do think it will probably be more modest, but I still think it could at least marginally increase demand.
I think it could help with buyer confidence, right? I think if I were considering buying in some market where taxes have been going crazy, it would be nice to know that the state or local government was considering ways to limit that ever increasing liability. And of course, those laws could always change in the future, but it might at least get some buyer confidence back into those markets and drive some demand. So again, my general feeling is that it’s not going to be these huge swings. It’s going to be more modest, incremental efforts that would help, along with what I’ve been talking about for years now, other ways that the housing market is likely to probably get more affordable, but gradually. So these improvements in property tax prices might also help go along with slower appreciation rates, lower mortgage rates, increasing wages, all those things combined could and hopefully will improve housing affordability over the next couple of years. So that’s it. That is my take on what’s going on with property taxes in the news right now. But I would love to hear your take. If you are watching this on YouTube, drop us a comment and let us know. Or if you are listening on the podcast, I always appreciate personal comments that I get either on Instagram or on BiggerPockets, so make sure to drop me a line there. Thank you all so much for listening to this episode of On The Market. I’ll see you next time.

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In This Episode We Cover

  • Florida’s new legislative push to abolish or reduce property taxes for homeowners
  • How much homeowners would save every month if their property taxes were eliminated
  • Can Florida afford to ban property taxes, and which services would be compromised if they did?
  • States that are most likely to eliminate property taxes if Florida succeeds
  • Serious side effects of eliminating property taxes and who pays the price
  • And So Much More!

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What’s the best rental property for the average investor? It’s not a single-family rental, it’s not a large apartment building, it’s not even a duplex or a triplex—it’s a “sweet spot” small multifamily. These investment properties, ranging from five to 25 units, make more money, are easier to manage, and help you scale faster to achieve financial freedom. Even large multifamily investing experts like Brian Burke are ditching the huge apartment complexes to buy these.

But what makes these small multifamily investment properties so much better than their bigger and smaller counterparts? We’re discussing the massive investing opportunities in 2025 for these properties with Brian today and how new investors and those looking for a manageable portfolio can leverage these properties to reach financial freedom.

These types of properties are still experiencing low prices with limited competition, which means that if you know about them, you already have an advantage. How long do we have until multifamily prices rebound and these investments become out of reach for regular investors? How do you analyze a small multifamily property to ensure it makes you monthly passive income? Brian shares his wisdom and gives an exact timeline for when it may be too late to buy.

Dave:
Hey everyone, I’m Dave Meyer and this is the BiggerPockets Real Estate Podcast where we teach you how to achieve financial freedom through real estate investing. Just recently I was on a panel for the BiggerPockets Momentum Virtual Investing Summit with our friend Brian Burke and he said something really interesting. He thinks the sweet spot in real estate right now is properties with five to 25 units. And if you don’t know Brian, he’s been investing for a long time. He’s been in the game for 30 years. He’s been contributing to BiggerPockets since 2013, so he is one of the most successful investors in the entire BP community. He’s also just one of those people who’s been right so many times that every time he says something like this, I pay close attention. Now, if you’ve heard him on the show before, you know that he’s not shy about telling you all the things that he’s not investing in.
So when I heard Brian say he is interested in this asset class of five to 25 unit properties, I wanted to find out more. And that’s what we’re doing on the show today. On this show, we talk almost every episode about residential real estate, which is properties from single family homes up to four units, and we sometimes talk about the other end of the spectrum, commercial multifamily real estate, mostly in the context of syndications that raise millions of dollars to go buy very large apartment buildings or housing developments. This middle ground though of five to 25 unit properties sometimes gets lost in the shuffle. So I want to ask Brian what makes those properties attractive, whether we’ve hit the point in the market cycle where investors should be jumping on deals in this category, and then I’m going to ask him his advice on how investors can analyze, purchase and operate this type of property. Let’s bring on Brian Burke. Brian, welcome back to the BiggerPockets podcast. Thanks for being here.

Brian:
It’s great to be back again even so soon.

Dave:
Yeah, well this is what you get for saying interesting things when we’re talking in different venues. Brian and I were talking on the Momentum Summit and you said something that really intrigued me about five to 12 unit properties. Can you just tell me and everyone why you think that’s kind of a sweet spot? Right now

Brian:
You have this kind of imperfect market in the small multifamily space, so you get into large multifamily a hundred units and up. It’s a very efficient market. It’s dominated by professionals who do it for a living. There’s not a lot of great deals to be found, but the small multifamily space, that’s where your mom and pop landlords live. That’s where you have tired landlords, that’s where you have deaths that lead to state sales and just all the kinds of things that happen in human life all happens in that smaller multifamily space. And as they say that chaos and dislocation breeds opportunity. So I think there’s opportunity in that smaller space.

Dave:
And do you think it doesn’t apply to even smaller multifamilies or does this also apply to two, three and four units?

Brian:
I think it applies to those two to four unit as well as it does that five to really, I’d say five to 25 unit space really kind of fits into this bucket. All of that applies when you get down into the smaller two to four unit space. There you have a little bit more competition from live in house hackers. You have some of that in that space, and I think you don’t have the economy of scale that you have with kind of that five to 25 unit space. So while the rules still apply there, I think that you get a little bit even sweeter spot if you’re in this as a real multifamily investor to be in that slightly larger space.

Dave:
Yeah, I’ve noticed that a lot and honestly why my personal interest has peaked to go into this commercial area is less about the economies of scale that you mentioned, but two to four units just seems super competitive and I think it’s BiggerPockets fault, I don’t know, but we’ve been preaching how valuable they are and they are. But you see now pricing on duplexes for example, is just kind of crazy unless you’re an owner occupant, and it’s because house hackers rightfully can pay more and still make those deals pencil. Whereas if you’re trying to scale a portfolio, you obviously can’t live in every property and you can’t pay as much as the person who’s going to house hack that property. So I totally agree with you on that. At the same time, I’m a little bit for some reason nervous to go beyond four units. Is it really all that different?

Brian:
There’s nothing to be afraid of. You brought up a good point about the smaller ones having maybe it’s BiggerPockets fault because you have all the house hackers coming in, but it’s also part of the reason that that space is so competitive is you can get Fannie Mae loans with lower down payments. You can get FHA. There’s regular conventional real estate lending that’s available to a single family home buyer. The same types of financing are available in that two to four unit space, and that does create a different competitive landscape. Once you’re five units and up, it’s considered commercial. That means the lending guidelines are different. It means down payment requirements are different, but operationally it’s basically still the same thing. Now the larger you get kind of in some respects, the easier it gets too.

Speaker 3:
So

Brian:
I had a 540 unit apartment complex. It was easier for me to manage than my 11 unit, and that’s just part of the way it is as you grow and scale and get teams. But when you’re starting out and trying to build a portfolio, this smaller multifamily space is a great place to learn. It’s a great place to build a portfolio, and believe me, you’ll learn more than you want to learn, but that’ll be really useful. And so don’t be afraid of it.

Dave:
The other thing that intrigues me is I personally got into real estate buying small that were in Denver and there’s kind of these cut up old mansions and Victorians. And recently I’ve only been trying to buy purpose-built small multifamilies because the organization of them, the consistency between units does in my opinion make a really big difference. Whereas all these old buildings that weren’t meant to be multifamilies that you cut up are just such a pain in the butt to manage and to fix. Whereas you buy a 540 unit, every unit is a carbon copy of each other. Maybe there’s a couple of layouts, but the systems, the clients you need, they’re repeatable. They’re knowable in a way that some of these small, so that part of it definitely appeals to me.

Brian:
Yeah, they can get a little crazy, especially when you get into these modified buildings and there’s lot those actually’s, a lot of em in Buffalo, when I was out there looking and bought this 11 unit, we looked at a lot of properties that were like two story single family homes that got repurposed into duplexes where the lower floor is one unit and the upper floor is another unit. And there’s all kinds of oddities that you find in that. And man, it runs the gamut. I mean between shared utilities and just a lot of those buildings are older and then their systems are really, really tough shape. So there can be a lot of challenges, but there’s also, again, anytime there’s challeng, there’s opportunity.

Dave:
Totally agree. Just when you’re reaching scale and when I’m trying to buy units in this part of my portfolio, I’m looking for ease of maintenance. So it just seems like this five to 25 unit area could be good, but I want to bring up sort of the elephant in the room, which is it a good time in the market to actually pursue these types of commercial deals. But first, Brian, we do have to take a quick break. We’ll be right back. Welcome back to the BiggerPockets podcast here with Brian Burke talking about a potential sweet spot in the market right now, which is rentals that have five to roughly 25 units. Brian was telling us a little bit before about what appeals to him, but I’m curious, Brian, commercial has been in a pretty big correction over the last couple of years. Do you think we are approaching a good time to buy for this subset of the multifamily asset class?

Brian:
Well, that depends. Dave, do you like to buy things at the top or the bottom? Bottom? Well then I think this might be the time for you, then it might not be the time for everybody. The challenge of doing that though is the best time to buy anything is when it’s most uncomfortable to do so. I have a mentor of mine in stock investing. He says the stock market is the only market where buyers fear a sale,
And I think the real estate market also kind of fits into that category. When times are tough, people get scared and they don’t want to get in, that means it’s a good time to get in. Now, I can’t say that today is the precise bottom of the market, but I can tell you that it topped out in the second quarter of 2022 and it’s been on a down slide ever since. And if we’re not at the bottom, we’re close enough to it where if you make a move now on a really well-priced property because you found some needle in a haystack, then I don’t think you’ll be sad that you did. This to me is a good time to buy. New inventory is starting to decline. Rents will come back when new deliveries start to decline in the second half of this year. So I think this is a really compelling opportunity in the small multifamily space.

Dave:
I love hearing that because I am very interested in buying these right now. So that’s very good news. I really do think this is a really interesting sweet spot for people. So hopefully everyone is also considering this because as Brian said, commercial real estate has been on sale for the last couple of years. But Brian, we are starting to see the residential market slow down right now. I’ve said that I think we’re going to have relatively flat prices this year. I think you sort of agreed when we were talking a couple of weeks ago. So can you maybe help our audience understand how and why the commercial space and the residential space don’t necessarily move in lockstep?

Brian:
Yeah, people always like to talk about the real estate market as if there is such a thing that all real estate does the same thing at the same time. And there’s a market cycle slide that you’ll often see people put up when they’re talking about real estate market cycles where the cycle goes up and it peaks out and then it comes down and then it troughs out and then it goes back up again. But I have a slide that’s way better than that and it has a bunch of lines that are crisscrossing in all kind of different ways because that’s really what the real estate market looks like. It’s looks like total chaos because you could have home prices in a slide while multifamily is increasing. Industrial could be going up while offices going down and hotels are trading sideways. All these things can be happening.
And what is also interesting is even within the same type of real estate, it can be moving in two different directions in two different locations. I mean, it might be where multifamily in buffalo is on a tear, but multifamily in Los Angeles is on a downside. These could be happening at the same time. So we always have to keep that in mind. But there’s a lot of bad news that’s been coming out about commercial real estate. Multifamily office especially has been in a really bad spot. What you have to look at is where in the cycle are we and what are the chances that that cycle is going to bottom out and then start to move in the opposite direction. Now, if you’re talking about going out and buying office buildings, yeah, it’s really bad out

Speaker 3:
There.

Brian:
Will they come back? That’s debatable. Maybe they will, maybe they won’t. But on the multi side, you see new deliveries coming down. You see rent growth starting to flatten. It was negative for a while. Now it’s flattening. When I look at rent growth forecast for the future, they’re trending up in most markets starting later half of this year and into next year. So if you can buy before that’s already happened, what do they say? Buy on the rumor and sell on the news. This is kind of we’re in that rumor stage. So I think that despite the fact that there’s been a lot of turmoil, I just think that that’s what creates opportunity.

Dave:
All right, well now you’re giving me FOMO and anxiety that I need to go buy something immediately. How long do you think this opportunity lasts? Do you think we’re just starting and there’s going to be opportunity for years to come, or is this kind of like a right here, right now kind of opportunity?

Brian:
I think that we have a little bit of time. There’s no sense to rush anything. You can let this play out. I don’t think that we’re looking at a V-shaped recovery where all this sudden we’re going to have this immediate massive bounce. I think that this recovery is going to be a process, and I think over the course of the next couple of years, you’re going to have some really sharp buying opportunities. And I think over the subsequent couple of years, you’re going to see the market start to mature. I’ve made up a few sayings. I might’ve said ’em on one of your podcasts before. I don’t remember which one, but people used to say about the multifamily markets survived till 25. These were the owners who were trying to just hang on. Well, they got to 25, but they’re still in a lot of distress.

Dave:
Yeah, nothing got better,

Brian:
Nothing got better. Their interest rates are still high, their loans are still coming due. And I had come up with a bunch of new saying and the dive in 25 was my first one, and that meant that the market’s going to stop going down. I mean, before it goes up, it first has to stop coming down. And I think we’re going to reach that point this year. And then I think it gets fixed in 26, meaning that I think next year we’re going to start to see some of this work itself out. The market’s going to get legs under it. I think you’re going to be an investor heaven in 27, meaning there’s going to be deals out there. You’re going to see the stuff that you bought. You’re going to get rent growth. You’re going to start to see price growth, and I think if you wait until 28, you’re going to be too late. Those are my sayings for the day. I

Dave:
Like this. All right,

Brian:
Take it for what it’s worth. So

Dave:
Brian, I want to ask you about property class. Within this space, do you recommend people invest in class A really nice polished spaces, class B, class C? How do you see that trade off in this particular subset of the market?

Brian:
It really has to match to your risk profile and the amount of work you really want to put in. If you have a high tolerance for risk, and let’s say you’re a real young go-getter, I’m going to kill it in the real estate business and I’m going to go find this really super below market deal, put in a ton of work and really turn it around. Buying class C properties might be for you because there’s some people that just won’t touch. They’re really management intensive. It’s really difficult to pull that off. It takes a lot of energy and a lot of time, and it’s a lot risk. If you have that in you, that’s a really great place to start, and I guarantee you will learn 10 times more about this business than you will if you want to just go buy class A properties

Dave:
And more than you want to, like you said, more than you want

Brian:
To, yeah, a hundred percent more than you want to. But if you’re kind of like moderately risk averse, going into that class B space is probably a good place to be. And if you’re just absolutely hands-off person like, look, I don’t want to mess with anything. I want no risk. I don’t want bad tenants, I don’t want it to deal with any of that stuff. Class A properties is probably the best place for you. Now, you’ll probably find that it’s the least amount of return, but on a risk adjusted basis, it’s a very good return. So you’ve got to match your personality and your risk tolerance and the amount of work you’re willing to put in and then decide from there which class is right for you.

Dave:
And I’m going to ask you a question you’re absolutely going to hate, but I’m going to ask it to you anyway. What is a good deal in this market, right? I know that cap rates are going to be very different in different property classes, different markets, but can you just maybe give us a little bit of a guideline for how you would look for and spot a good deal in today’s day and age?

Brian:
Yeah, I mean, a lot of people want to focus on cap rate and say, oh, a good deal means it’s this cap rate or that cap rate. Forget about cap rate.

Dave:
I know you hate that.

Brian:
I just hate cap rate. It’s just such a useless metric. What you really want to think about is the cash flow and replacement cost. I mean, if you can buy a property for a price that’s less than you can build it for, you’re already starting off on solid footing. But remember, this isn’t only called multifamily. This is also called income property. It’s another way that this is referred to as income property. You don’t go buy a 20 unit apartment complex because it’s a nice place for you to live. I mean, sure you could live in it, but that’s generally not why people buy 20 unit apartment buildings. They buy it because it’s income property. That means you got to look at what is the income, and if it doesn’t have income, it’s not a good deal. So when you’re underwriting, you’re going to look at your rent minus vacancy, minus operating costs, minus property taxes, insurance minus interest, what’s left.
And don’t forget about capital improvements. You’re going to have water heaters that break. You’re going to have parking lots that need to be resurfaced. You’re going to have roofs that need to be replaced, amortize the cost of those big ticket items over their lifespans and adjust for that as part of your cashflow question. And are you in positive cashflow territory? And is the cashflow that you’re going to receive enough to make the investment worthwhile? There’s another old saying that I really liked that says, all investments have risk, but not every risk is worth the investment. If you are going and buying a property that you have to put $200,000 a year into and you’re going to get a hundred bucks a month of positive cashflow, you’ve got to really consider whether or not this is a smart investment. If you could go invest in a mutual fund stock or whatever and get a much better return, you want to get a return on your capital. So look at it from a return on capital basis, not a cap rate basis, return on capital basis.

Dave:
Brian, I have more questions for you about these medium size multifamily properties, but first we do need to take a quick break. We’re back. Here’s the rest of my conversation with Brian Burke. Now, just totally asking for a friend and for our audience, not for myself, but if you were to be interested in this kind of deal, how does the underwriting and deal analysis process differ from either single family rentals or smaller two to four units

Brian:
In this five to 25 arena? It’s very similar to underwriting a fourplex. You’re going to look at your rent, you’re going to look at vacancy factor. And here’s something that I think is really important that people miss. If you own a fourplex, you can probably fill that fourplex up and have almost no vacancies for long stretches of time.
But when you get into this five to 25 unit space, your property is going to follow the market. So if the market has 10% vacancy, you’re going to find yourself 10% vacant. If you’re a hundred percent full, you’re doing something wrong. So really look at economic vacancy factors. Be respectful of what the market data is telling you about vacancy, about rent growth, about rental rates, because you’re going to be a byproduct of the greater overall market. It’s really tough to beat it when you get into these larger properties. The other thing to think about is the utilities. Who’s paying for them, who pays for what? Make sure you’re quantifying that and you’ve got a good management fee in there to pay a really good management company to help you with it. I’m not really a big fan of the DIY approach. I know some people really like to do it that way, but I’d much rather have a really strong competent manager in there and overseeing what they’re doing. So make sure that you’re accounting for those expenses. Those are the big things to look for when underwriting in this space.

Dave:
You said something that if you don’t have vacancy, you’re doing something wrong. Does that mean you’re just undercharging rent?

Brian:
Yeah, you’re undercharging rent. Yeah, rent. Rent. You should be at market vacancy. So if you’ve got 25 units and you’re a hundred percent full, your rents are too low.

Dave:
What about the debt side of things? Because for everyone who’s listening, just when you get a residential mortgage, usually you can get 30 or fixed rate debt. That is not typically what you do with commercial loans. They’re usually adjustable rate mortgages that have a balloon payment after 3, 5, 7, 10 years. So how does that factor the underwriting? Or what should we all be thinking about when we consider commercial debt versus residential?

Brian:
Yeah, commercial debt is a whole different animal. The best financing that you can find out there anywhere is the 30 year fixed fully amortized loan. And those are great for single family homes. You can even find ’em for your duplexes and fourplexes, but that’s not a thing in the small commercial multifamily space. Once you get over five units, you can sometimes find bank financing, especially if you have a relationship loan. If you’ve got a relationship with a local community bank, you might find some really attractive financing. I have that 11 unit building I told you about in New York. I had a local bank that financed it for me on a 25 year fixed rate, fully amortizing loan.

Speaker 3:
Wow.

Brian:
And so in the smaller space, you can find that debt out there. When you get into bigger multifamily, that gets even harder to find, especially when you get over 5 million. Those loans are really difficult to find. They usually will have some type of prepayment penalty. They’ll have shorter maturities like five, seven or 10 years. At that point, you have to pay ’em off for refinance. So it does get a little complicated as the loan size goes up, but if you’re under that 5 million mark, you can find really compelling financing from local community banks. That’s my starting point for that size.

Dave:
Alright, that’s really, really good to know. I guess the question is, assuming you can’t get one of those great fix rate debts, assuming you’re getting a more traditional kind of loan five, seven year or something like that, how do you underwrite that? Because do you just assume that you’re going to get a refinance at some point? Because that seems to be one of the major problems that operators have been facing over the last couple of years that they weren’t able to refinance. So how do you manage that risk?

Brian:
You manage the risk with a longer maturity. And the reason that a lot of operators are having that challenge right now is they got too short of a maturity. There was a period right after Covid where a lot of buyers, especially of larger multifamily, were buying with three year bridge loans. And these loans were intended to buy a property, fix it up, raise the rents, and then get a new loan. That was the reason that you would get those loans. But they kind of got repurposed where these syndicators were using this debt as a crutch because they couldn’t raise enough equity. So they would use these high leverage loans to juice their returns and require ’em to bring less cash to the table. But the trade-off was is that they had three year maturities, and that might work when it works, but if the music stops and there’s no place left to sit, that’s when things go wrong. So the challenge of that refinance is when rates go up, values fall. That refinance is very difficult. Outside of that, assuming that rates stay level or maybe they only go up a little bit and values do not fall, the refinance is certainly doable, especially if you’ve owned the property for a while. And that’s why the longer term maturities really pay off. If you get a loan with a 10 year maturity,
It’s pretty sure that you’ll be able to refinance in 10 years. The market should have gone up by then,

Speaker 3:
And

Brian:
If it did go down, it should have had enough time to come back by that point. And if it went down right before it was refi time, it already went up for eight or nine years and you should still be in pretty good shape. It’s the really short terms that will get you, because three to five years is the blink of an eye In this business. It may seem like a long time, but once you buy a property, you’ll find three to five years goes by really quickly.

Dave:
Thank you, Brian. You’ve really demystified the underwriting process for me a little bit. It really doesn’t seem very different from all of the regular presidential underwriting that I’ve done, and hopefully everyone listening to this sees that this really isn’t all that complicated. If you can underwrite a single family home or duplex, you can make some small adjustments and be able to underwrite these types of deals as well. But I want to sort of just talk about, just strategically, Brian, if you think this is a good asset for just regular investors, the average BiggerPockets listener, someone who’s going to buy a handful of units over the course of their lives to support their financial freedom, is this a better option than buying a bunch of single families or two or three triplexes or something like that? Why or why not?

Brian:
Well, I think it’s a different approach. It’s hard to say that one is necessarily better over the other because a lot of this depends on your own individual circumstances. Now, with the larger the properties you get, the more units you have concentrated in one location. Now that comes with advantages and disadvantages. The advantages are, let’s say you have a 20 unit apartment building and you have 20 single family homes. Well, in the 20 unit apartment building instead of 20 roofs to maintain, you have one roof to maintain
Instead of 20 property managers, because they’re all in different places. You have one property manager, instead of having to hire a landscaper to mow 20 lawns, there’s one landscaper mowing, one lawn. So you do get economy of scale, but the trade-off is you get some operational complexity. You get big enough, you might have to have an onsite person in California. If you have more than 15 units in one location, you have to have a quote onsite manager. So that adds some complexity to the business instead of just being really simple. So the financing is a little more complicated in the larger stuff, but I’m a believer in economy of scale. I’m a believer that in real estate investing, your journey takes you to larger properties. And I don’t mean more square footage on a house, I mean larger properties than others, more units in one location because that economy of scale is what gets you cash on cash return, which eventually gets you retirement. And single family homes can do it, but it’s very operationally complex to have a lot of scattered houses in a lot of different places. So I personally advocate for kind of a balanced hybrid approach where you might have, instead of a hundred single family homes, maybe you have five 20 unit buildings, and those could be in different locations. That’s fine. You get kind of the best of both worlds by having some geographic and portfolio diversification, yet also some consolidation to capture economy of scale.

Dave:
All right. I like it. I mean, you and I both are I think friendly with Chad Carson. I asked him the same question. He said the exact opposite thing, if you all listen to this thing, he was like, go buy 75 single family homes. But I think personally, I’m more of your belief. I started with small multifamily. I have some single family, and then I went sort to the opposite where I invest in syndications and the kind of stuff you do, which is hundreds of units. But I’m trying to fill out that sort of middle spot that I don’t have diversification and an ownership over. So that’s pretty interesting.

Brian:
At one point, I had 120 rental houses, and at one point I had 4,000 apartment units. Wow. I think it was easier to manage the 4,000 apartment units than the 120 rental houses.

Dave:
That’s amazing.

Brian:
He might’ve pulled that off really well, but I dunno, that’s just me. I mean, everybody’s different.

Dave:
I’m curious about timing though, Brian, because I totally buy the diversification aspect, but is this something new people should consider? Do you recommend building your way up to it?

Brian:
I recommend building your way up to it as you’re scaling to larger properties. I mean, it doesn’t mean you have to buy a single family house before you buy a duplex, but if you’re in a skip single family homes and go straight into multifamily, I would suggest starting with something that’s in the one to four category, just because of the ease of finance and just learning and getting your feet wet. And then I would get into that five to 15 unit space. There’s not a lot of difference in five to 15 units. You get over 15 units carrying that 16 to 25, that starts to get a little bit more complicated. It might behoove you to start in that five to 15 beforehand. I personally, I think I had a duplex first, and then I went straight to a 16 unit

Speaker 3:
And

Brian:
It was complicated for me to figure out. So I really always recommend climbing the ladder as a much easier way to get on a roof than to jump up on top of it. So no problem with starting small and working your way up.

Dave:
That’s good advice. I like that saying you’re full of good sayings today, Brian. I like that story. I’m

Brian:
Trying.

Dave:
Alright, well, thanks again, Brian, and thank you all so much for listening to this episode of the BiggerPockets podcast. If you enjoyed this episode as much as I did, please make sure to give us a five star rating either on Spotify, apple, or wherever you’re listening. We’ll see you next time.

 

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So, you want to invest in real estate…but where should you start? What’s the best type of rental property for a beginner? It’s easy to become overwhelmed by all the options, but in this episode, we’ll provide the four-step framework you need to make the right choice!

Welcome back to the Real Estate Rookie podcast! First, we’ll share four steps that will help you pin down the right investing strategy for your budget, lifestyle, and long-term goals. Then, we’ll introduce you to a few of the most beginner-friendly types of rental properties. Are you light on cash? House hacking could help you take down your first investment property with relatively little money out of pocket.

Are you looking to scale your real estate portfolio as quickly as possible? The BRRRR method (buy, rehab, rent, refinance, repeat) is one of the fastest ways to build wealth in real estate. Would you prefer your real estate investments to be mostly hands-off? Perhaps a long-term rental is more your speed.

Stick around till the end to learn about the three most common mistakes we see new investors make and what YOU must do to avoid them!

Ashley:
If you’re thinking about getting into real estate, you’ve probably asked yourself, where do I even start? There are so many strategies, house hacking, flipping a B, short-term rentals. That’s honestly a little overwhelming for most rookies.

Tony:
But what if we told you there’s a simple framework that can help you pick the right investment strategy today without second guessing yourself?

Ashley:
In this episode, we’re giving you the step-by-step formula to figure out which strategy is right for you. By the end, you’ll have the clarity and confidence to take action and start investing.

Tony:
Look, we see it all the time. New investors jump into real estate without a clear plan and they either burn out or they get stuck in analysis paralysis,

Ashley:
But not today, we’re going to break it down so you can avoid the common mistakes rookies make. I am Ashley Kehr,

Tony:
And I’m Tony j Robinson and welcome to the Real Estate Rookie podcast.

Ashley:
So there’s no one size fits all in real estate. Each person has a different set of circumstances.

Tony:
So we wanted to give you a super simple kind of four step formula that’ll help you figure out exactly what strategy makes most sense for you to start with. Now, be sure to stick around until the very end because we’re going to talk about some of the biggest mistakes we see Ricky Investors make when choosing the strategy. But let’s get into the actual four steps of this framework first. So I think the first step, and we’ve talked about this a few times in the podcast, but it’s really just about defining your goals and your motivations. And I won’t beat a dead horse here if you’ve listened to previous episodes, you’ve heard us say this before, but before you can really identify what strategy makes the most sense for you, you have to ask yourself, why am I doing this? Why am I investing in real estate?
Is it you want immediate cashflow today? Do you want long-term wealth for tomorrow? Are you looking to replace your day job? Is this just something that you want as a side hustle? What is it that’s actually motivating you to do this? And specifically when I think about motivations, you have cashflow, you have tax benefits, you have appreciation. And to a lesser extent, you have the ability to use properties yourself for vacations if you’re doing something like midterm or short term. But in most scenarios, you will not be able to equally satisfy all four of those motivations at the same time. So you’ve got to pick and choose which one is most important, second and most important, third most important, and then you can make a better decision around what strategy might actually satisfy those motivations.

Ashley:
And some of the common mistakes that I see new investors make when they’re trying to determine their strategy is they jump in without knowing their true motivation, which can lead you to choose the wrong strategy. When you choose the wrong strategy and it doesn’t align with your why or your goals, you’re going to feel burnout. You’re probably not going to like doing it, and you’re going to get frustrated because you’re not closer to achieving your goal, even though this might’ve been a shiny object that you listened about on a podcast and you wanted to do this investment because it seemed like it was going to bring you lots and lots of money. But if that wasn’t your true goal was high cashflow, and now you are spending every single night and every single weekend operating a short-term rental that you definitely didn’t want to do, maybe you make that pivot and that change.
You realize it was actually time that I desired financial freedom and time to actually do the things I want to do. So a high demanding operational investment was not actually the right strategy for you. So there should be some additional questions that you’re asking yourself. What is your desired monthly cash flow goal? Or how soon do I want to see results for my investments? Are you financially comfortable right now? Do you enjoy your W2 job? Are you not strained for cash and you don’t need anything immediately? Right now you’re looking farther down the road. So you really need to know your motivations and why you’re actually investing to make sure that the strategy you choose aligns with that.

Tony:
So that’s a super important first step is just making sure you understand your motivations. I think the second step is just really taking a moment to define not only the time that you have available, but also lifestyle that you want to live. It ties into that first piece of the motivations, but how much time do you really have? I mean, most people listening to this probably have some combination of family commitments, work commitments, hobbies, community commitments. Maybe they just want free time in general, but there are always demands on our time. No one has absolutely nothing to do. So ask yourself, how much free time do you have within those other responsibilities to actually dedicate toward building this real estate portfolio?

Ashley:
Garrett Brown, who kind of leads the bigger stays YouTube channel we’ve had him on before to co-host with us. He tells a story about how he did this $50,000 glamping investment where he bought the 10, and all of these gurus told him, you’re going to make tons of money just from this $50,000 investment. And he said he is never worked harder in his life to actually make that investment become successful, that he didn’t anticipate the operational, the hospitality, and the work that would actually have to go into it besides just making up that initial investment and setting up the tent. So you really do have to look at what goes into it other than just purchasing the deal.

Tony:
Yeah, I mean, we talk a lot about lifestyle and that’s a big reason why people get into real estate investing is because they have this idea of the life they want to live, but then they pick a strategy that doesn’t actually give them that lifestyle. It’s like you said, short-term rentals, right? The niche that I’m in, we have a hotel, it’s like those aren’t passive. Those are things that we’re actively involved in on a day-to-day basis. And if you really want just to be sipping my ties on the beach in Cancun, then maybe you need to be a private money lender. Maybe you need to be something else. But anyway, we’ll get into the examples later. But I think the goal is understanding lifestyle and the time that you have available to help point you in the right direction.

Ashley:
And we know this because we both started, or at some point in our journey, picked the wrong strategy and realized that we needed to pivot. Tony started out with long-term rentals and pivoted to short-term rentals. I started out with long-term rentals, but then I got shiny object syndrome and I went to campgrounds and I almost bought a million dollar campground and did a whole syndication deal. And that was my pivotal moment as to I actually don’t want to do a syndication deal. I don’t want to run this million dollar property. And I pivoted back to what I was good at and what was actually helping me reach my end goal of getting more time and being financially free. Some of the questions you should ask yourself is, do you want this to be a side hustle or a full-time pursuit? And even when we say side hustle, you still want to operate it as a business, but are you going to keep doing what you’re doing?
Whether you’re running a business already, you have a W2 job and you’re just going to build this real estate empire on the side, or is it that you want to go full-time into this? You want to be a real estate and foster? And also, how comfortable are you with unexpected issues with tenant calls, with communicating from people? And then kind of the last thing here is do you prefer passive income or active involvement? So usually, typically the more active you are involved, the more money you are going to make compared to things that are passively because you will have to share the gold with people who are actually involved in the management of the asset.

Tony:
Alright, Ricky, so we have two more steps to cover and then we’ll also break down some of the most popular strategies for rookies, but we’ll do that right after a break from today’s show sponsors. Alright, we’re back and we’re going over the four step process for helping you identify what you want out of real estate. So let’s continue with step number three. So step three, and this is a big one, but it’s to assess your own financial situation. I think a lot of people don’t fully grasp where they’re at financially and what it takes to actually get into real estate. And obviously there’ll always be strategies where you can get in for no money down low, money down, but in a lot of scenarios there is some form of capital that’s needed to get started in real estate. And I think one of the biggest questions you can ask yourself is how much cash do I actually have on hand?
Or how much cash do I have access to? If you’re low on cash, that’s going to send you to maybe one strategy. If you’ve got an abundance of cash, it opens up a little bit more doors. But I think a common mistake that I see with new investors is that they get fixated on, Hey, this is my idea. And then I say, okay, well how are you going to afford that? And they’re like, well, I don’t know mean people don’t just give you money when you’ve got a great idea. So you’ve got to have some form of understanding of where you’re at from a cash perspective.

Ashley:
Yeah, some resources that you guys can check out is some kind of app to actually track your assets, your liabilities, to build your own personal financial statement, but also to see where your personal finances are at. Look at your mortgage balance, look at your credit card balances, look at how much you have in cash. Monarch money is a great app. It’s the one that I use, but there’s a ton of other, and they have budgeting things set in. So if you really do need to assess where you are financially, getting an app like that to try and help you establish that kind of base can be scary to actually see where your money is spending. But if you’re having trouble saving right now or living within your means, that’s a great way to start to actually build the capital to invest in real estate. One of the common things that can happen besides just not being able to financially afford the strategy is not having enough in reserves and not being okay with spending that money in reserves.
That reserves are not your life savings. Those reserves aren’t your kids’ college fund. That’s not the money that you would use for their orthodontics. This is the money that is specifically saved in reserves for your rental properties so that if you have to spend that money, that’s okay. That’s what that money is there for. So you have to switch that mindset of, oh my God, I’m taking money out of our life savings to pay for a new HVAC system instead. That’s what this money is there for. And if you don’t have to spend it and you get to keep it like, yay, that’s a bonus. But I think that’s a big mistake is co-mingling almost that your financial life savings for your family is the same that you have for reserves for your rental property. And that makes it a lot harder to part with when you do have those big expenses that come up throughout the lifeline of your property.

Tony:
It’s a great, great explanation nationally, just like around the psychology of money and reserves and how different money serves a different purpose, and you got to kind of take that money out of your mind once it starts to stack up a little bit. Just a few questions to ask yourself around the financial piece. First is what’s your credit score? Are you at, I dunno, 400 or are you at 800? Obviously the higher your credit score, the easier it’ll be for you to go out there and get favorable debt and the lower the harder it’ll be. But even if you have maybe better credit, like what’s your DTI? What’s your debt to income ratio? If you are maxed out, it’s also going to be more difficult for you to go out there and get approved for a loan if at all. So you could still have a decent credit score but have a poor DTI or potentially vice versa, right?
Maybe you’ve got no debt, but it’s because no one will give it to you. So you want to get the combination of both of those things together to get a better idea of how is that going to impact your loan options. I think another one is how much debt are you comfortable taking on? I was scrolling through Instagram and I saw, who was it? It was Robert Kiyosaki and Mick Elroy. They were on a private jet and the opening part of their post was like, we have billions of dollars worth of real estate debt. And obviously they’ve done it very successfully, but are you comfortable going on and taking on that amount of debt?
Are you okay if someone offers you a loan with only 3.5% down, meaning you’re leveraging almost 97% of what that property’s worth? Or do you want to say, Hey, I’m always going to put down 25% because I just want to make sure I can sleep at night. So you got to ask yourself, what kind of debt load are you comfortable taking on? And if for whatever reason between your DTI, your cash on hand, your ability to get approved for a loan, maybe you can’t do it by yourself, well, are you comfortable bringing on maybe a partner, someone who maybe can fill in that gap, someone who can compliment what it is that you’re lacking, whether it be capital, whether it be the loan, or are you comfortable doing that? And if not, then do you have access to other funding options? Do you have maybe a self-directed IRA or actually that only work in some situations? Do you have maybe a 401k that you’re willing to cash out? Do you have a heloc? Are there private money lenders? Maybe? So you’ve just got to ask yourself in some way, shape or form cash need to be involved in some sort of real estate transaction, whether it’s yours, whether it’s the sellers, whoever it may be, there has to be some sort of cash. You got to identify where it’s coming from.

Ashley:
And then the fourth step is understanding your local market. So what is the budget that you have available to yourself after you’ve went and evaluated your finances, knowing what you’re able to afford. And maybe that even starts with getting pre-approved by lender. You need a lender, you can go to biggerpockets.com/lender finder to be matched with an investor friendly lender in your area. But when you are deciding on a market, you need to understand is it an expensive city where you’re actually not going to be able to afford it? Or even if you can’t afford it, the rents just don’t justify the cost to actually purchase the property? Or are you in an affordable market? So starting with your budget and kind of narrowing down as to what are the markets that fit within your budget. Some strategies work better in different places, so you need to have your strategy defined before you actually go and start looking for markets. Because short-term rentals are great and tourists are areas, but long-term rentals are great and good school districts. So knowing your market saves you from picking the wrong strategy.

Tony:
So a couple of questions to ask yourself here is what type of is just in demand in your area? Like Ashley, where she lives? There’s a lot of small multifamily, and Ashley’s gotten really good at buying small multifamily. Where I live, there’s virtually no small multifamily, right? It’s like suburban sprawl. So I couldn’t really do a lot of small multifamily where I live. So what type of housing is in demand in your area as is your backyard landlord friendly? I think Ash and I both live in states that are definitely more tenant friendly, which makes it a little bit more difficult for us. But you got to ask yourself, Hey, where you live? Which way does it lean? But even still, and just as an example, even if I’m, I’m in California, Ashley’s in New York, both states that are definitely lean more so towards the tenant, but we’ve both been able to build successful portfolios in these markets still.
So it doesn’t necessarily mean that you can’t do it, you just got to kind of know how to navigate it. Vacancy rates, average rents, all things that you can go do research on to help you get some of those insights. And then obviously if where you live doesn’t work, are you comfortable going long distance? And long distance doesn’t necessarily mean out of state. It could just mean two hours down the road. It could mean six hours, it could mean 6,000 miles, but just ask yourself, are you comfortable going long distance? If for whatever reason you’re in, backyard doesn’t work. So those are the four steps, right? And I think as you, again, Ashley and I can’t tell you without knowing you, hey, do this exact strategy, but the goal is that by going through those four steps, you get a better sense of where you’re at.
And now that we’ve covered those four steps and you kind of know what it is you want out of real estate investing, we want to hit some of the more common strategies that we see rookie investors take as they get started. Ash and I have done several hundred episodes of the rookie podcast. We’ve seen some of the tried and true methods that work no matter where you start, no matter how much money you start with, no matter what city you live in, these are some of the strategies that we’ve seen work time and time again. So the first one up and one that Ash and I both probably think is potentially the best way for a Ricky to get started is house hacking. And house hacking is basically the concept of you going out and buying a property, living in one portion of that property and then renting out the other portion of that property.
It could be done with a single family home where you live in one bedroom and you rent out the other bedrooms to other tenants. It could be done in a small multifamily, maybe you go out and you buy a triplex. You live in one unit, you rent out the other units. It could be buying a single family home when you renting out the basement. It could be a single family home and you have an A DU, doesn’t matter what the extra space is, but the idea is that you subsidize the cost of owning that home by renting out your excess space. The benefits of house hacking are that typically you can get into it for less than a traditional rental property. So if you’re someone who’s maybe light on cash, you can get into a house hack for if you go FHA 3.5% down. There are other loan programs out there like naco, which I’ve talked about a lot on this podcast where you can get ’em for zero. So really if you want to make sure that you’re getting the best kind of bang for your buck house, sacking is I think one of the best strategies.

Ashley:
So another great strategy for building wealth is to do a burr. So this can kind of go two ways where you finding a property that needs to be rehabbed or needs to add value, but you can also find properties below market value and then add the rehab value to it too. So starting off, this is a great way to build wealth by not having to infuse a lot of capital long term. For Burr, it is you buy a property, you rehab it, so you need the funds to purchase it, you need the funds to do the rehab, then you rent the property out and you get that rental income. But then you go and refinance and you pull your money back out of the deal to be able to go for the last R to repeat it, to purchase the property. There’s many different ways to actually purchase a bird deal.
You could use all cash, you could use a heloc, you could from your primary residence, you could use a hard money lender, you could purchase it with bank financing. You just have to be careful of what their seasoning period is before they let you go ahead and refinance. But with this strategy, even if you’re not able to pull out all of your funds, this could be less money you leave into the deal than if you were to go and just put 20% down on a property. I think we’ve definitely seen that it’s harder to do a perfect burr where you’re getting all of your money back out, but this is still a great way to generate wealth so that you can reuse any of the capital that you investing into the deal. So one of the cons I will say for doing a bur is that you’re going to be doing a rehab.
And a rehab project comes with many things, project management of your contractor, having some idea of what goes into a rehab or what needs to be rehabbed. So if you have no experience at all in construction rehab, you don’t know what a two by four is, all of these things. There’s YouTube University to gain some knowledge, but you can also find properties that just need cosmetic updating. And that’s where I started, where it was just flooring, ripping out carpets, putting in vinyl plank. That added tremendous value painting, added tremendous value. Then I got a little more savvy and was changing out cabinets, but still it was a while before I worked my way up into gutting and doing full guts and replacing all the electric and things like that. So with a burr, you have to have a little bit of knowledge of what you’re getting into and look at your comparables of the property to understand what is going to actually add value.
If you are purchasing a property that’s in a C class neighborhood and the property values are probably capped at some amount where nobody is going to pay more than X amount to live in that neighborhood, if you’re going in and putting in granite countertops a luxury bathtub, you’re probably not going to get the return, even if it becomes the nicest house in the neighborhood, there’s usually some cop as to how much somebody will pay, but also how much somebody would rent that property for. So looking at your comparables is really, really important when doing a bird two. So this is great for investors with some capital or access to capital with a line of credit, a HELOC, and who want to be able to grow and scale quickly by recycling this burr over and over again.

Tony:
And Ashley, you make a lot of good points around some of the challenges around burrs, but my very first deal was a burr, and the way I think that I navigated some of those challenges was that I had a really strong team around me. I had a lender, I had a lender who had lent on a lot of other burb properties in this exact market. I had a contractor who had been in the market for a long time, came well recommended for multiple people, and it was really the people that I put around me that gave me the ability to do it the right way. Now obviously I educated myself and I was on the BiggerPockets forum and I was reading the books and I was listening to the podcast, but I think having a good team around you makes a world of a difference. So if you are a Ricky that’s listening, biggerpockets.com/agent finder, biggerpockets.com/lender, those are the ways you go out there and start building the right team of people to support you with the strategy.

Ashley:
And you had a great property manager too.

Tony:
I did, yeah. Yeah. Also had someone, because I was working a full-time job, lives several states away and found a great PM to help rent it for me as well. Third strategy, short-term rentals, obviously, right? This is kind of my jam, my niche, but basically it’s the Airbnbs of the world. So you get someone who comes in, saves for a couple of days and they go home, then someone else comes in, saves for a couple of days and they go home and you charge on a per night basis as opposed to having someone sign a long-term fixed lease. The general pros of short-term are that typically if you do it the right way, you should be able to generate more cashflow, right? A same house rented on a nightly basis will typically generate more than that same house rented on a long-term basis. The other benefit, which is the reason that it got a lot of people in the short term are the tax benefits.
I won’t go into it in extreme detail, but just know that there’s something called the short-term rental tax loophole. And there are a lot of people who want what’s called the real estate professional status, but it is very difficult to get when you have a W2 job, but through short-term rentals in the short-term rental tax loophole, there’s something called material participation, which basically allows you to take all of the paper losses from your day job, I’m sorry, from your real estate investment and apply it against things like your W2 income and your day job. So definitely a big benefit. Look up the shortterm rental tax loop poll. But some of the cons I think are that there’s definitely been an increase in competition and I think the properties that were just okay a few years ago are now mediocre, and the properties that were great a few years ago are now just okay, and it’s really only the ones that are the cream of the crop where people are really running this like a business that are doing incredibly well.
So you got to make sure that you’re stepping in with the right training, with the right resources. But overall, I still think there’s a lot of opportunity here and it’s really best for people that are willing to actively participate. I mean, you could passively do this if you just give it out to your property manager, but if your goal is to really juice your cashflow, usually you’re going to want to do that yourself. So you got to be able to actively participate and then you need a certain degree of creativity or at least being able to hire out the creativity because you do want to be able to provide experiences for your guests, and I think you got to have a little bit of imagination to make that a possibility.

Ashley:
Tony, what is the going rate right now for a short-term rental manager?

Tony:
Most short-term rental property managers charge somewhere between, I’d say 10% of gross revenue on the low end. I’ve seen it as high as 35 or 40%.

Ashley:
I was just curious. I remember when Airbnb was super big and 20 21, 30 to 40% really seemed like very, very common. Do you see that coming down now is there’s more short term rental management companies in co-hosting becoming a big thing? Has that really driven down the price

Tony:
It has, and you hit on a big piece. There is a slight difference between full short-term rental management and just the co-hosting model. And I think the co-hosting model, you’re maybe just handling some of the guest communication, but then the owner’s still handling, hey, the cleans, the maintenance, the supplies, all of the other parts of running the business. Whereas if it’s full service, they’re doing everything soup to nuts. So yeah, I think we’ve definitely seen a shift in cheaper managers coming on board, but it doesn’t necessarily always mean better.

Ashley:
So now onto our fourth one, which is my bread and butter, the long-term rentals. So this is definitely more passive, I would say, than short-term rentals, but it’s, it’s definitely not a passive investment. You can hire a property management company to take on the boatload of the actual active management, but you still have to do some kind of asset management. So you still need to review everything that the property management company sends you. Sometimes they’ll need your approval for repairs that are over $500 or whatever their limit is. Most property management companies aren’t going to quote out your property insurance for you every year. They’re not going to go and fight your property taxes to get them decreased. So there still is an element of having to be that asset manager on your property. So kind of some pros is the less involvement than short-term rentals.
It’s also more predictable cash flow. So it’s not as, usually it’s not as high as a short-term rental, but it’s steadier income. And then this is really best for someone who doesn’t have a lot of time. So especially if you’re getting into a turnkey property or even if you did a burr and this property is well the rehab that you’re not having to deal with repairs and maintenance constantly on the property, there can be way less interaction with a resident. There’s lower risk. So definitely with smaller multifamily like duplexes and then single family because you can always sell that property as an investment or to a family or to a person. So I really do like that with single family homes is that you have the option to sell it as a rental or depending on the market, sell it so somebody can purchase it for their primary residence.
Doing that right now with the property, I bought it in 2020 I believe, and then it’s been a rental property since 2020, and now I am just fixing a few things on it. The carpets got destroyed by the last tenant putting new carpets in. We did some structural work to it and we’re actually going to sell it, and I think there’s going to be a really great pool of primary homeowners that will actually want to purchase this and not actually use it as a rental property. So I do like that option of turning a long-term rental into a potential flip, I guess over the course of five years. This is also easier barrier of entry to purchase a rental than some of the other strategies too. Then there are some ways to get into long-term rentals and to be truly passive. So first one is you can be the private money lender on the deal.
You’re not going to get the tax benefits of being invested in an actual rental property, but you can lend to somebody that could really be on any property type, not just long-term rentals, syndications, whereas somebody else is the operator, someone else’s finding the deal, they’re managing the deal, they’re operating the deal, and you are just the limited partner. You have no say you can’t do anything, but you give them their money and you hopefully get your return. The last piece that I would add to a passive investment is real bricks. So this is fractional ownership of a property. And so what you do is you basically can take a hundred dollars and you can go and invest it at real bricks and you pick your property you want to invest in and you own a small ownership of that property. I think the minimum’s a hundred, but you could really invest as much as you wanted up to a certain amount too. That’s another way to passively invest your money. Also,

Tony:
Ricky’s, obviously Ash and I didn’t cover every single potential real estate strategy that’s out there, right? There’s far too many to cover. I think we just wanted to hit some of the more common ones that we see specifically for folks that are looking for cashflow, right? I mean, if you just want big chunks of cash, there’s flipping, there’s wholesaling, there’s other activities. But in terms of like, Hey, we just want some money coming in every month. We want to build long-term wealth. These are some of the main strategies that we see. Now we want to kind of fill in the last piece of the puzzle here, which is for all of you rookies to understand some of the big mistakes that we see as folks look to get started in real estate investing. So we’re going to cover that right afterward from today’s show sponsors.
Alright guys, so we’re back. We want to finish off by talking about some of the big mistakes that we see Rickeys make when it comes to getting started. And I think the first one is analysis paralysis. I think there’s something to be said about doing your homework, about educating yourself, about being responsible as you make decisions, but there’s also a point where all of that quote, education and all of that preparation just really turns into, I don’t know, I guess analysis paralysis, right? Where you’re just not doing anything and you’ve got to really be able to draw that line in the sand and say, I am now ready to take action. And my general advice here is that if you are at the point where you are listening to the podcast and you’re reading the books, and you’re watching the YouTube videos and you’re nodding your head because you already know 90% of what we’re talking about, you probably need to go do something now. Otherwise, you are just going to keep kicking the can down the road. You’ll never know anything. Don’t wait for that to happen. You just need to know enough that you can confidently take that next step

Ashley:
Hand. It might take longer to get that first deal than you think. So if you’re not taking action, whether that’s analyzing a deal every day or putting in offers, that could be something like we have a lot of people that come on and talk about door knocking, how they’ve door knocked for a year before they even got their first deal. So imagine if you wait until you knew everything and then it’s still a whole nother year before your offer is actually accepted on a property too. So I think creating a mix for yourself is where you’re taking action, but you’re also still engaging in informing yourself on what’s going on in the real estate market right now. What else can you learn about or actually sitting down and writing out, what don’t you feel confident about? I had somebody message me on biggerpockets.com yesterday and said, Ashley, I’m having trouble with market analysis.
Do you have any resources or links to try to help me with that? They identified what their struggle is, they were confident in other things. So I compiled a whole bunch of things and I said, start here and then let’s talk again. But we, there’s just so many things that can be overwhelming that it’s hard to know where to start, but you first have to identify what is the thing you don’t feel confident in, and then tackle that, then move on to the next thing. Don’t try and consume everything at once because that definitely will put you in analysis paralysis because it will be overwhelming.

Tony:
I think the next big mistake that we see often is shiny object syndrome. This is where you keep jumping from one idea to the next. And oftentimes we see this from people before they ever actually even get started. You talk to ’em on month one, they’re like, yeah, I think I want to be a flipper. You talk to ’em on one two. Yeah, I think I want to be self storage. Talk to him. Oh yeah, I think I’m actually going to do ground of construction. And you talk to ’em six months later and they haven’t done anything. And I think, again, there’s something to be said about committing and looking to build excellence in one specific area. Ashley has become incredibly gifted at small multifamily in and around the Buffalo, New York area at Buring properties in those markets. I’ve become incredibly gifted at short-term rentals. That’s where we put a lot of our energy. So I think if you can really narrow in on one asset class when strategy, not only do you start to build your confidence faster, but the speed at which you find success also increases because all of your effort is going into this one thing. So I think that’s one big, big mistake I see from Ricky is that they jump around a little bit too much.

Ashley:
And then you can build your foundation for if you do want to chase that shiny object syndrome and try something new if you foul or it doesn’t go the way you think, you still have that strong foundation of your original strategy that is working for you. And that happened to me. I did long-term rentals and then I pivoted to doing my first short-term rental. That wasn’t an arbitrage, and it was an A-frame cabin I bought for $49,000. I went $40,000 over budget, and it took me almost one full year to do the rehab on this property. If that would’ve been my first deal I ever did, that would’ve killed me. That would’ve killed me. I definitely did not have an extra $40,000 to infuse into that property. And I definitely, maybe if that was my first deal, I would’ve done more research. I would’ve taken more time, but I was like, oh God, I can do rehabs.
I’ve done burrs and all this stuff, but it was just a very different property. And then it took us a couple months to actually get it furnished and get it listed and get it up and running as our first full short-term rental, which added on to the time that we weren’t occupied. So there definitely was those learning experiences there. So I think if you have an opportunity and one strategy that I did it because I was a property manager, so I knew how to manage a property, that was my step above that was my advantage into going into long-term rentals. So if you do have an advantage, think about if there’s a strategy like we talked about in the beginning that fits your why. If maybe there’s two you’re deciding on, but one you have an advantage in, take that one. Build your foundation first.

Tony:
I think the last one, and this is a big one, it’s taking advice from the wrong people. We all in our lives have well-intentioned yet super ill-informed people when it comes to investing in real estate. We’ve all got the Uncle Joe, the Aunt Jane, who says, oh, don’t buy real estate. We’re going to wait for the market to crash. And I literally know people in my life who’ve been saying that since 2018 and the crash has not materialized. But guess what has happened since 2018? One of the biggest runs of real estate investing ever. And all those people missed out on that because they were sitting on the sidelines. So even if your parents, even if you’re best friends, even if maybe your spouse is saying like, Hey, I’m not sure if you should invest in real estate. You’ve got to take advice from people who have actually done it. You’ve got to understand when to filter information out, when to filter out advice from people who haven’t necessarily achieved what it’s you want to achieve. So I think the biggest thing that you can do as a rookie is commit to politely saying thanks, but no thanks. When someone gives you advice, when they don’t necessarily have the pedigree to be giving you that advice.

Ashley:
Well, thank you guys so much for joining us today. We hope you learn something and we hope you don’t get stuck in analysis paralysis. If you’re watching this on YouTube, make sure to comment below what your why is and what you want out of real estate investing, and then what strategy you have chose. We would love to hear from you. I’m Ashley. And he’s Tony, and we’ll see you guys on the next episode of Real Estate Ricky.

 

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Are we headed right for a recession, or are stocks on sale? We don’t own a crystal ball, but Ricky Mulvey from The Motley Fool is capitalizing on the recent stock market swing by loading up on some of his favorite equities. Stay tuned to find out if now is an ideal time for YOU to “stock up,” too!

Welcome back to the BiggerPockets Money podcast! In light of the recent market pullback, Ricky is going to share why he thinks it’s the right time to take advantage of low stock prices. He’ll discuss some of his best bargain buys, his biggest portfolio wins and losses in recent years, and, most importantly, the four-step approach you can use to identify stocks that could be set to soar in 2025.

If you’re a regular listener, you know that Scott and Mindy are partial to stashing their money in index funds, sitting back, and watching their wealth snowball over the long haul. You might say that Ricky has a slightly larger appetite for risk, as he isn’t opposed to picking stocks, timing the market, and getting out after three to five years. Stick around to find out if his strategy works!

Mindy:
As of the time of recording, the stock market is down, and this is either bad news because maybe there’s a recession coming or it’s good news because stocks are on sale. It’s time to stock up. Today’s guest is Ricky Mulvey, host of the Motley Fool Money Podcast, and he’s joining us to talk about ways to still find great investments even in this current market. Hello, hello, hello and welcome to the BiggerPockets Money podcast. My name is Mindy Jensen, and with me as always is my still investing in the stock market co-host Scott Trench.

Scott:
Thanks, Mindy. Great to be here. Dow you doing, oh God, whatever. We’ll try again later. BiggerPockets is a goal of creating 1 million millionaires. You’re in the right place if you want to get your financial house in order because we truly believe financial freedom is attainable for everyone no matter when or where you’re starting or even if you are one of those stock picking types today, we could not be more excited to have Ricky Moy from the Motley Fool here on BiggerPockets money to talk about stocks in a general sense and things that you can look for as you attempt to find great value in the stock market. Ricky, welcome to BiggerPockets Money.

Ricky:
Thanks for having me. What a time to talk about stock investing.

Scott:
Yeah, maybe we start there and just get your reaction at a high level to how you feel about the pullback we’ve had here of 10 ish percent as of March 11th from the peak in February, and most major indexes.

Ricky:
I don’t want to give you too much credit, Scott, but this is something I know you were worried about on the show for a little bit now, even in February when you’re looking at, what was it, the forward PE of the broader market at 29, stock market corrections are a good and healthy thing, and in fact is someone who is investing for decades and trying to make a lifetime out of this. This is something that I’m excited for and in a weird way also rooting for,

Mindy:
Oh, explain how you’re rooting for this

Ricky:
Because it’s like if you go to the store and you see your favorite shoes on sale for 20%, you get a little bit happier to buy them. There are companies that I’ve been looking at that I’ve had on a watch list that have become from a metric sense more affordable is people become increasingly pessimistic about the economic outlook for the next we’ll say, we’ll say year with the trade war that’s going on. People are worried about a recession, but I’m in this game for decades, and so as a younger investor, this is something I’ve become increasingly excited for when I think about that long time horizon.

Mindy:
Okay. Two things. I love that you said I’m in this for decades. Yes, absolutely. If you are investing for decades long returns, this is going to be a drop in the bucket. I truly believe, of course, past performance is not a ticket of a future gain and I cannot guarantee that the stock market is ever going to go up again, but I have faith that it will. Second Ricky, you mentioned that Scott was looking at the forward projections of the stock market and that’s why he sold. Would you categorize these recent market drops as PE related?

Ricky:
Not entirely, and I also want to be, I mean Scott, I know you were buying a rental, so it wasn’t just your feelings about the market. You don’t want to say, oh, the market’s too hot, too cold, I’m in and I’m out. But I think that it’s a combination of things. You look at a brewing tariff war, which is becoming increasingly in reality. We’re recording this on March 11th, but this is something that economists have warned about. If you shut down global commerce through more taxes or I shouldn’t say shut down, but rather impede global commerce through 25% ish taxes, that slows down the economy. And then the other thing is that I think you had investors when things get priced up like that, they look for reasons to sell. And when you give a strong bear case like that, which I don’t want to dismiss the reality of it, it leads crowds to head for the exits.

Scott:
I kind of summarized it as, and I think you have to incorporate the political element into it at this point, even though we love to stay away entirely from it. But I think the way to phrase the political element is I think hundreds of millions of Americans are asking themselves, am I comfortable leaving the majority of my financial portfolio in US stocks given the activity side of the Trump administration and for a large and potentially growing percentage of those people? The answer that is no. I think that’s the best way to frame the problem without really getting into the politics of the situation too deeply. Do you agree with that?

Ricky:
I think that’s fair. There used to be this, I have a background, I worked for a financial advisor on there radio show before I got started at the Motley Fool. This was widespread among the financial advising industry is people would bring out a chart where they’d prove basically that the stock market returns have basically no correlation to who’s in office, but I think it’s increasingly difficult to make that case. And what I would say now is a lot of this does seem to be self-inflicted and I would also consider the fact that this is a more violent market, good and bad. I think there’s going to be stronger ups and downs is things change based on a headline, a new tariff, a response to the tariff, all of that kind of thing.

Scott:
Just a couple of clarifying points on my position from a few weeks ago, which I think is largely unchanged despite the pullback here. One is I was just uncomfortable with the Schiller PE ratio rather than the forward PE ratio. The forward PE issue or change in a heartbeat as we saw in 2008 in terms of things I was afraid is the word I would use of the fact that price to earnings in real terms over the last 10 years adjusted for inflation in real terms for the s and p 500 and other US index funds were priced at close to their 1999 levels. And that was my primary fear. And then on top of that I was like, the market that’s priced that way needs a lot of things to go right and anything that goes wrong could potentially put that and create a problem.
It’s like kindling and any spark connect, ignite a fire. That was my thesis. I didn’t have much more to it than that and I’m like, I just can’t, can’t handle the heat I’m getting out of the kitchen and I’m putting it into real estate, which I’m more comfortable with and feel like even if there’s a massive general downturn, I will lose less badly than I would with equities in terms with a paid off property and in the event that things and I’ll also be able to refinance even at a lower value at that point and use those dollars for something else. And if things go well and I’m completely off my rocker with this, I’ll still earn a six 7% cap rate and some appreciation on the property, which is not going to be too far off the index long-term average. So that was more my thought process just for the record there. In addition, do you see the same risks that I’m talking about in there and what is your reaction to that play as a stock market guy?

Ricky:
Two things. One, I think you did something incredibly wise. You moved to your circle of competence way more about the real estate market than I do, and you saw an opportunity there where you said, this is a better use of my capital. The thing that I would be a little more cautious about is anytime you’re getting in and out of the market, you have to be right twice, it’s very easy to say that the market is overheated. What becomes increasingly difficult is deciding when to get back in. I remember stories of investors where they saw 2008 coming and they pulled out their money, but when do you decide that you have an all clear signal to get back into the market? And there’s research from JP Morgan that I’ll bring up basically seven of the stock markets, 10 best days occurred within 15 days of one of the market’s worst days. So I think it’s incredibly difficult to be right twice.

Scott:
I completely agree. That’s why I’m not saying, oh, I’m going to go back in. I’m saying I permanently reallocated to real estate and if I see a generational opportunity, maybe I’ll refinance, but it’s more mostly just this is a paid off property that I’d be happy to hold for 20, 30 years on this run. I just have that option. Should I ever want to refinance it? It’s kind of more the way I think about it.

Ricky:
There are still pockets of the market that are cheaper than the broader market that I think are worth looking at. And there’s also parts too with interest rates being a little higher for someone like you Scott, if you look at broad baskets of corporate debt, there’s one ETF I’m thinking of in particular that has more than a 7% yield on it. So you don’t get the appreciation you may get from a rental property, but you trade that off with not doing a whole heck of a lot of work. I’ll pay the fine folks at BlackRock to do the diversification for me and I’ll take the 7% checks on that ticker, USHY. So high yield corporate bonds.

Scott:
Well love it. So what is your kind of thesis? Where are you looking as an expert in the stock market and analyst for Alpha for value in today’s world?

Ricky:
The thing I’m really looking at right now more than I think I have before is insider buying activity. So I’m trying to look for companies that have good three to five year holds for them. And then also I like seeing insiders buying gobs of stock with their own money because to me that’s an indication that they believe that their company is undervalued.

Scott:
How do I even begin? Let’s say I like that idea. How do I even begin to do research to see which insiders are buying stock? And what are some interesting observations you’ve had recently that you’re exploring whether or not you’re actually going to pull the trigger and invest?

Ricky:
I’ll talk about a stock that I own, but there’s a couple, there’s sources on one account I like is called insider radar that basically tells people when there’s large purchases of insider stock, but also when insiders in companies go to purchase shares or sell, they report it with the SEC. So when you’re looking at a company, one of the filters I do is to see what insiders have been doing with their own personal stakes in the company. And that’s a form you can find on the NASDAQ website. They have to report it if they sell or buy shares.

Scott:
Yeah, shout out to Randy Trench, my father who has said to me in the past, there’s a lot of reasons people will sell stock. You want to buy a house, pay for college, all those kinds of things, but there’s only one reason you buy stock

Ricky:
And especially on the open market, these are people that know how to value their company and if they think the market is wrong, let ’em put their money where their mouth is.

Scott:
Now we need to take a quick ad break, but listeners, I am so excited to announce that you can now buy your ticket for BP Con 2025, which is October 5th through seventh in Las Vegas. Score the early bird pricing for a hundred bucks or go to biggerpockets.com/conference. While we’re away, we will have a BiggerPockets money track where we will be discussing in particular ways to actually fire with these one to 2 million, two and a half million portfolios with a particular emphasis on the middle class trap. And yes, after a few beers, I do love a good round of craps in the casino even though we host a money show touting personal financial responsibility here. Hope to see you there.

Mindy:
Welcome back to the show.

Scott:
Love it. Okay, so you look at those things and then what are some of the firms that you’re interested in that are where you’re seeing that?

Ricky:
One stock I’ve been buying lately is it’s TKO holdings, ticker, TKO, and this is one just kind of started making a profit. This is the parent company of the UFC. The WWE professional bull riding and soon a boxing league. And I’m actually, I’m glad to be here. I’m happy to talk about combat sports for as long as you’d like me to. But there’s something interesting going on with this, which is that the CEO Aria Emanuel has set up a automatic buying program for his company’s stock. And usually when you see company leaders, they set up automatic selling programs. So the market doesn’t take it as an indication. Oh, the CEO EO just sold a lot of stock. They want to diversify away, do the thousands of things that Randy trench referred to. But in this case you see a lot of insider buying and I think the company also has a couple of key catalysts that make it for me an attractive stock to purchase and one that I’ve been in my personal account over the past few weeks, months.

Scott:
So your thought is in the current environment it’s kind of wacky out there, but insiders are buy-in. What intrigues me? How do you then do the next level of diligence or thought process on an investment like A TKO?

Ricky:
Everything comes down to what are the earnings this company can do and what is the sentiment going to be because that’s what the market values. What are your earnings and then you put a multiplier on that in order to create a value, you’re doing an equation. So for with TKO, I’m thinking of a few things. One, I think they have a pretty tremendous value driver and I got to credit my colleagues Nick Sippel and Jim Gilley’s in their work on this, but this year they are the only company with a major media rights deal that’s coming up, so that’s the UFC. And if you look at a few moves that ESPN has been making lately, they’ve been getting rid of baseball, they ended their contract with professional baseball and this has been something that I think they’re basically creating room to invest in a big media rights deal for the UFC also, you have the wwe, which just premiered on Netflix in the United States and also Netflix has the international broadcast rights for the WWE E.
So I think they can significantly grow their global audience for that. And the third factor you have in this is the money from Saudi Arabia. So the UFC is going to start basically a boxing league and this is being done in conjunction with the fine folks in Saudi Arabia to compete with the current system in boxing. The other thing I would consider for a value driver is there is a political element, right? Dana White is the CEO of the UFC, not the organization. He has a long and deep loyal relationship with President Donald Trump. So you have to think if this guy wants to get a deal done, he’s going to have less resistance than he would’ve had in the past four years. I think that’s just kind of icing on the cake. So those are the value drivers that I’m really thinking of a growing sport audience, money coming in from the outside and then you look at the valuation, it’s at about 34 times forward earnings when I checked Y charts this morning. To me that’s not bad for something that’s essentially a monopoly in two areas already in professional wrestling and in mixed martial arts.

Scott:
Awesome. So I love that. So there’s not a value play. It’s not like this has a great price to earnings multiple or super strong balance sheet. This is a growth story and you’re looking for companies that are going big in the current context and have potential major strategic needle movers here. And there’s a very rational argument for why this company could really dramatically expand and has really huge tailwinds behind it,

Ricky:
Has tailwinds and has a moat.

Scott:
Yeah, moat’s perfect. So

Mindy:
I like this insider buying thing. I never even thought to look at that, although that has definitely been something that I have thought was a good thing when I was interested in a stock and then, oh, the CEO of the company is buying oodles and oodles of this stock. Oh, that makes me feel even better about my choice.

Ricky:
Yeah, you want to find CEOs and co-founders that have basically themselves tied to the mast of this ship. And the second level of this is it’s not just the insider buying activity, but it’s also good to see what insider stakes that they have in the company. Does this CEO own a lot of stock? Because if this is 90, 95% of their personal portfolio, even if they think the stock’s going to go up, they may not be buying on the open market for diversification reasons. But I think this is a pretty important check for me when I’m looking at buying a stock, especially right now.

Scott:
So let’s go into that because I think that the same thing is true in the syndication space. We have these guys who raise money to buy an apartment building and they put nothing into the deal. It’s what I call a free spin on it. They can go up on around there and look, I think there’s going to be a weak correlation frankly for some of these things. I think that the math would prove that out of our history, there is a correlation between insider buying and better returns over time, but it’s fairly weak. Is that right Ricky?

Ricky:
I don’t have the data on it. I would say look for strong insider buying and that’s up to you as an investor what’s strong to you. So two examples that I think of in the past. One is just a few months ago, Calvin McDonald, she’s the CEO of Lululemon stock got crushed. He bought a million dollars worth of stock for the CEO of Lululemon. Is a million dollars significant? It’s kind of hard to tell. For me it was significant enough and the stock’s done okay since then. We’re having a cool down in sort of apparel sales, but that was something that was important to me. And then the other one that I found significant was Ted Sarandos. He’s the former CEO of Netflix co-founder of Netflix. A few years back in 2022 when the stock was just absolutely getting hammered when everybody was pessimistic about the future of Netflix because they had lost subscribers on an earnings call, he went out and with more than a million dollars of his own money, went and bought Netflix stock on the open market. I think it was below 200. And since then the stock has beaten the market since then. To me that a strong indication and it’s one I look for, not just the head fake, not just a few thousand dollars, but once we’re getting into supercar money, that’s when I start to get excited is a lower stock investor. Scott,

Scott:
When I think about good alignment with the executive of the chief executive of a company or one of these syndicators, it’s somewhere reasonably close to half of their personal wealth is in that investment and great if they’re taking additional dollars to buy into that. But that to me is what meaningful really looks like. Now many people won’t do that. A quarter is still good, less than 5% of the individual’s wealth in the asset that they’re running in terms of what the capital they have at risk. That would be a concern to me on it and that’s what framework you’re getting at here is you have to guess in order to understand strong insider buying, it sounds like you have to kind of guess at what the personal wealth of some of these individuals is external to the company and make sure that the company is their number one or very close to their number one, the most meaningful single placement that they’ve got in their personal portfolio.

Ricky:
There are other important things when you’re looking at a mature company, does this company, does it produce positive earnings? Does it produce positive cash flow? What is it doing with that cashflow? What is the market’s price tag and expectations that it puts onto this company? Those are also very key and important that I want to make sure I’m not brushing aside as we have this conversation.

Scott:
Oh, absolutely. I just love that this is the starting point and this is a great, we cannot spend hours and hours going through all these different things. That’s what you do full time at the Motley Fool. You have such a body of wealth and information on there over long period. I just love the insight into this, Hey, this is the first thing I look for. It’s the first thing that gets me piqued, my interest piqued about doing more research. Is it? Awesome.

Mindy:
So Ricky, let’s look at your personal holdings. How would you categorize your split between index funds and individual stocks in a percentage basis?

Ricky:
I lean toward individual stocks if we’re counting, so we’ll count my 401k in that I’m probably, I’m probably 60 40 index funds to individual stocks.

Mindy:
And do you have any bonds or any other non-stock holdings?

Ricky:
I hold a bond fund USHY that I mentioned previously. It’s not super major position, but it’s to me a little bit of a cushion and I’ll take 7% for sitting here and playing on the computer with y’all.

Mindy:
I like 7%, I like 15% better.

Ricky:
Yeah, nothing wrong

Mindy:
With that

Scott:
15% being the index fund return for the last couple of years, right? Is that’s what you’re referring

Mindy:
To? Actually I’m guessing at my returns for the last couple of years, I haven’t really looked at that. I haven’t, what a terrible thing to say. I haven’t really looked at it but I haven’t. I mean Carl looks at it every day so I don’t have to. Ricky do you a that has changed the makeup of your portfolio like you picked a winner or you picked a non winner?

Ricky:
My best ideas and my worst ideas, let’s get into it because if we’re talking about a winner, I also want to talk about times that I’ve been absolutely fundamentally wrong and lost money.

Scott:
Chinese fruit juice company,

Ricky:
That’s Scott. The two that have been big winners for me have been meta platforms in Spotify by a dollar basis. Those have driven a lot of returns from my portfolio and that was a time where both of those I think were times where I saw long-term trends where the bears were hammering down on very pessimistic points where I was able to go, I think you all may be wrong about this, we can start with meta. So meta back in 2022 ish, we’ll say it was no longer Facebook. We’re a metaverse company now and we’re going to spend lots of money on reality labs and everybody’s going to go around wearing these goggles to play video games to meet online and to watch movies. And the investors at the time were very concerned about the amount of spending that was going on and in my view, they kind of missed the fact that this is still a platform with billions of people spending their time and attention on it, an incredible ad platform. And so I took a stake in the company and that has been a good winner for me. The flip side of that I’ll also say is that’s also one where I sold too early where I sold some of my shares because I’m like, okay, good. I’ve made a good game gain, let’s reallocate this elsewhere. I price anchored and I made a mistake.

Scott:
Love it. I remember that time period and I don’t participate in this, but I remember the back of my mind, I was thinking about Man meta’s in this and there was some Reddit post or something that was to the effect of, man, look how much better grand theft Auto Fives virtual world is from five years before the billion dollar spent by meta on this, the META’S 3D virtual reality world. And that was tanking their stock. I remember that. And that’s when you bought that was a smart buy because it’s like okay, we’re going to get up on that and go back to our core business of dominating the world and from social media perspective and the traditional business and that’s exactly what they did.

Ricky:
They did. And there’s a couple of things that, one thing you said there is you had an observation about that and I know you don’t like individual stocks as much, but the thing that I want to communicate is that you as a retail investor, you as a regular investor, you actually have tremendous, you have some tremendous advantages over institutional investors if you’re a long-term buy and hold investor and there’s a famous investor named Peter Lynch and one of his ideas is that the observations that you have about the world aren’t always valuable but can be valuable. And this is especially true for people who live between the coasts that are able to see some economic trends that may not be as visible outside of places like New York City.

Scott:
Yeah, it’s funny because his book one Up on Wall Street is a wonderful read for folks. I always tell folks who are, they don’t really know they’re just getting started, especially in high school or college, it’s really hard to convince someone in that area just index fund for the next 50 years for it. So I tell ’em to read both the simple Path to wealth and a book like One up on Wall Street to get kind of the different perspectives of those and make their own decisions and let ’em know I chose the index fund approach there. But I will say over the years, there have been a couple of times when I’ve been like, this is an absurd situation. I really want bet on it and I haven’t, don’t know what my record would be. I have to go back and actually write ’em down in the future and kind of look at one of the ones that is most memorable for me on this is Kodak.
So Kodak is a company, obviously a camera company, declining for a very long period of time, less than half a billion dollars in market cap now. And in 2020 they came out with Kodak coin, their crypto for photographers and their market capitalization increased from 250 million to 750 million overnight. And I remember thinking, I have never been so sure in my life that this company’s going to come crashing right back down. And sure enough, within a few weeks they did that and I just regret to this day I never bought a put option with is a small amount of money on that one it it’s like Warren, there’s 10 times in your life when the market will hand you something just so extraordinarily absurd that you got to act on it in there. I dunno, is that kind what you’re referring to in

Ricky:
These situations? I’m generally a long only investor. I’ve tried shorting stocks before. You said put option, which is good because that can bite you a lot less than shorting a stock. But I’m a long-term optimist and there a part of, there are times I’ve wanted to short stocks. I don’t love rooting for companies to go down in flames. The case of Kodak is a special example. Anytime you start seeing a coin that’s associated with the company, something that just seems weird and off that gets your spidey senses up. Yeah, I think you made a good observation on it and I wish you made a profit.

Mindy:
We have to take one final ad break, but we will be back with more with Ricky MoVI right after this.

Scott:
Thanks for sticking with us.

Mindy:
Let’s talk about holding periods because Ricky, you said I sold meta too early. My favorite best friend Warren Buffet has said my favorite holding period is forever. What is your typical holding period?

Ricky:
Yeah, Warren Buffet says that in their stocks that he has owned for fabulously long period of times, but anytime you look at Berkshire’s 13 f, you see some buys and sell in there. He gets, he could sometimes get a little traity with it.

Scott:
I agree. There’s a big difference between what he says and what he does. Frankly in a lot of areas right now he’s got 300 billion in cash. He exited every huge chunks of the portfolio in the last couple of months. So I agree that there’s a lot of people quote him and there’s a big difference between the two.

Ricky:
You could find a Warren Buffett quote that suits what you want to do sometimes. The thing I would also say to Berkshire, they’re an entirely different investing category than us folks here and listening. They have to shoot with an elephant gun. This is one of the largest companies on the open market. They’re not even able to buy small cap companies. They have to look at stakes in very large cap companies. You just talked about how a lot of large cap companies were overvalued so they’re not able to play in the parts of the market that someone on the retail side is as well. Now to actually answer Mindy’s question, what’s my holding period? I think three to five years is a proper one. I like to find companies though that think in terms of generations when possible, not all of them do. They’re a couple that come to mind, but I think three to five years is a good amount of time to test the thesis and that also puts you ahead of the pack in a lot of ways. I found according to the New York Stock Exchange as this was in 2020, the average holding period of shares was five and a half months, which is a decrease of a late 1950s peak of eight years. So investing is a very strange thing. If you’re willing to sit on your hands and do nothing, I think that can give you a large advantage over a lot of the crowd.

Mindy:
Okay, that’s really interesting because my favorite holding period is a really long time, I’m not going to say forever, but I’ve been in, I think Apple iPhone was introduced in 2003 and I’ve been in Apple since then. I got into Google on their IPO in I want to say 1998. I’ve been in Tesla since 2012. I hold for a really long term and I might sell a little bit. I did a full disclosure. I just sold a hundred thousand dollars in V, what did I sell a hundred thousand dollars in VGT because, not because I think the market is bad, but because I’m building a house and I needed some extra cash, but for the most part I hold for a really, really, really long time. And Ricky, you said you are investing for decades. Why are you only holding for half a decade?

Scott:
Also, I want to pile along with that question with a part two to Mindy’s question here, which is tax drag. So if I have a hundred thousand dollars invested today, and let’s say I have a gain of a hundred thousand dollars and I realized that gain and let’s say it’s close to the marginal tax bracket, right? That could be very little, but it could be at a high tax bracket, 15% for long-term capital gain in one bracket or up to 20% plus we live in Colorado, all three of us, so there’s a four point a half percent state tax on both long-term capital gains, short-term capital gains and income here. So let’s say that we sell a hundred thousand dollars in stock now we have roughly $75,000 rounding to 25% that we invest and we put it right back in the market. Well, it’s not like after tax in 30 years we’re left with the same amount. Well actually have materially less after tax wealth when we go to sell portfolio B that’s invested a lower after tax basis than the previous one. So how you think through that concept of tax drag on the returns of your portfolio with that three to five year hold period? It’s a fair criticism of my decision recently as well. I will go through that and that’s the first time I’ve ever sold stocks.

Ricky:
Oh, you real estate investors with your tax thoughts, how could you, so to be clear, the three to five years, that’s the amount of time you want a thesis to play out. If a stock is performing well, you want to continue to hold it as long as possible. The three to five years is when I’m basically signing up to buy shares. That’s what I get in my head. These are the fundamentals that I’m thinking about and I want to see this play out over three to five years, so I’m not itching to sell. With that said, there can be thesis altering events. You want to be careful about recognizing those and making a decision based on that happening. But that’s when I’m buying a stock, I’m thinking, okay, this is my three to five year sort of thesis on this and then after that you can revisit it and you can continue to hold. I’m not looking to necessarily sell in three to five years, but those are the sort of amount of time chunks that I’m thinking in. And then I do a lot of my investing within Roth accounts, so I’m taking after tax money, no gains on sales, that kind of thing. Yeah, we love the Roth account.

Scott:
Perfect. Awesome. So we do that in the retirement account. You don’t have this problem out there to a large degree either. It can be tax deferred or the post tax account in the Roth. What about does that change for a specific companies? So for example, I imagine that meta, you had a clear several year thesis in that particular example, but I imagine if I was looking at the market as a layman, I would not imagine that would apply to say Costco, right? Costco, my belief is they should just keep doing what they’re doing in perpetuity with few changes because I want to continue going there to fund a modestly luxurious lifestyle on the cheap for many decades to come. But does that change for you with any specific plays like a Costco?

Ricky:
I don’t own Costco stock. I wish I owned Costco stock. Perhaps I should go out and buy some. That’s something I’m a customer of and that’s the type of thing where you’re seeing the thesis play out every time you visit, you go to a Costco, maybe the thesis changes and you go and you realize, you know what, maybe they’ve just hiked my membership a lot. Maybe I feel like I’m not getting quite the value on Costco steaks that I once did or those, I forget what they’re called exactly, those figi bars. I have ’em as a snack once a day. Every time I go to Costco I get them. Maybe I’m noticing that the stores are a little bit dirtier that the freezers are out of stock. So you’re saying that as long as Costco keeps doing what they’re doing, if you own shares in Costco, you would be an intensely active observer in how the company is doing. And it is the type of company where I think about what would it take for me to stop shopping at Costco. It’s a lot. Every time I go there, you spend a few hundred dollars and you feel like you just got a great deal,

Scott:
But then it comes down to what’s the price to earnings ratio? And I looked it up and Costco’s trading at 54 times price to earnings. And so okay, a lot has to go right to meet those expectations and that’s where this all gets really complex again.

Ricky:
Yeah, you’re not the first person to realize that Costco is a great place to go buy goods and a good place to work. The way that I might consider reframing that though is you’re talking about Costco, like a store, like it’s a store. What if I told you it was a real estate company with a subscription component attached to it? Because a lot of the ways that it makes money is that subscription revenue and as long as they keep people happy, that’s what I think the street is saying is that that’s pretty safe. Additionally, right now, given the market uncertainty that we talked about at the top of the show, you’re seeing a lot of investors that say, I want to go to something that seems safe and what seems safer than Costco.

Scott:
Yeah, that makes perfect sense. Although I pushed back on the real estate piece, you wonder what else could possibly go into the Costco building in the event that they had to liquidate the real estate at some future date,

Ricky:
They could put an Amazon warehouse there. The part with that is they own a lot of their real estate where you see a lot of stores that are leasing their space. So they are a real estate owner is I guess more of the point that I was trying to make rather than them being a reit.

Scott:
Let’s wrap up with a couple of more tidbits here. So you start your approach with, hey, the market pullback is an opportunity that presents at least a little better buying chance than maybe it was than there was a few weeks ago. In some areas you then look for insider buying in particular to start your story. Go ahead. You’re about to say something. So react to these.

Ricky:
Yeah, that’s one component. I think more broadly the thing that I would encourage that I do that I would encourage folks to think about, where are you spending your time and your money? And that can be a good place to start looking for stocks as well. What do you see that’s becoming popular with your friends? And then you use that as an opportunity to research more. If we use the time, the time and attention thing, you’d be looking at companies like Facebook, Costco, maybe Visa, MasterCard. You look at some of the big tech stocks that enable the internet to happen. You could look for worse places than that, but one of the things I try to look for what’s happening in the world around me and then I use that as an investigation to look into the company. Sometimes I end up buying shares in the company and then sometimes I don’t.

Scott:
Got it. And that’s very much aligned with the Peter Lynch one up on Wall Street approach. So if that is appealing to you or even worth considering, would you agree that people should definitely pick up a copy of that book to get something that’s fairly close to the starting point that you use to investigate opportunities?

Ricky:
Yeah, I think it’s a great way to see how people have historically beaten the market. It was written years ago, so there are a few things you’ll look at that seem a little dated. There’s no cost of trading anymore. I think the market is a bit more violent than it used to be. I think the ups and downs are significantly larger, but I think it’s a great starting point and also is good to give you the confidence that you think of a lot of games in professions and activities where the professionals have a tremendous advantage over you. And I think one up on Wall Street is a good antidote to that to say no, you actually have tremendous advantages is an individual investor who’s able to be patient and also move freely.

Scott:
Okay, so we have that as the starting point. Zooming back out, the market pullback is at least an incrementally better opportunity to go hunting for bargains. We start with where are we spending our time and attention here and what are our friends doing? What are things that we’re starting to notice that we on the ground can see as individual investors? Then we look for insider buying. And those are kind the very beginning points of how you at least begin the thought process of looking for investment opportunities after that. There’s a large amount, I’m sure, of due diligence and research that you do on these companies that would take us much longer. But are there any kind of key additional points that you’d say are downstream, they’re like, Hey, we like the insider buying. I’m starting to spend a lot of time and attention to all my friends are watching MMA fights. What would be a gotcha, what would’ve been something that could come up in diligence but didn’t that would’ve scared you away from it?

Ricky:
From TKO specifically?

Scott:
Yes.

Ricky:
What would come up that I really wouldn’t have liked there if I saw no path for them to be able to make a profit. So from there, you want to look at, I like looking at operating profit because there’s sort of nowhere that’s basically fewer places for a company to hide. If you can’t make an operating profit, you have some splaining to do. Maybe you’re a young company with a big growth story and you can set that aside. But from there I’m looking at what are these companies pathways basically pathway or pathways to being profitable? And if I thought that, so for instance, with TKO, if I saw a ton of dilution, that’s something that would give me pause If I didn’t see insiders taking stakes in the company or if I were seeing things like people suddenly becoming disinterested in mixed martial arts in the WE or if they were getting way outside of their circle of competence.
So one of the things is that they’re making a play on the boxing side that makes sense for a combat sports organization. Sometimes you’ll see companies that get a little too expansive for themselves. Maybe they want to go buy an online marketplace or an energy drink. I would start asking questions about why they’re doing that. But after you go through that, you say, what is the market assuming about this company? And then what has to be true for this to be right? What has to be true for it to be wrong? And then I’m thinking about the fundamental value drivers that could increase earnings or change sentiment about the company.

Scott:
I would love talking about this stuff. I read the books too early and not too early, but I read the books early on about how you can’t beat the market and stayed away completely from this. But you can tell I always have a little part of me that wants to go into this. And I know Mindy and Carl talk about index funds and then our bajillionaire because of their Tesla and Google investments,

Mindy:
But we have moved into index funds. We had never heard of them until, I don’t know, when did Jail Collins write that book?

Ricky:
Most truths I think are somewhere in the middle for people who are focused on stock investing. I think index funds are wonderful and can make a lot of sense. I own a lot of them myself. For those who are interested in investing, I think investing in stocks and companies is a great way to make hypotheses about the world, to be a curious participant in society and also have a scorecard of how right you are or how wrong you are. And this is, yeah, it’s something I personally enjoy. And I’m not just saying that as an employee of the Motley Fool,

Mindy:
Ricky, where can people find you online

Ricky:
At Twitter? On Rick, at Rick, so slick or it’s X now at Rick, so slick on X. That’s two S’s between the K and the O. And also if you’re interested in stock investing, we have a podcast, it’s called Motley Fool Money. I host it. We put out six shows a week. It’s a fun time. I’d invite you to check it out.

Scott:
Yeah, you do a great job over there. And you have a couple of different hosts on that show as well that have the expertise in different areas, right?

Ricky:
Yeah, I’m one of three. So I co-hosted along with Dylan Lewis and Mary Long. We also are very lucky to be assisted by a wonderful roster of Motley Fool analysts who are even more of an experts or even more of experts in the stock market than I am just a lowly host of the Motley Fool Money podcast. But yeah, there’s a ton of folks on it and we try our best with it.

Scott:
Awesome. And I just want to say we’ve had a wonderful experience in the overlap that we’ve had with everyone from the Motley Fool over the years, including what was supposed to be very bloody battle between real estate and stocks with two experts from Moley Fool on the BiggerPockets Real Estate podcast. Mary has been wonderful to work with, you’ve been wonderful to work with, and we look forward to meeting Dylan someday as well. So thank you for all you guys do over there and the free sharing of your expertise here on BiggerPockets.

Ricky:
My pleasure. And I’ve enjoyed basically every interaction. Not basically, I can say every interaction I’ve had with an employee of BiggerPockets has been pleasant, and I’ve always been impressed by everyone I’ve talked to has just seemed competent, which has always impressed me and I’ve been grateful for in my experiences with BiggerPockets.

Scott:
I would love talking about this stuff. I read the books too early and not too early, but I read the books early on about how you can’t beat the market and stayed away completely from this. But you can tell I always have a little part of me that wants to go into this. And I know Mindy and Carl talk about index funds and then our bajillionaire because of their Tesla and Google investments,

Mindy:
But we have moved into index funds. We had never heard of them until, I don’t know, when did Jail Collins write that book?

Ricky:
Most truths I think are somewhere in the middle for people who are focused on stock investing. I think index funds are wonderful and can make a lot of sense. I own a lot of them myself. For those who are interested in investing, I think investing in stocks and companies is a great way to make hypotheses about the world, to be a curious participant in society, and also have a scorecard of how right you are or how wrong you are. And this is, yeah, it’s something I personally enjoy. And I’m not just saying that as an employee of the Motley Fool,

Scott:
Well, we can tell you’re passionate about it. Thank you so much for sharing your wisdom here with us. We really appreciate it. Thanks for everything that you guys all do at the Motley Fool. We look forward to learning more from you over the years here. And best of luck this year

Ricky:
With TKO. My pleasure. Thanks for letting me on the show.

Mindy:
Thank you, Ricky. This is a lot of fun, and we’ll talk to you soon. Alright, Scott, that was Ricky Mulvey and that was a really, really fun conversation. What did you think?

Scott:
You can tell I love this stuff and I’ve had to force myself to not do any stock picking essentially for the last 10 years because I’ve read the research and that suggests that passively manage index funds tend to overwhelmingly outperform active investing. And yet the Motley Fool and that community, there are plenty of exceptions to that that are out there that have clearly outperformed the market over time and plenty of people who try it and do it honestly and to the best of their abilities and believe that, and Ricky is one of those people out there, and you can tell it’s just so, it’s fun. It’s fun to talk about these things and to place these ideas out there. So I think that hopefully that conversation, what it does for Full is it says, look, we are not changing our core beliefs and index funds.
And Ricky, even at Motley Fool Guy is in 60% of his stock marketing positions are an index funds out there. There’s a best practice component to that, and it shouldn’t be a taboo thing in a general sense to spend some time doing this if that’s something that you’re interested in, a general sense, maybe not with the majority of your portfolio, but it’s, it’s not like you’re breaking with a religious doctrine here to invest in individual stocks from time to time. And it’s something that a lot of people have done and been very successful with. And there’s also good research to say that the index fund tends to be a little better for the average, if not the majority of investors out there.

Mindy:
I would say if you are thinking about investing in individual stocks, you should have a reason, not just, oh, my best brother’s girlfriend told me about this one stock, so I should totally put money into it. No, if you don’t want to do the research to figure it out, or if you’ve heard of a stock and you’re like, oh, that sounds great. I’m totally going to put my money in there. You would be better off with index funds. But if you want to do the research, if you have an unfair advantage, if you have insider information, and I don’t mean that in a illegal sense. I mean, your brother works at GM and he keeps talking about this car and how it’s doing great things with test audiences or whatever. Clearly, I dunno what I’m talking about there, but if you know somebody who is really excited about a product and can tell you more about it, and then you start doing your own research and you dive down that little rabbit hole and you’re like, oh, you know what?
This seems like a great idea. I would definitely not suggest putting all of your money into it. Definitely don’t get a mortgage on your house. Oh my goodness. The meme stocks, when people were taking out mortgages on their house so that they could put money in meme stocks that ultimately did not perform the way that they thought they would, that’s not a good idea. If you’re going to invest in individual stocks, you should have a reason. But if you have a reason, dabble Scott, I would love to see you buy Costco stock. It’s like $800 a share an hour at $900 a share.

Scott:
I can’t buy. But here’s the thing, if I’m going to dabble, I’m going to dabble. But coming out of today’s conversation, I would be more inclined to begin my research with Peloton than with Costco because of that value dynamic. I can love Costco all I want and then say, in order for Costco, I need to do more research. Of course, I don’t really know what I’m talking about, but the 54 times price to earnings ratio scares the heck out of me for Costco versus the very low revenue to price ratio, to enterprise value ratio for Peloton, for example, is really interesting. And so I could not do the TKO style investment that’s predicated on these big deals and relationship with Trump and those types of things. My mind doesn’t work that way. Oh, there is clear value to be produced in this area and we can scale up from there. In this particular business, I would be totally, I would approach him from a totally different angle than even than Ricky does here. That’s just the way I’m wired.

Mindy:
I like that point of view though, Scott, Ricky invests in one way because of his experiences and his knowledge base, and you invest in a different way because of your experiences and your knowledge base. And if somebody’s investment strategy makes you feel uncomfortable, then don’t use it. There are so many other different investment strategies out there. I would hope that nobody is listening to this show and saying, oh, well Mindy does this, therefore I’m going to do that too. Or Scott did that, so therefore I’m going to do that too. No, have a reason for what you’re doing. Do your research.

Scott:
And again, I probably won’t do any particular individual stock investing, or if I do, it’ll be, well, less than 1% of my position because I’m an index funder, right? If I’m an index funder, even though I’m out because of the current market as I put more into index funds or into stock market, it’ll almost certainly be via passively managed low cost index funds over the most of my life. If there’s ever a sharp break, I reserve the right to make that and go into a different direction at some point in the future. I’ll let everybody know.

Mindy:
Okay, great. Well, that’s awesome, Scott. And that wraps up this episode of the BiggerPockets Money podcast. But before we go, I want to let you know that we have a newsletter that you can subscribe to. We can deliver it directly to your inbox, nothing for you to do except go to biggerpockets.com/money newsletter and subscribe today. You will hear information from me, information from Scott. Scott had his very own column called Scott’s Thoughts, so we would love to have you subscribe. We would love to share our information with you. So again, biggerpockets.com/money newsletter. And with that, he is Scott Trench. I am Eddie Jensen saying, do caribou.

 

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Traditionally, young people have been desperate to leave their small towns and strike out for high-paying jobs in the big city. However, the exorbitant cost of city living has resulted in the opposite now being true. Since the COVID-19 pandemic, younger Americans aged 25 to 44 have been moving to smaller towns in alarming numbers, changing the landscape for real estate investors in the process.

According to Hamilton Lombard, estimates program manager of the Demographics Research Group at the University of Virginia’s Weldon Cooper Center for Public Research, the migration toward rural America has been so great that small towns have been enjoying a revival.

Rural Regions See a Population Spike

Based on population estimates released by the U.S. Census Bureau, the findings show that between 2020 and spring 2024, two-thirds of population growth for those aged 25 to 44 occurred in areas with fewer than 1 million residents or rural counties. 

“Perhaps the most striking statistic within the 2023 age estimates is the fact that since 2020, the country’s small towns and rural areas have been attracting younger adults at the highest rate in nearly a century,” writes Lombard.

Also fascinating is that despite major corporations issuing return-to-office mandates, the migration to small-town America amongst a younger demographic increased in 2023, upending the previous decade’s stats that saw 90% of this growth was concentrated in the largest metro areas with more than 4 million residents.

The loss of residents from smaller towns and cities from the 1990s onward made rural areas economically blighted, with a loss of businesses, communities, and vacant buildings and an unbalanced demographic of largely older residents. Ironically, some of these rural towns and small cities are now seeing residents flood in, making these prime spots for real estate investors to kick-start their wealth-building journey by buying up affordable houses.

Choosing Which Small Town to Move To or Invest In

Being strategic makes sense when choosing which small town to move to, especially if you want to coordinate it with real estate investing. However, even if you don’t plan to invest immediately, small-town living could also be a good idea to help you lower your expenses to save and be better positioned to invest in the future.

Additionally, according to Worth.com, office occupancy and downtown recovery figures look much better in smaller cities than in the biggest markets, a statistic that favors lower living costs in these areas.

Commutable to a Larger City 

Hybrid work has put small towns in play for employees who need to be in larger towns and cities three days a week. According to Lombard’s study, Arlington County, Virginia, across the Potomac River from Washington, D.C., saw its population of young adults grow faster than any other county within the nation’s 20 largest metros during the 2010s. It had six times as many younger residents as those over age 65. However, the pandemic and remote work reversed this in the 2020s, which went against the idea of younger people moving to larger metro areas. 

Natural Beauty for Short-Term Rentals 

According to AirDNA, small cities and rural areas saw a 16% year-over-year increase in listings in 2024, while midsized cities only grew by 10.3%. The short-term rental data website stated,  “These gains reflect an influx of new investment properties entering the market as active vacation rentals.”

The website added that high interest rates and high prices have factored into short-term rental investing.

Realtor and investor John Walker and his wife, Jade, purchased a short-term rental in the small town of Boston, Pennsylvania, on the Great Allegheny Passage, known as the GAP Trail, a popular biking and walking trail, near McKeesport, Pennsylvania, about 20 miles outside of Pittsburgh. He picked it up for just over $50,000 and put around $100,000 into renovations. 

“We’ve had visitors come from everywhere because of the popularity of the GAP trail,” he told BiggerPockets. “The town itself is affordable and easily commutable into the city. Some weekends when it’s not booked, we’ll come here ourselves and ride our bikes. It’s been a great investment.” 

Data Center and Tech Development Plans Spur Investment 

The tech boom has also been a boom for rural America, particularly where data centers to support artificial intelligence (AI) are being built, which require vast expanses of cheap land with access to natural power sources. Demand for construction crews, particularly electricians, is matched only by the demand for accommodation in which to house them.

A New York Times article reveals that four of the largest internet and software companies spent more than $200 billion in capital expenditures last year, mainly on building new data centers. They’re expected to spend just as much or more next year. 

According to Entrepreneur.com, booming tech corridors nationwide are transforming housing sectors. The article says:

“Smaller cities like Abilene, Texas, are experiencing economic revitalization as businesses, housing developments, and local services expand to support AI operations. This increase in job creation means higher demand for housing, commercial spaces, and retail businesses. As AI data centers continue to grow, surrounding communities will need to expand rapidly to accommodate their workforce—creating long-term investment opportunities in both residential and commercial real estate.”

Researching and anticipating tech growth and development throughout the U.S. is a great way to turbocharge your real estate investing career.  Larger developers will buy land and construct housing for long-term employees, but that takes time to coordinate and implement. There’s a gap for smaller investors to buy and renovate existing housing to flip or rent to the scores of workers needed to get data centers and fabs off the ground as the AI boom continues to unfold.

Final Thoughts

While many jobs will remain in big cities, as the New York Times‘ Ezra Klein recently pointed out, big cities like New York City, Los Angeles, and Washington, D.C. are too expensive for middle-class Americans. Compare salaries to the cost of living in these places, and it’s no wonder that there has been a dramatic shift to smaller, more affordable towns and cities. 

Couple this with the technology boom centered around AI and the need for vast swathes of cheap land, and an ideal opportunity has presented itself for savvy real estate investors to capitalize on this generational shift.



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