Dave:
Hey everyone, Dave here. Happy holidays from all of us here at BiggerPockets. To wrap up 2025, we’re sharing a few of our favorite episodes from across the BiggerPockets Network this year. Today, it’s an investor story from Real Estate Rookie that was originally published back in April. So you can enjoy this episode. It’s Ashley Kare and Tony Robinson speaking with investor Luke Tetro, and I’ll be back with new episodes of the BiggerPockets Podcast starting January 2nd.

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

Tony:
And I’m Tony J. Robinson, and let’s give a big, warm welcome to Luke. Luke, thank you for joining us today, brother. Thank you guys. I appreciate it.

Ashley:
So Luke, you work as a welder for your full-time job, but you’ve told us you don’t love your job per se. So how did you land on real estate for your next steps for financial freedom?

Luke:
Well, I think it kind of started with it was a little bit more than a dislike of my job. I found myself pretty miserable, just kind of disappointed in myself how I ended up where I was at in life. I always felt like I should be doing something a lot bigger, a lot more, and I just never felt like I quite fit in with the guys I was working with, the long 60, 80 hours a week we were working. And before I knew it, I was 25 years old and I started welding straight out of high school. I didn’t go to college, just went kind of straight to work. And I just felt like my life just kind of … I snapped and all of a sudden all of my younger years are over and I’m just not really getting anywhere.
So that’s kind of how I started thinking outside of the box, getting out, what am I going to do? And real estate kind of fell into my lap because I had one mentor in my life and it was my best friend growing up’s father. He was a custom home builder. He had a few single family rentals and it was just kind of always topic of conversation. I can remember when we were younger, just he was going to pick up rent or he was going to fix a house. I don’t think I really took much to it. When we were in high school, I was 18, our mind was on some other things, but I think that kind of ingrained somewhere in my mind. I always kind of knew I could fall back on that. So I think once I got to almost a breaking point of where I needed to make a change, I called him up.
We had a quick phone call and I was like, “Yeah, now or never, let’s just try it. I’ll find a deal.” And I kind of made an agreement with him where he’d essentially be my first private money guy. And I ended up finding the first deal and it kind of all just snowballed from there.

Tony:
I want you to take us through your first deal, Luke, because I’m told that you found your first real estate deal on Facebook Marketplace, which is almost the quote of finding a good deal on Craigslist. So walk us through how you found this deal.

Luke:
It gets even better than that because the top off, the fact that it was off Facebook Marketplace, I sent my now fiance to go walk it because I work a lot, so it’s hard for me to be free during the day. And she’s never done one construction job. She’s never bought a house before. She has zero real estate experience. So she walked it. She’s like, “Oh, I guess it looks all right.” And I negotiated with them over Facebook Messenger because they didn’t want to take a phone call. And I bought it sight unseen to kind of make things a little more interesting.

Ashley:
And did not even talk to the person either that they won’t take a phone

Tony:
Call. My God. So I guess let me just ask, Luke, did you not at any point feel that this might’ve been a scam given that Facebook Marketplace didn’t want to talk on the phone? Were you worried at all about that?

Luke:
Honestly, I had 20 mutual friends with them. So to me, that was a real person. So I didn’t know them personally, but I was like, “It’s got to be legit.” And she showed up. They were there when she was there and they walked through it. There was a tenant in there. So she was like, her first experience of tenant, she’s walking over all their stuff. They’re kind of walking them through with the homeowner. She said it was just wild. And yeah, we decided to go through with it.

Ashley:
So let me ask you this for your first steps as, okay, you guys negotiate through Messenger, you have a deal, what’s the next thing that happened? Did you hire an attorney? What are those next crucial steps to actually close on the property?

Luke:
Luckily, I kind of really leaned on my mentor there because he’s been in real estate for 30 years. And so as soon as we agreed on a price, I just kind of went to him and he sent me to his attorney. They drew up all the paperwork. I didn’t know what I was looking at. I barely even read the contract if I’m being totally honest. And we just bought it. That was kind of how … I don’t know if it was ignorant, me being naive or just ready to go. I don’t know, but luckily it worked out.

Tony:
And Luke, obviously you’re in a unique position because you had this mentor, someone who had a lot of experience in real estate. And for a lot of the Rickis that are listening, you may not have someone like Luca that can hold your hand and guide you this process in real life right next to you, but there is a way to create your own board of mentors. And I think a lot of it starts with building the right team to support you. So for me, the folks that really helped me early on were my agents and my lender, and they were kind of my conduit to introduce me to the other people that I needed to meet. So for the Rickies that are listening, use the BiggerPockets Agent Finder, use the BiggerPockets Lender Finder to get connected with folks in your specific markets that are already working with real estate investors and can hold your hand to say, “Hey, you found this amazing deal, Luke.
Here’s who you need to go talk to you next.” So just trying to make sure that for the Rickies that are listening, you understand what those options are for you as well. So Luke, you find this deal. I guess give us the numbers on it. What did you end up buying it for and how did you know that it was actually a good deal?

Luke:
So they had it listed for 85 grand, I think. And after, I mean, I really just kind of took it upon myself to comp a property. So I went on Redfin and all the solds and I was kind of doing the whole shebang and I figured it’d probably be worth right around 120, 130, and it didn’t need much work for what it was, I mean, from the pictures I saw. So I figured my original plan was I was going to be the one to fix it up along with my mom, she helps us do stuff and my fiance. So I figured we could fix it up pretty cheap. I budgeted for 20 grand. And I was like, after listening to your guys’ podcast and to some other people, I was like, we could refi out and then move on to the next one. And that’s kind of how it went.
We ended up putting a little over 20 grand into it and we got it rented. I took it to the bank and they appraised it at like 135, 133, somewhere in there. And I pulled out as much as I could. I paid him off. We profited a little, took home a little less than 20 grand and we were off to the races, I guess you’d say.

Ashley:
That’s awesome.

Luke:
What a

Tony:
Killer first deal.

Luke:
Yeah. At the time, I didn’t know that because I had done so little research and stuff, but now kind of where I’m at now, it was a pretty good one.

Ashley:
So with that property, you ended up renting it out. What were the rents? What was the cash flow?

Luke:
Yeah, so we ended up … Now it’s rented for like 1,350 and it cash flows about 400 bucks a month.

Ashley:
That’s awesome.

Luke:
Yeah. Yep.

Ashley:
With no money into the deal. You pulled all your money back out.

Tony:
Yeah. Yep. It worked out great. This might be one of the best first deals, Luke, that we’ve heard on the podcast. You found it in a very unconventional way, messaging someone on Facebook. You had a private money lender line up the whole thing. You estimated 20K in rehab. You actually spent 20K in rehab, which isn’t normal. You refinance, pull cash out, and you’re still cash flowing several hundred dollars per month. That is amazing.

Luke:
Looking back now, it is pretty funny that it all worked out that way.

Ashley:
Luke, I have a question about your friend’s dad being the private money lender. Does your friend invest at all too, or is this just something that you’ve done? And I guess if your friend hasn’t, why hasn’t he with his dad’s help?

Luke:
No, he does not actually. And I don’t know why. Me and him kind of, once high school hit, me and him kind of went two different ways. He was a great lacrosse player. He went out. He actually won a couple national championships. Unfortunately, came from a little different family and I went right to work after high school. So I think we just kind of had different mindsets. I think he’s kind of back in town now and I’m sure he’ll eventually get into it. But I also kind of … His dad helped me. I mean, to this day, I love him and I call him my dad, but he built his portfolio brick by brick, cash, save up cash for the next house, no banks involved, no nothing. So when I started kind of going this route, it quickly turned into him calling me crazy. So that was the one and only deal we’ve ever done together.

Ashley:
I just find it interesting because my story started out very similar where I started working for my childhood friend’s father helping him with his real estate as a property manager. And he was my first mentor, but my first deal I actually partnered with his son, so my friend growing up and we did our first deal together. And my pitch was like, look what your dad is doing. We should do that. We’re going to take a real quick break, but when we come back, Luke, I want to hear more about your journey and how you were able to scale so quickly to 35 units in two years. We’ll be right back.

Dave:
As a real estate investor, the last thing I want to do or have time for is play accountant, banker, and debt collector. But that’s what I was doing every weekend, flipping between a bunch of apps, bank statements, and receipts, trying to sort it all out by property and figure out who’s late on rent. Then I found Baselane and it takes all of that off my plate. It’s BiggerPockets official banking platform that automatically sorts my transactions, matches receipts, and collects rent for every property. My tax prep is done and my weekends are mine again. Plus, I’m saving a ton of money on banking fees and apps that I don’t need anymore. Get a $100 bonus when you sign up today at baselane.com/bp. The Cashflow Roadshow is back. Me, Henry, and other BiggerPockets personalities are coming to the Texas area from January 13th to 16th. We’re going to be in Dallas, we’re going to be in Austin, we’re going to Houston, and we have a whole slate of events.
We’re definitely going to have meetups. We’re doing our first ever live podcast recording of the BiggerPockets Podcast, and we’re also doing our first ever one-day workshop where Henry and I and other experts are going to be giving you hands-on advice on your personalized strategy. So if you want to join us, which I hope you will, go to biggerpockets.com/texas. You can get all the information and tickets there.

Ashley:
Okay. Let’s get back into the show with Luke. So Luke, you’ve had your first successful Burr that you completed. What is the next move for you? What did the next couple deals look like?

Luke:
We kind of just kept the ball rolling with the next one. I found, honest to God, another house off Facebook Marketplace.

Tony:
What market are you in, Luke? We didn’t mention that. What market are you in?

Luke:
I’m in a small market outside Rochester, Syracuse area of New York. We’ve kind of stuck to smaller towns, and I don’t know if that plays a difference, but I’ve bought quite a few deals off Facebook Marketplace. We kind of went, walked it, same deal. It was disgusting. So this was a lot different where we were going to be getting into some real rehab on this one. And I bought it for 40 grand. We put another 40 into it and at the end of it, it ended up appraising for 145. So that was another great one. But it was a lot of learning lessons along starting to work with contractors because after that first deal, I didn’t really mention, but halfway through it is when I started building some relationships with contractors, with guys that do stuff because I got about a month in to me doing the work after I work.
And usually I don’t get out. We usually start working around 5:00 AM. I work till five, six o’clock at night. So by the time I get over there, it’s seven and actually productivity-wise, you’re probably only getting an hour and a half of work done at night. And after about a month of that, I sat down with my fiance and I’m like, “This isn’t going to work. This isn’t scalable. This isn’t repeatable.” And I’m miserable. This sucks. And so we started finding people. So then they kind of finished up that first one for us and then we kind of rolled them into this next one and immediately that didn’t work out. So I was on the hunt for contractors. I found some more. They came in and we ended up doing the property pretty decent. They weren’t the best to work with, but it was kind of one of those things where I couldn’t be too picky because we had the house and we had to get it done.
But yeah, we ended up getting it done. We rented it out to an attorney and that come to find out cashflow a good $40 a month. When I ran my numbers, those were not the numbers I budgeted for. I thought I was going to be like the other one around three, 400 bucks a month. And I had made some mistakes. I missed a couple. This was a different town and taxes were way higher for whatever reason. And I skipped it, honestly. It was just me not kind of doing my due diligence. So that was kind of an eye opener to where we got it rented, I was pumped, it was an attorney, she was great. And then we started kind of paying everything. And after a few months, I’m like, this thing is … We ended up turning that one into an Airbnb now, actually.

Tony:
Interesting. So you guys pivoted the strategy a little bit. And since you made that transition, what has the cashflow looked like on that one?

Luke:
That one on average does like a thousand bucks a month.

Tony:
Yeah, that’s amazing. All right. So to take it from 40 to 1,000.

Ashley:
What a drastic change in cashflow by transitioning that strategy. How much more did you have to put into the property to furnish it and things like that?

Luke:
Not much. I mean, we only spent like five grand on getting … It’s a small little two bedroom, so we definitely went the cheap route, but I mean, it looks great and it does really well in the area. It’s the number one Airbnb.

Tony:
You said something that was pretty amazing. So we got to pause in this, Luke, because you said that you were netting 40 bucks per month as a long term. You transitioned to short term and it went from 40 to 1,000. So that’s an additional $960. And I’m breaking down my calculator here. That’s an extra $960 per month in profits, right? So 960 over 12 months is $11,520. You said the investment to get that additional revenue is only 5,000. So if we take our profit of 11,520, divide that by our investment of 5,000, we get a cash on cash return of 230%. The reason why I point that out is because there are a lot of people who are listening that already have properties that much like yours aren’t meeting their initial projections, but instead of focusing on buying the next deal, sometimes you can get a much better return by reinvesting into the properties that you already own.
And that is an amazing proof of concept because you invested 5,000 bucks and got a 230% return. Could you have put that money into a different deal and gotten a 230% return? Probably not. But going back to your story, Lupe, because I think it’s amazing, I just want to make sure I have your stats right. 35 rentals, 13 flips, AKA monthly cashflow in two years.

Luke:
It’s not entirely correct because we have a few things that are under contract to sell and buying, but it’s right in there. Yeah.

Tony:
Generally speaking, right?

Luke:
Yeah. Yep.

Tony:
So I think the biggest thing is, I can’t even wrap my head around that level of activity in such a short timeframe. So how were you able to scale so quickly? What was the secret sauce that allowed you to move at such a rapid pace?

Luke:
I think it was a mixture of just my mindset mentality and kind of really reflecting on the deals we’ve done and kind of looking at those, how we did them and how can we do them again. So I was just kind of going back to where we’ve originally talked and where I was in life, I was ready to get out of it. And I’m the type of person that once I kind of reached that point, I don’t care. I will go and I’ll make it work. And so I kind of had that mentality. And then once I did the first deal with my buddy’s dad there, I learned that that was an option. And then obviously exploring all the forums and YouTube and podcasts and stuff, learning about private money, different ways to get money. I actually went out and joined our local country club to try and network, and that’s where I found a couple of the guys that I do all my deals with now.

Ashley:
What a great idea. I know our local country club, I mean, it’s out on the sticks, but it’s like a hundred dollars a year for a social membership. If you don’t play golf and you just want to go and be a social member, what a great investment.

Luke:
That was kind of where our head was and that was why we joined. I like to golf, but I didn’t need to necessarily join the nicest place in town, but me and my fiance kind of talked about it and we figured it would probably be good for business and it definitely has been.

Tony:
Luke, let me ask. So you joined the country club. First, what was the cost?

Luke:
It’s like 3,500 bucks a year.

Tony:
Okay. So not a small expense, but definitely not a major expense either.

Ashley:
But that’s what somebody would pay on a mastermind.

Tony:
Yeah, exactly. Or even more than that in a lot of situations, right? So 3,500 bucks for the year, you join, you’re a member now. How do you go from, I signed up to getting to the point where the folks who are in this country club are actually lending you money because are you just going in there handing out your business cards saying, I’m Luke, give me your money, I’m Luke, give me your money. What do the actual conversations look like?

Luke:
Well, so luckily for me, I kind of have a foot in the door because I’m very good at golf. So when I go and sign up for leagues or tournaments, everybody wants to be on my team and that’s not cocky at all. It’s just-

Ashley:
No, no, no, no. I love the honesty of it.

Luke:
Just the reality of it.

Tony:
Yeah. It would be the literal opposite for me. No one would want me on their team if we were golfing because I am terrible. So I’m glad you had that working for you.

Luke:
Yeah. And that’s kind of how I’ve met so many people because I started to get random text messages like, “Hey, there’s a tournament going on next Friday. Would you want to go? ” So because of that, I’ve just met the biggest roofer in our town. I know him. I have a cell phone number now, so he does all of our roofs. I met a guy who owns a couple big fence companies, so they do our fence. I mean, just all these relationships that have come of it, it’s worked out great.

Ashley:
Tony’s literally looking up golf lessons right now.

Tony:
Not golf lessons, but I am looking up our local country club right now to see. I’ve never even looked into it before.

Ashley:
But how cool to take something that you enjoy doing, that you love doing and turning it in a way to network and to make those connections.

Luke:
And that’s just kind of what I did. Whenever we play, I just would make a point of talking about what I had going on. And I’ve learned that guys with money, everyone kind of thinks the same. Everyone’s trying to make money with money. So they hear of a young kid who’s hungry, who’s doing deals. They’re not afraid to throw them a hundred grand.

Ashley:
And you’re good at golf, so you must be trustworthy.

Luke:
Yeah, of

Tony:
Course. I guess Luke, one final question on that piece, was it a very direct ask on your part after you had built these relationships to go to some of these folks and say, “Hey, you know I’m in real estate. I’ve got this deal. Let me know if you’re interested.” Or was it more, I guess, kind of the inverse where they were like, “Hey, Luke, if you ever have anything, let us know. ”

Luke:
I work with three main guys now and two of them came to me. And then the first guy, I actually printed out the entire deal, I brought it to his office where he works and we kind of sat down and went over all the numbers and I kind of sold them on the deal. And since then, now that it’s been a lot easier now that I have stuff going on and people know what I’m doing. And that was the biggest thing I preached to anybody I talked to was I wouldn’t ask for any money that I couldn’t pay you back, whether this house burned up in flames. And I truly meant that and I truly would never borrow money unless I had a way of getting them paid off in other deals or in other equity lines I have. So being very open and honest about the numbers and kind of where I’m at.

Tony:
And then in terms of structuring these deals with the various partners, was it all private money? Were there equity partnerships and how were you actually structuring the relationships on these different deals?

Luke:
So we do a very basic, depending on who I work with, it’s either 10 to 12%, and it’s just a flat 10 to 12% interest, whether I have the money out for a month or a year. And I always cap it at a year. So that’s how I’ve done every deal. I haven’t done any equity positions yet. I’m looking at some bigger deals that we’re trying to possibly talk about that. But as far as everything I’ve done with them, it’s kind of been smaller stuff where we buy it, we go in, we fix it up, either sell it or refi them out and get them out of it pretty quick.

Ashley:
Now you mentioned some bigger deals and you’ve got your rentals, you’ve got the flips that you’ve done. So what are these bigger deals that you’re looking at?

Luke:
Obviously, I just closed on a 18-unit mobile home park.

Ashley:
Congratulations.

Luke:
Thank you. Thank you. That’s been a pretty big learning curve.

Ashley:
Is that in New York? You did close on it in New York?

Luke:
Yeah. Yeah. It’s like 45 minutes away, so pretty local. And we have a couple larger apartment complexes that we’re looking at as well, but nothing official on those.

Ashley:
So let me ask, when you’re looking at these bigger deals, what has been the difference between looking at the single family properties you’re buying to rent or flip compared to the due diligence per se on a larger multifamily property?

Luke:
Oh, it’s leaps and bounds different. I’m learning now that, so I don’t want to sit here and act like I know what I’m talking about because I don’t feel like I do. Well, yeah, there’s just so much that goes into them. So many more tenants and I’m in New York, so there’s so many tenant laws and I’m learning for this mobile home park. There’s also a seven unit apartment building on the mobile home park that’s condemned that we’re starting with. And one of the apartments, we’re kind of doing our walkthrough and all of their stuff was still in there, but they were gone and supposedly moved out. Well, come to find out they did move out, but all their stuff’s there, but in New York, technically I still have to go through an eviction process. If I don’t, they can sue me for getting rid of their stuff.
So it’s kind of like one of those things where I wouldn’t have thought that’d be a big deal. I wasn’t told about the tenant. I was told it was a condemned building by everyone I talked to, Co, the previous owner, and now come to find out we might have to go through this process.

Ashley:
Which do you even know where to find the tenant to serve them or anything?

Luke:
I got a number, so I got to make a few phone calls and hopefully I can offer them a little money and get out of there.

Tony:
So look, super excited to hear about this 18 mobile home park property that you just purchased. I think the biggest thing for Ricky’s that are listening is probably the thought of how do you actually put the funds together to buy something this big? So what approach did you take to buy this mobile home park? Was it creative financing, seller financing, private money? What did you do to take this deal, deal?

Luke:
Yeah, so this deal was very odd situation how the whole thing happened. It was actually, I saw it for sale on Craigslist about a year ago, actually.

Ashley:
And we go from Facebook Marketplace to Craigslist.

Luke:
Even worse. So I talked to the guy, I talked to him for a few months and it was always odd conversations with him. It was just, he was super squirrely. There’d be one week where he’s like, “I need the money. I need the money. Let’s sell it. ” And then I wouldn’t hear from him again for a couple weeks and same kind of cycle. And eventually I just kind of gave up on it, moved on. And then a couple months ago, I saw it listed on the MLS and I’m like, and they wanted a ton for it, so I didn’t even bother. Kind of moved on again. And then I was talking to one of the guys I do deals with and he was kind of talking about how he’s foreclosing on a property up in Addison. I’m like, “Is that? ” And I asked, and sure enough, it was the same deal.
He was actually holding the note for this mobile home park. So I started kind of talking to him. He gave me the whole rundown. It was not the best situation, a bunch of back taxes, a bunch of back utilities. Nobody’s gotten paid in years and the whole town wanted him out. So I kind of talked with the seller, I kind of talked with the lender and I kind of was the middleman trying to wheel and deal and kind of wisdom my way in there. And so the agreement I came up with, the lender was if I could get him to just sign the property over me, can I just assume the debt and you’ll start getting paid and we can all move on. You don’t have to worry about going through a foreclosure process and he already knows I’m good for it. So he’s like, “If you could talk him into it, that’s fine by me.
” So then the next couple months were just me and the seller kind of going back and forth for basically what extra he was going to pocket on top of a sub of the debt. We ended up agreeing on him not getting a dollar. So at closing, I came out of pocket, no money, and I completely assumed the debt. We’re going to defer payments for a year while I fix the whole property up so I don’t have to worry about mortgage payments. The trailer park cash flows quite a bit of money on its own without the seven unit building in the front. So by the time I’m actually going to have to start making mortgage payments, everything should be up and running and it should be a really, really good deal.

Tony:
So Luke, you don’t have any partners on this deal. You didn’t even necessarily raise any private money for this deal. You just assumed the note and came with $0 out of pocket?

Luke:
Yeah, exactly. I actually got paid 50 grand at closing because I had him bump the note up an extra 50 grand so I could start rolling some of that into renovations.

Tony:
Luke, you might be the best real estate investor we’ve ever interviewed, finding deals off of Craigslist and Facebook Marketplace. And I love the story, man.

Ashley:
This guy just got burned for years from this other person and he’s willing to give you an extra $50,000 to take this property.

Tony:
Imagine going to a bank and saying, “Hey, bank, give me $50,000 to take over this note.” Oh

Luke:
Yeah. And if they saw a picture of the property, they would’ve laughed at my face too.

Tony:
Luke, I got to take you with me in my negotiations moving forward, man, because you got the gift of gab or something going on there, man. Oh,

Luke:
No. No, I think I’m just lucky.

Tony:
Well, we’ve got to take our final ad break, but we’ve got a little bit more to get into here with Luke. But while we’re gone, make sure you guys are subscribed to the Real Estate Rickey YouTube channel guests and find us @realestatericky, and we’ll be right back after the short break.

Ashley:
Okay. Welcome back from our break. We are here with Luke. So Luke, before we wrap things up, I want to touch on your W2 job. So you were able to actually move your fiance out of her normal W2 to run the business with you. So maybe touch on what she’s helping you do in the business and then also what your plan is to be able to quit your W2 job.

Luke:
I want to preface that. None of this would have been possible without her. And I also, my mom used to work for UPS. She would load boxes on the trucks and she quit and she now works as well. So those two are kind of full-time during the day, which allows me to still work and pay the bills. And I’ve yet to take $1 from anything we’ve made. It just all goes right back in. And the only thing we’ve paid is just my mom and her and the Airbnb has covered that. So it kind of works out great and so we kind of split the roles where my mom kind of handles project management, I guess you’d say. And then Mal takes care of all the tenant issues, all the legal document Payments, she’s extremely, extremely type A. So it works out amazing for emails, calls.
I don’t have to worry about a thing. If I need something, there’s an Excel spreadsheet that is updated by the hour and I’m not like that at all. And I think without her, we really would be in a mess because our numbers would be kind of … I like to be in the front, kind of pushing forward, finding deals. And then luckily she’s able to keep everyone organized. And my mom’s really got good at talking the contractor jargon, so it’s kind of worked out well.

Ashley:
And then what about yourself? What’s the plan for you to eventually move out of your W-2

Luke:
Job? That’s kind of where my biggest, I guess, hurdle would be right now. It’s just, it’s obviously a scary thought leaving a good job that pays all the bills and allows us to do this. I have worries if I do it too soon, it might really hinder us being able to continue to grow. But also I know how productive I can be. So I could only imagine if my two, three hours a day working was 15. So it’s kind of one of those things where I’m nervous on it. I don’t really know how I should pay myself. I’m afraid to take money from the business. I don’t like the thought of it. And so I guess that’s just kind of where I’m at currently, is trying to figure out exactly all the logistics. Do I want to up my flipping? Do I want to just pay myself off of flipping?
Should I worry about growing cashflow to get to the point where all my bills are covered and then I can just not worry from that? And so it’s kind of currently where I’m at with everything.

Tony:
Yeah. If I can give you my recommendation, Luke, I think there’s a couple of things. You’ve built an expertise in a few areas already. The flipping to generate large chunks of cash, which is great. Obviously, you’re really good at finding deals in your market that are undervalued and then stabilizing those properties to generate cash flow. And your ability to raise money to fund these deals. So you’ve got three massive skillsets, flipping for big chunks of cash, buying, renovating for the cash flow, raising money to fund all of your deals. So you’ve got all of the pieces in place, I think, to lay that foundation to get you to step away. I think if I were you, the two things I would focus on are one, getting your personal reserves to a point where you’re comfortable. And what that comfortable is, what that number is going to vary from person to person.
Maybe for you, it’s six months of your living expenses. Maybe it’s two years of your living expenses. Whatever the number is, just decide for yourself. What number do I want to have in the bank? Not business reserves, but for Luke personally, to cover my mortgage, my groceries, my bills, my fund, just my life. How much do I want to have set aside? Then get your cashflow to a number to say, okay, well, if I know my living expenses are X, maybe you want 2X in cashflow because there’s going to be ups and downs. You’re going to want to make sure you have money set aside. So I think if you can tackle those two things, getting your personal reserves in place and then getting your cashflow to a point, again, whatever threshold you feel makes the most sense. But if you can check both of those boxes, then it’s like, okay, well, I’m almost losing money at this point by not going into the business full-time.

Luke:
I guess when you put it that way, I should probably quit tomorrow. Well, there you go, man.

Ashley:
Well, Luke, thank you so much for joining us on this episode of Real Estate Rookie. Where can people reach out to you?

Luke:
I’m not huge on social medias, but you can look me up on, I mean, Instagram is luke_tetro, Facebook. It’s Luke Tetreau and- And Luke,

Tony:
How do you spell your last name for folks?

Luke:
It’s T-E-T-R-E-A-U-L-T.

Ashley:
I’m Ashley and he’s Tony. Thank you so much for joining us on this episode, Real Estate Rookie, and we’ll see you guys soon for another episode.

Ashley:
We’re closing out the year with one of our most popular episodes because what better time to plan your financial freedom than right after the holidays? This is the Real Estate Rookie Podcast, and I’m Ashley Kehr. As you unwind from Christmas and start thinking about what you want 2026 to look like, this rerun with Dave Meyer is exactly what you need. Most investors go into the new year saying they want to build wealth, but they don’t have a clear plan, timeline, or number. They just stay stuck. In this episode, Dave walks you through how to define your financial goals, calculate your freedom number, choose the right strategy, and reverse engineer your real estate game plan. Before January hits, take an hour to map out what your future could look like. Financial independence isn’t a dream, it’s a math equation. Let’s get into the episode.

Dave:
Hey everyone. Welcome to the BiggerPockets podcast. I’m Dave Meyer. Thank you all so much for being here. I want to ask you all a question to start this episode, and I want you to be honest. How many of you actually have a specific financial goal? I’m not just talking about, oh, I want to be financial free. I’m talking specifically like I want $10,000 a month in cashflow by 2035. How many of you have that level of goal? I think if we’re all being honest with each other, it’s like basically none of us, maybe 2% of you have actually gone out and done this. And that’s okay. It took me probably eight years of investing in real estate and being really into personal finance before I figured out that I really mattered whether or not I had a financial goal thickly. And that might be okay at the beginning of your investing career to be perfectly honest.
But if you want to build a portfolio of low risk, high upside investments over a sustained period of time, you need to have a plan, you need to have a strategy, and in order to have that, you need to have good goals. And so today, what we’re going to do is talk about goal setting and how to do it the right way. I’m going to break this down into three really actionable parts and you all should just follow along. I’m actually going to break out the whiteboard and show you some really simple tools like actual things that you could do either as you’re listening or later today when you go home. Go and actually do this so that you have these financial goals, especially as we head into a new year, you can have these specific goals and build a plan backwards from those goals.
The three parts we’re going to go over are first, the long-term goal. And this is the most important. We’re going to spend most of our time here figuring out why you’re doing this in the first place. Where do you want to be 10 years from now, 15 years, 20 years? I know everyone has this vague notion of being wealthier or having more time. That’s not good enough. What you need is a specific goal, and I’m going to help you get that today. The second part is defining a one-year goal because once you’ve figured out the long-term vision, then you need to sort of back into more achievable, more actionable things that you could do in the next year. And then part three is a three-year vision. So we’re going to do long-term big picture, then one year, then three years. And as you’ll see, even though very few people have actually done this, it’s really not hard.
By the end of this podcast episode, you’re going to have these three numbers. And I promise you, it will help you a ton as you formulate your strategy as an investor. So let’s get into it. First up, we’re going to be talking about our long-term financial goals. And there’s basically two different questions that I want you all to answer by the end of this section here. Number one, how much money do you want? And number two, this is the one that people miss is when do you want it by? The key to doing this the right way is finding something that is tough. You want to be a little bit uncomfortable. You don’t want to be, “Oh, for sure I’m going to be able to hit that number.” But you want to feel like if I execute my plan well, if I am diligent, if I work hard, I’m going to be able to hit that number.
That’s sort of the magic balance that you’re looking for here section. So these are the first concepts. The first question is, how much do you want to have? And the second question that we want to answer here is how long? Those were the two things I said. So let’s start with how much. There’s different ways that people can answer this. You could answer this through net worth. You can answer it through cashflow, through your portfolio. For me, the way that I think about it is the after tax money that I need to support my lifestyle. So I recommend that people think about it this way, after tax income, because all of us are going to be taxed differently. Real estate has a lot of tax advantages. So if you’re using real estate for your lot of your income, you might not need to earn as much as you would in a normal job because you’re going to have those tax advantages, which is why I prefer this after tax income thought.
Now, for those of you who don’t have a budget or don’t really understand what your spending is right now, that’s probably a good place to start. I would recommend you have a budget or go onto your banking app. It doesn’t need to be super complicated. Most people, if you have online banking, go and look at your online banking and figure out what your average spend is per month. And this is a great place to start when you’re figuring out what you want your income to be. And I want to be clear that you can’t just make this number up. You could, but I don’t recommend it. It would be easy to just say, again, I want $30,000 a month in after tax income. That’s a ton of money. And maybe you do aspire to that. And if you’ve thought about this hard and come up to that number, that is okay.
But there is risk in overshooting here because if you say 30,000 and all you need is 20,000, that means you might work in a job or build your portfolio longer than you actually need to. We want to find the balance of getting what we want out of our lifestyle and making the most time for ourselves. And so if you’re working unnecessarily to achieve an income that you don’t actually need, that kind of goes against the purpose, right? And so I really recommend just starting rooted in what you’re actually doing today. Now, I expect for some people who are listening and watching the podcast right now, they might be okay with their current income. If you are established, you like your lifestyle, that’s really all you have to do is figure out your budget and average spend if you’re comfortable staying at this level. If you are not and you want to expand your lifestyle in some way, I would just say try and be specific about that.
So if your budget right now is $5,000 a month, I wouldn’t just randomly say $10,000. I would just spend 20 minutes thinking about the things that you would want that you don’t have now and how much more that costs. It’s really not that hard. I actually have, as part of my book, Start with Strategy, there’s a Excel file that goes through this and that actually helps you calculate these numbers so you can do that or you could just do it on a piece of paper, honestly. It’s not that hard. So I’m going to assume that our budget and what we want is $7,500 per month, but there is one more advanced move that we need to do, right? We want $7,500 a month in today’s dollars. And I know this is going to get a little bit nerdy, but this is, I think truly the number one mistake people make in setting their financial goals is not accounting for inflation.
This is a big picture stat, but the value of your dollar on average gets cut in half every 30 years. Just think about that for a second. So if you are near my age, I’m 38 years old, I probably will be retired at 68, hopefully. In 30 years, if I was making $10,000 a month, it would be the equivalent of having $5,000 a month today. Now this is a big problem that a lot of people face in retirement and I don’t want all of you to face that problem. So I want you to adjust upward your goal to account for inflation. For us in our example here that we’re following along with, our goal is going to be $10,000 per month. We’re going to adjust up for inflation from 7,500 because we want to make sure that our spending power stays at that $7,500 level well into the future.
And in the future, you’re likely to need at least $10,000 to be able to do that. I’m not doing this in a very precise way. I’m doing $10,000 because that’s a nice round number, but adjust upward your goal to account for inflation. That’s the main thing here. So that’s step one in figuring out how much you need is what actually you need to fund your lifestyle. Step two is going to come where we figure out what our equity goal is in our real estate. So we need a real estate equity goal because even though the way that you’re going to replace your income long term is through cash flow, I personally believe that it’s easier to think about this by thinking about how much equity you actually need. Now, I’m not one of those people who doesn’t think cashflow’s important. I only buy deals that cashflow, but I am not focused on cashflow early in my career because what I believe and what I know based on all of the analysis I do is that the best way to have cashflow later in your investing career is to have a lot of equity.
Once you have equity, once you have money, cashflow is super easy. So I’m going to extrapolate our goal out from, we had $10,000 a month, but for this calculation we need to do annual. So what I’m going to do is say that we want $120,000 per year in cash flow. And then the next thing I need to look at is what cash on cash return do I realistically believe that I can get 20 years from now? And I know that’s hard to project, but it’s got to be somewhere between five and 8%. I’ll tell you that. That’s the number you should be picking. I like 6%. I think we’ll be able to do better than 5%. 8%’s a little bit higher. This is not deals that you’ve held onto for a long time saying, you can go out and buy off the MLS, you can buy an apartment building and get this number.
This is equivalent to what anyone who’s familiar with commercial real estate would call a cap rate. And so I believe 20 years from now, I’m still going to be able to buy six caps, and that’s a 6% cash on cash return. So all I’m going to do is divide my annual goal of 120,000 by 6% cash on cash return. And what I know from that is that I will need $2 million in equity to be sure, pretty much 100% sure that I could get the cash flow I need at the end of the day. So for me, this becomes my goal as a real estate investor. I’m sitting here in 2025 thinking, how do I get $2 million in equity by the time I want to retire? This is obviously just one example. If you said you wanted, I don’t know, $150,000 a year in income, but you’re a little bit more conservative and you think that you could only get a 5% cash on cash return, then you’re going to need $3 million, for example, in equity.
Or if you only need $100,000 and you’re more confident that you’re going to be able to get an 8% cash on cash return, what does that come out to be? That’s $1.25 million. So whatever these numbers are for you, this is the financial goal I want you all to come up with. How much equity does your portfolio need to be worth? And I’m not saying the value of your properties. That is not what I’m saying. It’s the equity you actually own in those properties. That’s what you need to be calculating. So if it’s $2 million, $3 million, $1 million doesn’t matter, figure this out for yourself. Okay. So now we have answered question number one. Remember we started by saying, how much do you need and how long? We now know how much. We’re going to use $2 million as our example and we’re going to get to how long now, which is what we call your time horizon.
And this is super important thing that not a lot of people think about, but your time horizon is really going to dictate your investing strategy. I’m going to explain that more right after this quick break. Welcome back to the BiggerPockets Podcast. I’m Dave Meyer going through how to set good quality financial goals that will help you formulate a great investing strategy heading into 2026, and honestly, for the rest of your investing career. Before the break, we talked about just needing to know how much you want, and I recommend thinking about that in terms of equity. There’s a couple of steps to that as a reminder. Figure out the after tax income that you want, adjust it for inflation, divide it by the cap rate you think you can get, and that’s going to get you that equity number that you want. We’re going to be using $2 million as an example.
Now the question then becomes how long? And this one is a little bit more of an art than a science because most people will just say ASAP, right? You want to be retired in three years or five years or seven years. And for some people, that might be realistic. If you were just trying to replace your income without any additional lifestyle enhancements, I would say that the average there is eight to 12 years. You could probably replace your income assuming that you have enough capital to buy your first property today. So I think a lot of people are in that situation. So eight to 12 years could be a good timeframe. That’s for doing pretty plain vanilla kinds of deals. If you’re willing to be a little more active, maybe take on a little bit more risk, which we’re going to talk about in a little bit, you can speed up that timeline.
But for most people, I think we’re going to be talking about something around eight, 10, 15 years. And they might feel like a long time, but I have been doing this for 15 years and I promise you it is really not that bad and it is so worth it. Taking 15 years to achieve financial freedom is amazing. I am sorry that people on the internet lie and say that they do this in three to five years. Maybe some of them do, but I promise you, the average person, it takes 10 to 15 years. Unless you want to take on a lot of risk or you’re pouring 60 hours a week into this business, 10 to 15 years, totally doable. You can probably do it in eight to seven if you’re going to be even a little bit active in your portfolio. So just think about that for yourself, where you’re starting out and where you want to get to.
I’m going to just assume for the purposes of our example that we’re going to start with, let’s call it $75,000 in savings that we can invest today, and that we want to retire within 15 years. Now, I understand that some people want to do it faster, and that is definitely possible, and this is the time to dictate that. If you want to go faster, you need one of a few things to happen. One, you need to be starting with a lot of money. I know that sounds really silly, but it’s true. If you have a million dollars, you’re probably going to be able to do it pretty fast, right?That’s a lot of money to start with. The second thing you could do is try and increase your income. I did this by deciding to go to a state school and go back to college for a master’s degree and try and increase my income to accelerate my financial freedom through real estate by making more in my day job.
Some people might want to do that. The third option is to do it through real estate. And I know this is a very common question on here, but it’s not required. But if you think that you could go and flip houses and make a ton of money, that might be something to consider. If you think you can wholesale in addition to your job, or you can wholesale and make more money than you do today, also a decent option. If you think that you would be a great real estate agent and would be able to make more money than your current job, that’s another way that you can do it too, some people. And then the fourth option is to do value add real estate investing. And so that would be, I think for the majority of people listening to this podcast, probably doing something like the BRRR method, because that’s going to allow you to invest in relatively safe rental properties, but also build equity at the same time.
And so just think about which, if any, of those things you want to do. If you don’t want to do renovations, you don’t want to change your job and you’re kind of just want to coast, that’s totally fine, but it’s going to take you probably 10 to 15 years. If you want to shorten that to let’s call it seven to 10 years, think about which of those things you can realistically do. Can you get more income or are you willing to put in the time and effort into doing things like the BRRR method to grow your equity faster? For the purposes of our example, I’m going to say that we have $75,000 to invest today and that we’re going to shoot for, let’s call it a 12-year time horizon. So that’s what we got. That is step one of our long-term goal. That’s all it takes.
I’m blabbing about and explaining this and we did this in like 15 minutes, right? So you can do this in your own time, take 10, 15, 20 minutes and figure this out. We know now that our goal as a real estate investor, the thing we need to be focusing on when we set our tactics, when we pick what deals to do, what markets to invest in, our goal is to have $2 million in equity in 12 years. That’s the goal that you need to set. And if you have this, I promise you, everything is going to get so much easier. It sounds so simple and it is, but everything will get easier if you start to think about your portfolio in this way. Now, before we move on to the one-year goal, which we’re going to do in a minute, just do a gut check and make sure that this sounds reasonable.
If you want to do the math, you could do that because I would recommend that. But if your goal is like, “I need $5 million in five years and I’m starting with 50 grand, I’m sorry, that’s just not going to work.” If you’re a rental property investor, you can expect your money to compound at somewhere between 10 and 25%, depending on how involved you want to be. If you’re just buying regular deals, 10% is probably 12% is probably where you’re going to be. If you’re going to do the Burr, you could probably do 20, 25, maybe 30%. And so think about that and see if you’re within that realm of possibility. If your goal is way bigger and you’re going to need to compound at 50 or 60 or 70%, honestly, you can do that, but you’re going to have to flip houses. It’s the only way you can earn those kinds of returns in real estate, and that comes with risk and a lot of time that doesn’t make it wrong, but that’s how you’re going to have to do that.
So think to yourself, is it worth it to me to do flipping and take on more risk and commit more time? Or should I just back out my goal a couple of years and take on less risky, less time intensive kinds of strategies? That’s totally up to you, but just think about that before we move on to our one-year goal. So that’s step one of your financial goal. And then we’re going to move on to our one-year goal because obviously having that sort of 12-year vision isn’t good enough. You need to start now backing into what you have to achieve this year to make sure that you’re on track for year two, for year three, for year four, and so on. So the place that you need to start for your one year goal is by doing something what I would call a resource audit.
And this sounds fancy and corporate, but it’s not. It’s just a question of how much time do you have to commit to real estate in the coming year and how much money? Everything comes down to these two questions, right? Our first year goal was what amount do you want? In what timeframe? Our one year goal is going to come down to those same sort of variables that we’re dealing with. Now we already answered the question for our example, which is $75,000. But for all of you out there, I really, really encourage you, if you haven’t done this yet, think about what are your investible assets right now, right? Investable assets are not your total net worth. It’s how much money you can responsibly put into real estate today. So let’s just use an example and say, you have $50,000 saved up. Now, you shouldn’t invest all of that.
You can’t invest all of that because budgeting experts say you need three to six months of emergency funds to weather a storm. We’re going into a difficult economic period, I believe, and so you probably want six months of emergency funds. And if you have kids, that might be even longer, that’s up to you, but you need to set aside some money. And so it’s not just the number in your bank account, that’s not your investible assets. What you need to figure out is how much money you can responsibly put into real estate. So figure that out for yourself. But for our example here today, we’re going to use $75,000 as an example. Now, time is another really important variable here because again, if I wanted to grow as quickly as possible, I would flip houses. That is the best way to earn a lot of money quickly in real estate, but I don’t have that time.
And the example that we’re going to use is going to say we don’t have that time. We though are willing to put in, let’s call it 10 hours per week for real estate, thousands. To me, 10 hours a week, you’re going to be able to do a lot in real estate investing. You’re going to be able to find great deals, you’re going to be able to do value add, you’re going to be able to self-manage, you’re going to be able to do a lot of things that you might want to do to maximize the early years of your investing or whatever, the next years of your investing, if you put in 10 hours a week. And so figure that out honestly for yourself though. If you don’t have 10 hours a week, be honest about that because if you buy a deal that requires 10 hours a week of a commitment and you only have five, you’re not going to operate that deal well.
And this is exactly why you have to go through this process because I see so many investors going out there and just buying whatever deal. They buy a short-term rental and they don’t have a lot of time to furnish it. And then it just winds up being kind of a crappy short-term rental and it doesn’t perform. And then what’s the point of doing that in the first place? So be honest with yourself about how much time you’re going to be able to commit, because that’s how we’re going to pick what deals that you should be doing in the next couple of years. So for me, if I’m trying to take a medium aggressive approach, which is what I recommend to most people, it’s like you don’t need to be really passive and really conservative. You don’t need to be super aggressive, but if you want to do things like a BER or cosmetic rehabs on rental properties, those are fantastic ways to pursue financial independence.
And the first, if you have 10 hours a week, you’re going to be able to do that. So think about this for yourself. Once you have an answer to that, I think sort of paths kind of start to diverge here because what your answers are are going to really depend on what you’re going to do in 2026. So I’m going to draw up actually a little quadrant here about the two different variables that we’re talking about. So on one axis, if you’re listening on the podcast, I’m drawing a quadrant. On the horizontal axis, I’m drawing time and on the vertical axis, money. And where you fall, in which quadrant, which box you fall in is going to really dictate what you should be doing in your first year. So if you’re low on time, but you have lots of money, so you’re in this first quadrant here.
What I would invest in here is I would think about rental properties because you don’t have a lot of time, you’re not going to be able to flip. So I would think about rental properties, low leverage because you have money and so you’re not going to need to put five or 10% down. So I’d say put 25% down. And then if you have time, I do cosmetic rehabs because you’re not going to have time to do a big rehab because again, you’re falling into this low time bucket. That’s what I would look for. If you’re just asking me and you fall into this bucket, you have money to invest, not a lot of time, buy rental properties, put 25% down, do a cosmetic rehab, don’t think that hard about it. This is going to work. Next quadrant that you go into is a lot of time and a lot of money.
This is obviously a good place to be in, but what I would do is heavy into Burr’s. If I had both time and money, that makes a lot of sense to me because that’s going to grow my equity as quickly as possible. But if I did a heavy Burr or heavy value add Burr, that is going to take up a lot of time. But if you have time and money, I would go heavy into these BRRS. The next one is high on time and low on money. The things that I would look to do are things like potentially wholesaling. I don’t have a lot of experience in that, but if you wanted to, this is a good way to make money. I would try and partner on flips and see if you can use sweat equity, or I know this is going to be controversial, make more money.
I know that sounds silly, but if you don’t have a lot of money, but you have a lot of time, go make more money, whether that’s doing a side hustle, investing in your education so you can increase your income to becoming an agent on the side. I don’t know, but if you can make more money with that extra time that you have, that’s probably going to be the best way to help your investing career at this point. So think about that. Then we go into the last bucket, which is low money and low time. This is a tough place to be, right? If you don’t have time and you don’t have money, real estate investing is going to be very difficult for you. And I just want to be clear about that. I know there are tons of people on the internet who like to say, you can get into this industry with no time, no money, I’m sorry, but that is not true or it is very, very rare.
And I don’t want to discourage you if you fall into this bucket because you can get from where you are today to becoming a real estate investor, but making a real estate investment is probably not the next step in your journey. What you need to focus on is one, either freeing up time so that you can do those other things I just talked about, or earning more money, spending time saving money. You can still educate yourself as an investor. You can save money and then invest maybe in a year or two because your goal is to get your foot in the door. And so if you’re in that fourth quadrant, figure out a way. Your year one goal is find a way to get your foot in the door. And when we get to our three-year goal in a little bit, you’re going to be able to have a little bit more exciting goal.
Don’t worry about that, but year one is going to be just getting your foot in the door. If you’re in these other quadrants, the way I would think about it is try and figure out one, how many deals you can realistically do and at what point. So if you’re in quadrant one, you’re doing these rental properties with low leverage, putting 25% down for cosmetic jobs, I would say maybe you could do one of those is a realistic goal. One deal at, I’m going to target a 15% annualized return. I do deals like that all the time. If I don’t have a lot of time right now and I find a decent deal, 15% annualized return, that’s fantastic. The stock market averages 89%. It’s having a good year this year, but 8 to 9%, if I can make 15% on a low effort deal, I’m pretty happy about that.
That’s just an example. That would be one goal I would say. If you’re going to do BERS, I would say maybe try and do two deals and try and get maybe a 40% annualized return because you’re going to be able to hopefully do a BER, maybe you do two of them. They take six months each, maybe they take nine months each. So let’s just say you get into two deals at an annualized rate. You might not realize all of that in one year, but just say an annualized rate of 40%. Or if I’m wholesaling and I’m in this third quadrant, remember that one is with low money, but high time, I would try and figure out how much more money you can make. How much can you save would be my year one goal. Not necessarily how many deals I can do, but if I’m in quadrant three and I have 20 grand, my goal would be something like $50,000 to invest next year.
I know that doesn’t sound as exciting as going out and buying a deal, but I promise you, if you save 50 grand, next year you’re going to be able to do a great deal and it’s going to accelerate your career probably faster than it is than trying to like get a little piece of a random deal or doing a really risky flip. That’s my honest advice. That’s what I would do if I were in that situation. Now going back to our example of having $75,000 to invest and 10 hours a week, I’m going for the BRRR. That’s what I would personally try and do. And so my goal, my one year goal would be two BRRS and then on my first BER, I think I’ll only be able to sell that first one or refinance that first one in the year. Maybe I’ll start my second one within one year, but realistically at 10 hours a week, I can only do one at a time.
So I’m going to think about, that’s probably a nine month project and I’m going to say, I want to earn at least 40% on that deal. I want a 40% annualized return on that first deal. That’s huge. 40% is awesome. That actually would come out to for $75,000. That’s a $30,000 return, right? So already in year one, we’ve gone from $75,000 in equity that we need. We’re trying to get to two million and we’ve already gone up to 105,000. If you’re able to do that, I promise you, you are going to be able to hit your goal and I will do the math for that. When we come back from this quick break, stick with us. Welcome back to the BiggerPockets Podcast. Now that we’ve done our long-term goal and our year one goal, let’s just extrapolate this out because you can basically do the strategies that I just said well into the future.
And I know, like I said, you’re going from 75,000 to 105,000 your first year. I hope that sounds like a lot because it is. That’s an amazing return. If you’re making a 40% return, you should be super happy. But I just want to extrapolate this out a little bit because there’s this kind of magical thing in math called the rule of 72. And this says that if you take the number 72 and you divide it by your rate of return that you’re earning, that’s how many years it will take your money to double. If you take the number 72, you’re earning on average an annualized return of 10%. It’s going to take you 7.2 years to double your money. Now, if you’re doing the BRRR or cosmetic rehabs, which is what I think The majority of our audience should be doing. I think hitting 24% annualized returns is very practical.
It’s not going to take so much time. You’re going to still need to be able to put in some work, find great deals. But if you can get, let’s just round it to a 30% annualized return. That’s going to take work. You’re going to need to do cosmetic rehabs. You’re going to need to do BERS to earn at 30%. You can’t just go buy a regular rental property and 30%. But I’m just going to show you, this is what I would do if I was starting with $75,000. I would just try and target this 30% annualized return every single year because I’m starting in year zero with 75,000. Then in year three, we’d have 150K. In year six, we’d had 300K. In year nine, we’d have 600K. See how this thing starts to compound? And then in year 12, we’d have 1.2 million. And then in year 15, we’d have 2.4 million.
So this is actually a really good example. I kind of set our goal arbitrarily earlier. I was kind of just coming up with this example as we go. And what I came up with is I said I wanted $2 million in 12 years. Well, now I’m looking at this and I’m thinking that’s probably a little unrealistic. In 12 years, even if I earned a 30% return, which is good, I would be at just $1.2 million in equity. That’s still a great place to be, but it looks like my time horizon is going to be closer to 14 to 15 years. That’s still awesome. I’m talking about being able to replace my income and earn $1120,000 in after tax income. That’s just 10 grand to spend every single month in 14 to 15 years. I’m just starting with 75 grand, which takes time to build up, but it’s not like you’re starting with a millionaire’s amount of money.
And I’m only putting in 10 hours per week into these deals. If you want to accelerate this, you can find ways to make more money and put more investible assets, save more money. Remember, this, what I’m doing right here, 14 to 15 years, assumes I put no new money into my investments. I’m taking the 75K and I’m just extrapolating that. But for most people, you’re going to be able to save money every month, put more money back in. That’s going to help you get to 12 to 15 years. But that’s what I want you to do at the end of this exercise is to be able to say, “Yeah, I gut checked this and I think that this is reasonable.” For me, I would say now at the end of this exercise, my long-term goal is $2 million. I’m actually going to say still in 12 years, because I said 14 to 15 years would take it with no new money into it, but I think I’m going to be able to add some new money into it.
So I actually do think 12 years is realistic. That is my long-term goal. My one-year goal is going to be, I’m going to round to 100K in equity. And my three-year goal, remember, I think that I want my money to double in three years. My three-year goal is going to be $300,000. That’s my example. This is what I want all of you to get to. Know these three numbers for yourself because once you do, you can already start to figure out what deals you should be doing. If these are my goals, I know that I can’t just go buy on- market MLS deals. I am not going to be flipping. I probably don’t want to do short-term rentals because although they can offer more cash flow, my goal is building equity. I know that my goal is building equity. And so that allows me to hone in on projects where I can do a BRRR or a cosmetic rehab for you.
See how this is already helping me set my strategy just by knowing these numbers? There’s so many great ways to make money in real estate, but I know my goals. So I know I’m going to do BERS and cosmetic rehabs and I’m going to look for a market where I can do that for my 75K because I have enough money to get into a deal. And so I’m specifically going to look for markets where I can put in $75,000. For me, that’s probably going to be somewhere in the Midwest or Southeast. If I put 25% down, I’m probably going to target a deal that is like $250,000 with a $50,000 rehab. Like that is something you can go out and achieve today. So I’ve basically backed into my buy box for next year. I know that if I want to hit my goal, I’m going to look in the Midwest for a Burr cosmetic deal that is in the 200 to $250,000 range with a $50,000 cosmetic rehab.
That’s amazing. So many people spend so much time trying to figure out what their buy box is, all these different strategies. I’m coming up with this example in real time, just using these numbers that I’m making up. I already was able to figure out my buy box just by backing into where I want to be 20 years from now. And this is why I say that knowing these financial goals is the number one key thing that investors need to do that most of them miss. Spend 30 minutes right now figuring out what these numbers are for yourself. And I promise you, your plan for the rest of 2025 and 2026 and the rest of your investing career is going to become so much easier. Now, I think in this podcast episode, I’ve given you enough to be able to do this, but if you like this concept and you really want to get a crystal clear vision of where you want to go in your investing career, I’m going to be a little bit of a pusher and recommend my book, Start With Strategy.
Literally, the whole book is kind of about this idea that if you set your long-term goals well, you can back into the right strategy. So if you want to go deep on this, you can check out my book on BiggerPockets. It’s called Start with Strategy. It’s also on Amazon, but hopefully this has been enough for you to just do this by yourself. The book is just for people who want to go a little bit deeper. That’s what we got for you guys today. If you have questions about this, please let me know. Or if you want to hear more content about this kind of stuff, we always talk about tactics and strategy, but I think this stuff is so important, which is why I wanted to do this episode today. If you want more content like this, please let us know in the comments or hit me up on Instagram or I’m @thedatadeli.
Thank you all so much for listening to this episode of The BiggerPockets Podcast. I’m Dave Meyer. I’ll see you next time. To just do this by yourself, the book is just for people who want to go a little bit deeper. That’s what we got for you guys today. If you have questions about this, please let me know. Or if you want to hear more content about this kind of stuff, we always talk about tactics and strategy, but I think this stuff is so important, which is why I wanted to do this episode today. If you want more content like this, please let us know in the comments or hit me up on Instagram or I’m @thedatadeli. Thank you all so much for listening to this episode of the BiggerPockets podcast. I’m Dave Meyer. I’ll see you next time.

Starter homes have become nonstarter homes for many Americans. Three-quarters of the homes currently listed for sale are out of reach for median-income earners, according to a recent analysis from Bankrate. 

The lack of buyers, however, is reshaping the investment landscape for small investors, who are buying up single-family homes in record numbers.

Affordability Is Slipping Away

Using the metric that standard housing costs should not exceed 30% of gross income (before taxes), according to Bankrate, the typical U.S. household earns around $80,000 per year, but would need to make around $113,000 to afford a median-priced house. This, according to brokerage Redfin, is about $440,000, a figure that varies markedly by city. With mortgage rates just above 6%, affordability is pushing buyers out of the market.

“The people who you know are finding homeownership to be easier either have higher income, or they have family members who can help,” Chen Zhao, head of economics research at Redfin, told Bankrate. “There are also those who bought a home before 2022. If you were part of that group, you got pretty lucky.”

According to the National Association of Realtors, only 24% of housing sales in 2024 were by first-time homebuyers. In 2010, the number was 50%.

“Only a sliver of the housing market is affordable to the typical household,” Bankrate data analyst Alex Gailey told CBS News. “That’s when homeownership starts to feel less like a common middle-class milestone and more like a luxury.”

Behind the affordability issue lies a severe lack of supply, which, according to investment bank Goldman Sachs, is short by around 3 million to 4 million homes beyond normal construction.

A Renter Nation Mindset

The affordability issue has been prevalent for the past three years, since interest rates first started to climb. Now, the renter nation mindset appears baked into many who have given up on owning a home. 

According to a study by Northwestern and the University of Chicago, Americans who were born in the 1990s “will reach retirement with a homeownership rate roughly 9.6 percentage points lower than that of their parents’ generation.”

A Pew Research Center analysis examined where younger Americans, aged 25 to 34, still lived with their parents in 2023. Unsurprisingly, expensive cities in Texas, Florida, and California showed the highest percentage of young adults living at home, with young men more likely to do so than young women.

Luxury Condos Aren’t Helping

Although adding new housing has alleviated the supply issue in some areas, particularly the Sunbelt, many of these new condos are too expensive for first-time homebuyers, who can do without a slew of amenities and luxury finishes that push the units out of the “starter home” price range.

The Renter Sweet Spot

For landlords to appeal to the vast swathe of renters unable to get on to the property ladder, they must speak directly to their wallets. 

In 2024, USAFacts estimated that the U.S. renter household paid a median of about $1,490 per month in rent, which equaled 32.8% of median renter income, though these figures varied by location. Mortgage trade publication Scotsman Guide, citing the Census Bureau, said that over half of all renter households (50.3%) are burdened by housing costs and spend over 30% of gross income on housing.

To work out how much a prospective tenant can reasonably afford, the simple rule of thumb for landlords is to multiply their gross monthly income by 0.3%. So if they earn $5,000 (before deductions), they should be able to afford around $1,500 in rent. For many landlords who ignore what prospective tenants can afford, the rude awakening of a vacant apartment, followed by a drop in rent, is a reality in many cities.

“Rent continues to fall in many of the major metros across the United States for a variety of reasons,” Joel Berner, a senior economist at Realtor.com, said. “The biggest one is that rent is still correcting itself from the dramatic run-up of 2021 and 2022, when several years’ worth of rent gains were seen over the span of a few months.”

Renting Is Still Cheaper Than Buying

Even if prospective tenants could afford the down payment to buy a home, renting is still cheaper than buying. Realtor.com quotes a median mortgage payment of $2,040 versus $1,693 for rent. Only a sizable drop in interest rates and greater supply will bring about some parity.

For minimum-wage earners, the situation is even more dire, with just five of the top 50 metros being affordable for those earning minimum wage. Escalating rents have not, for the most part, been due to small mom-and-pop landlords, who own the majority of rental housing in the U.S., but rather to corporate landlords.

Rents Are Down

“The corporate landlord invasion or the financialization of rental housing is the most significant factor fueling these rental housing challenges,” Dr. David Jaffee, professor of sociology at the University of North Florida and founder of Jax Tenants Union, told Realtor.com of his local market in Jacksonville, Florida. 

“Add on the rising cost of the other basic necessities, and workers will still be falling behind,” adds Jaffee. “At best, rents will stabilize at their already inflated levels.”

Overall, rents are down. Apartment List says the national median rent dropped 1% in November to $1,367, around $300 less than Realtor.com’s present-day figure, marking the fourth consecutive month of decline.

“That 18-to-34-year-old group … I think it’s up to 32.5% of those now are living with family, and that’s the highest it’s been in a while,” Grant Montgomery, CoStar’s national director of multifamily analytics, told CNBC. “I think it reflects high rental costs that have risen over the years, as well as the tougher job market for young folks just coming out of college.”

Strategies for Investors to Find Deals and Increase Cash Flow

For smaller landlords to compete with Wall Street for investments, the key is to be nimble, think outside the box, and act fast. 

These are a few strategies to employ. Some of these techniques have been around for a while and have run aground amid the inventory drop, but many buyers are still finding some success:

• Look to off-market deal flow: Run direct-to-seller campaigns (letters, SMS, door knocking) targeting absentee owners, older landlords, and properties with liens or code issues that are not yet on the MLS.
• Use data tools like PropStream to build lists.
• Work with specialized agents and wholesalers to find distressed or hard-to-sell homes.
• Use creative financing: Sellers of hard-to-sell properties may be willing to entertain seller-financing terms if it helps move their problem properties. Consider subject-to and conventional note-holding deals.
• Add ADUs to single-family homes: ADUs have been a game-changer for many people, allowing them to earn more income without altering the structure of an existing home. The good news is that Fannie Mae has broadened its financing options for single-family homeowners who wish to add an ADU.
• Other options to increase income include converting basements, attics, or garages into existing buildings, or renting by the room, so long as it adheres to code.

Final Thoughts

There’s no getting around the supply issue, but not every young adult has a parent they can stay with, and neither, for that matter, does an older adult always have a place they can afford.

Being a successful landlord in the current cash-squeezed environment means knowing how to compromise on rents by buying under-market, adding sweat equity, or adding additional units for minimal cost. The government is also bending over backwards to bring more housing to the market and has a number of different loan products worth investigating.

The best strategy is to live to fight another day and weather the current affordability storm, while making the most of tax advantages, equity appreciation, and loan paydown.

Dave:
Hey friends, it’s Dave Meyer, host of the BiggerPockets Podcast. I hope you are all enjoying the holiday season. To close out the air here on the BiggerPockets podcast, we’re republishing a few of our most popular episodes this year from across the entire BiggerPockets Podcast network. Today, it’s an episode of On The Market originally published back on October 30th. This show is me breaking down Zillow’s 2026 Metro level price forecast. So if you are curious whether Zillow thinks prices are going to go up or go down in your region of the country, or maybe you’re looking for a new market to invest in, or maybe you just want to nerd out with me because you love looking at which cities are trending up and down, the next 30 minutes has all of that. So enjoy and I’ll be back with fresh new episodes starting January 2nd.
Hey, everyone. Welcome to On the Market. Thank you all so much for being here. I’m Dave Meyer, and today sort of going back to my roots, this is one of my favorite things to study and talk about real estate markets. We’re going to talk about the regional trends that we’re seeing, the opportunities to be had, and the risks you probably want to avoid. You might already know this, but there isn’t really such thing as “the real estate market.” On the show, we cover the national market a lot because it’s helpful to understand some big macro trends, but what really matters most to your actual portfolios, to the profits that you’re actually generating is what’s happening on the ground in your local market. And of course, we cannot cover every market in the US and today’s show alone, but in this episode, we are going to do a deep dive into housing prices into different regions, different states, different cities across the US, and help interpret what it all means.
We’ll start with just talking about what has been going on in 2025 and what we know about regional markets as of today in October 2025. Then we’re going to talk about this sort of interesting and fascinating paradox that’s going on in the investing climate right now. Next, we’ll talk about rent growth and how regional variances there should factor into your investing decisions. Then we’ll even talk about forecast because we just got brand new forecast showing where prices are likely to go by city across the US into 2026. And lastly, I’ll just go over my thesis about markets in general and just remind people what I recommend you do about all the information that we’re going to be sharing in today’s episode. Let’s do it. We’re going to start with the big picture. You’ve heard this on the show a lot recently, but everything is slowing down.
That’s what’s happening on a national level. Of course, we’ve seen regional differences across the years, but the main thing I want everyone to know is even the markets that have been growing the last couple of years, these are your Northeast, your Midwest, places like Milwaukee and Detroit and all across Western New York and Connecticut. They are still up year over year in nominal terms, but their growth rate, which is something we’re going to talk about a lot today, is slowing down. And in case you’re not familiar with the difference, when I say the growth rate is going down is that maybe last year Milwaukee was up 7% year over year and now it’s up 3% year over year. So still positive growth, but the amount of growth is less and the trend continues to go down. That is the big broad trend that we’re seeing pretty much everywhere in the United States.
And just to hammer home this point, I want to show that in previous years, well, obviously during the pandemic, we saw places with 10, 15% year over year growth. That’s not normal. Actually, normal appreciation in the housing market is about 3.5%. And so what we’re seeing now is the hottest markets are now at normal. For example, I call that Milwaukee. That’s been a really hot market the last couple of years. That’s now at 3.2%. Detroit’s at 3.7, Rochester, New York at 3.2, Hartford, Connecticut, which has been on fire at 4.2%. So I’m not saying that there’s no pockets of higher growth. I’m just showing that these years of abnormally high growth appear to be over in almost every market in the United States. There are obviously smaller markets, but I’m talking about big major metro areas and almost all of those are now at normal or below average for growth.
And as we’ve talked about in recent episodes where we talked about the difference between nominal, not inflation adjusted prices and real prices, we are also seeing that almost every market is negative in terms of real prices. Inflation right now is 3%. And so any market where prices are up less than 3% nominally, you could argue is actually down because it’s not growing as fast as the pace of inflation. So that’s where we’re at right now with the hot markets, but obviously there’s the other end of the spectrum too. And I hate to pick on Florida, but when you look at what is going on with Florida, it really is getting pretty bad. I am pretty measured, I feel like about these things. I have not called for a crash the last four years like everyone else has, but what’s going on in Florida specifically is getting to that territory in some areas.
You see in Punta Gorda, for example, it’s down 13% in just a year. Cape Coral is down 10% in just a year. And we’ll talk about forecasts in just a little bit, but they’re not forecast to get better. And when I’m looking at a map right now as I talk, it’s from Zillow. It just shows basically what’s happened year over year in all these markets. And a lot of states are a mixed bag. Even states like Texas, which has a lot of declining markets, a lot of them are just kind of flat. And there are still some markets that are positive. There are pockets of good. That’s not happening in Florida. Florida has been just hit by so many different things, whether it’s the oversupply issue, the insurance cost issue, the special assessments going on with condos there, the overbuilding issue. There’s just so much going on there that I think it would be safe to say that Florida is on a statewide sort of crash watch.
It’s not there yet, but I think there is a decent chance that we will see double-digit losses across the state of Florida from the peak of where they were to the bottom where they will eventually bottom out, but I don’t think we’re close to that right now. Other areas of weakness, like I said, are Texas and really along the Gulf Coast with Louisiana seeing pretty weak areas too. Arizona has also been struggling. And then on the West Coast, it’s kind of just all flat. There are some markets in California that definitely aren’t doing well. There’s some that are mildly up. Same thing’s going on with Oregon, same things going on with Washington, Idaho. All along there, you’re kind of seeing just a mixed flag of mostly flat stuff. I want to also just talk quickly about a recent report that I saw from realtor.com talking about the hottest markets in the US because realtor.com, they can look at this stuff in real time, which properties are getting the most listings, have the shortest inventory, shortest days on market.
And so they put out this report for the hottest markets in the US. And I want you all to think about what the common thread is while I read off a couple of these things and we’ll talk about it. Number one, Springfield, Massachusetts, then we have Hartford. So again, Hartford hottest growth last year, still really hot. Kenosha, Wisconsin, Lancaster, Pennsylvania, Appleton, Wisconsin, Wassaw, Wisconsin, Racine, Wisconsin, Rockford, Illinois, Beloit, Wisconsin, Green Bay, Wisconsin, all in the top 10. Then we have a couple others. I’m not going to read them all, but in the Northeast, like Manchester, New Hampshire, Providence, Rhode Island, Worcester, Massachusetts, Milwaukee, all of this. So what do you notice about these markets? Well, yeah, a lot of them are in Wisconsin. Wisconsin is on fire right now. But what I notice here and has been my thesis about the housing market for, God, years now, is affordability.
All of these markets, all of the markets that are still doing well, that are still hot, are relatively affordable. Meaning the people who live in that market can afford to buy homes. It’s not like you need inbound migration or you need massive amounts of job growth right now. It’s just that regular people who are gainfully employed in this market can go out and buy a home. Those are the markets that are doing well, and I believe it’s the markets that are going to continue to do well. And you might be thinking, wow, the Northeast is very unaffordable. Why are you calling those markets affordable? It’s all relative because even with a generally expensive region like New England or the Northeast, there are more affordable options that are hot right now. For example, New Haven, Hartford, Connecticut, New London, Connecticut. All these places in Connecticut, why are they so hot right now?
Well, they’re directly between Boston, an enormous economic hub that is very expensive, and New York City, an enormous economic hub that is very expensive. So if you’re looking to live in this region and maybe you only have to go into the office a couple of days a week, Connecticut is looking like a very attractive option because it is relatively far more affordable than these other options in the Northeast. That’s why I say it’s all about affordability. Providence, Rhode Island been a very, very hot market the last couple of years, same with Worcester, Massachusetts. And yeah, the median home price in those markets is way above the national average at $550,000, but it’s not Boston where the median home price is over $800,000. So to me, what’s happening is it’s all about relative affordability. And this is a really important takeaway because people say things like, “You can’t invest in the Northeast or California or Washington state.” Well, clearly there are pockets of places that are growing.
And I am not saying that affordable markets are going to be completely insulated from the correction that we’re in because I believe a lot of these markets are going to decline, but affordable places in my mind are going to see the least dramatic dips in the coming years. So look at Austin. That is an awesome market, but it got way more expensive for the average person who lives there over the last couple of years, combined that with supply issues and you see a big correction. Same thing went out in Boise, same thing going on in Las Vegas. And actually that brings us to the next thing I wanted to talk about, which is the other side of the coin. We just talked about the top 20 or so markets that are the hottest right now. What about the coolest? Or if you want to frame it in positive terms, you could call it the strongest buyer’s market in the United States right now.
Number one, I didn’t even plan this, but is Austin, Texas, shocking, shocking, where you are in a place where sellers outnumber buyers by 130%. This is wild. Think about this. So this is a report that came out from Redfin and it shows that right now in Austin, there are 17,403 sellers right now. How many buyers are there?
7,568. That’s a difference of nearly 10,000 buyers. There are 10,000 buyers missing in Austin right now. So if you want to just peek ahead to what we’re going to talk about soon about where these prices are going, in a market like that, they’re going down. See similar things in Fort Lauderdale where it’s 118%, West Palm Beach, Miami, Nashville, San Antonio, Dallas, Jacksonville, Las Vegas, and Houston. Those are the top 10. So pretty much all in Texas and Florida. You also have Nashville and Las Vegas thrown in there, but those of the biggest markets in the country are seeing the biggest imbalances right now, which means buyers have the most power, but prices are also likely to drop. And this situation actually brings up this kind of interesting paradox that’s going on in real estate right now where there are some really good markets that are in deep corrections.
So does that make that a really good opportunity or a lot of risk? We’ll get into that right after this break. Stay with us. 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. Check out fundrise.com/pockets to learn more. The Cashflow Roadshow is back. Me, Henry, and other BiggerPockets personalities are coming to the Texas area from January 13th to 16th. We’re going to be in Dallas. We’re going to be in Austin. We’re going to Houston and we have a whole slate of events. We’re definitely going to have meetups. We’re doing our first ever live podcast recording of the BiggerPockets Podcast. And we’re also doing our first ever one-day workshop where Henry and I and other experts are going to be giving you hands-on advice on your personalized strategy. So if you want to join us, which I hope you will, go to biggerpockets.com/texas.
You can get all the information and tickets there.
Welcome back to On The Market. I’m Dave Meyer going over some regional trends that we’re seeing in the housing market right now. Before the break, we talked about what’s been going on with prices. We talked about some of the hottest markets mostly in the Northeast and in Wisconsin specifically. We talked about the coolest markets, which are mostly in Florida and Texas. We had Vegas and Nashville on top of that. But I wanted to talk about this a little bit more because I think there’s this interesting paradox that’s been going on for a couple of years, and I think it’s just going to get more dramatic, which is that some of the markets that are experiencing the biggest corrections and are likely to go into further corrections are markets with pretty good long-term fundamentals. Austin, Texas, it gets picked on a lot because it’s been beat up for three years right now, but there’s still a lot of good stuff going on in Austin.
It’s still a very desirable place to live. It has good job growth. It’s the state capital. There’s a giant university. There are a lot of things to like about the Austin market. The same thing goes with Nashville, right? That’s been one of the hottest, most popular cities in the country. Dallas has a lot of great fundamentals. And the list goes on. I invest in Denver. It’s not on this top 10 list, but the same thing is absolutely going on in Denver where prices are going down a little bit. Rents are even going down in Denver, but it’s a city with really good long-term fundamentals. And so this is something I just think that you should consider as an investor. I’ll talk about this a little bit more at the end when I talk about what to do about this. But if you are an investor who is willing to take risk and wants to take a big swing, you’re going to be able to buy good deals in these markets.
Good deals are coming in Austin. They’re coming in Nashville. They’re coming in Dallas. I can tell you that. If you are looking at a market like Dallas where there’s 32,000 sellers and only 16,000 buyers, you’re going to be able to negotiate because for every single buyer, there’s two homes. So there is going to be tons of opportunity to negotiate. Now, of course, you’re going to have to protect yourself and you do need to take a long-term mindset because we don’t know when these markets are going to bottom out. But I do think this situation is going to become even more dramatic where I’m going to borrow word from the stock market, but some of these markets might become what you would call oversold. The supply and demand dynamics just shift in a way where prices go down probably more than they should. A lot of these markets do need to come down in terms of affordability, but I think you’re going to be able to find good deals in these markets in the next couple of years if you are willing to take on a little bit of extra risk to realize what will potentially be some outsized gains in the future.
Now, I want to turn our attention now to some forecasts for what is likely to happen over the next year because Zillow actually just put out their forecast for metro price changes between September 2025, September 2026. And I know people like to hate on zestimates, but Zillow’s been pretty good about this. They’ve been pretty accurate about their aggregate macro level forecasts, and it’s something I definitely look at. And what they’re forecasting is a lot more of a mixed bag. So we are going to see the Northeast and the Midwest that have been pretty good, still be pretty good. They’re probably still going to lead the country regionally, but it’s going to come a lot closer to flat in the next year. And they’re also forecasting that even the markets that are down, Austin, for example, they’re also going to come closer to flat. Just as an example, Zillow believes that the fastest growing market over the next year will be Atlantic City, New Jersey with 5% growth.
We have Rockford, Illinois and Concord, New Hampshire at 5%, Knoxville, Tennessee at 5%, Saginaw, Michigan at 5%. Fayetteville, Arkansas, shout out to Henry at 4.8%, Hilton Head, Connecticut, and then more places in Connecticut, but we’re getting some other places towards the bottom of the list. Jacksonville, North Carolina. We’re seeing Morristown, Tennessee. So a lot of places in the Northeast. They’re projecting that the Midwest cools down a little bit, but the Carolinas and Tennessee, which have been really strong for the last decade, but a little weak in the last year starting to rebound. Meanwhile, if you look at what they’re forecasting for the lowest performing markets, it doesn’t look good for Louisiana. The bottom five markets are all forecasted to be in Louisiana, Huma, Lake Charles, Lafayette, New Orleans, Shreveport. You skip a couple and then Alexandria, Louisiana, Monroe, Louisiana, all told seven out of the top 10 are in Louisiana.
The rest are mostly in Texas. We have Beaumont, Odessa, Corpus Christi. Then we see San Francisco, California, Chico, California, Punta Gorda, Florida. Mostly what they’re projecting is a year of more flatness. They’re not projecting most markets to go down by more than one or 2%. The majority of markets in Zillow’s forecast are between negative 2% and plus 2%. So that’s where Zillow thinks we’re going in. Most other forecasters don’t put out monthly forecasts like Zillow. That’s why I like this is they are just constantly looking at new data, taking it in and updating their forecast, whereas a lot of the other companies put this out annually. And so we will get a lot more forecast towards the end of the year, but this is the most recent one we have. And I do think it’s pretty reasonable. Obviously, they’re not going to be right about everything, but I think they’re generally in the right direction based on the other data that I’ve been tracking, inventory levels, housing dynamic levels across the country.
I think they’ve done a good job here. All right, we got to take one more quick break, but when we come back, we’re looking at rents and how that factors into the equation, regional differences there. And we’ll talk about what you should do about all this and how you should be making investing decisions based on this information. We’ll be right back.
Welcome back to On The Market. I’m Dave Meyer going over regional data that we’re seeing in the housing market. We’ve now gone deep into prices in the US. We’ve talked about what happened over the last year, what’s happening right now in the hottest markets, biggest buyers markets. And then we looked at Zillow’s forecast for what’s likely to happen over the next year. I want to turn our attention to one more dataset before we do the whole so what of this whole thing and talk about what you should be doing about this. And that’s rent because obviously this is going to matter a great deal in your own investing decisions. What we see over the last year is largely similar regional trends. There are some differences that we are going to talk about, but if you look at where rent growth has been the hottest, it has been in the Northeast and in the Midwest.
I’m looking at a map of it right now and they’re showing they’re using a color code where anything that grew is red. It’s all red. There’s no place in the Northeast or the Midwest, maybe one place in Iowa, but the rest are all positive. Meanwhile, if you look at the place where rents are declining the most, you see Arizona and the Phoenix area is bad. The west coast of Florida, which is just getting hammered, Denver, which I alluded to before, Houston and Dallas, and in places like Georgia and in Tennessee as well. If you want the official list, the fastest year-over-year rent change, this is going to surprise you guys. You are not going to guess this because it’s not in the Northeast and it’s not in the Midwest. Fastest year over year rent growth in the country goes to San Francisco, California at 5%.
It’s interesting because prices are going down there, but rents are going up. We also see Chicago at 4%. I am always boostering Chicago. This is why 4% year over year. Other rent growth, really strong in California, Fresno and San Jose, Providence, Rhode Island, Minneapolis, Virginia Beach, Pittsburgh, New York, and Richmond, Virginia. So not huge surprises there, but I didn’t expect San Francisco and Chicago to be at the top of that list. Meanwhile, the slowest year over year rent growth, this one doesn’t surprise me at all. Number one. Sorry, Austin, but you are taking the top spot again, or I should say bottom spot because negative 6.5% year over year. My own portfolio’s feeling it with the number two spot in Denver, Colorado, negative 5%. Then we see Arizona, Phoenix, and Tucson, New Orleans, and San Antonio at negative three and a half. And we have Memphis, Orlando, and Dallas as well.
Now, I’m calling this out because I think, again, there are some really interesting dynamics here. I’ll call out my own portfolio and just admit that I am seeing rent declines in my bad apartments. Any of my units that are really great, unique properties that have a lot of value, those are renting fine. Nothing has happened to those. But for example, I was just renting a basement unit. It’s just kind of a bad unit. I’ve tried renovating it. The layout just doesn’t work, but it’s a basement and I can’t move the walls and it just kind of stinks. And the rent has fallen there from 1,900 bucks a month to 1,700 bucks a month. That’s what I was just able to lease it out for. So that’s a pretty significant decline. I could have maybe held on longer, but I didn’t want vacancy, but that’s the kind of stuff I’m seeing in my own market.
Now, that worries me about buying in Denver right now because I am not really that worried about price declines, but price declines combining with rent declines, it’s not the best, right?That’s not exactly what you want to be investing in. Now you still can find pockets where things are growing, for sure. There are going to be neighborhoods and areas for sure. But if I’m just looking on a metro level, that worries me a little bit. Meanwhile, when you look at some markets like in California or in Washington, or actually a bunch of markets in Texas, for example, or South Carolina, we’re seeing this as well. Prices are flat to falling, but rents are still going up. And this is something that I feel like is lost in all this discussion about what’s happening in the real estate market right now, is that in some of these markets, arguably in many of these markets over the next two to three years, cashflow prospects will finally be getting better after years of getting worse.
We are definitely seeing this across a lot of the country, and I think it’s a trend that is going to continue. So I really recommend as we sort of move into our next section here talking about what to do about this, looking at these things in conjunction, because again, you can invest in a market with declining rents and declining prices, but you got to get a killer deal. You have to get a smoking deal for that to work. Meanwhile, if you’re buying in a market that’s flat, which I think is going to be the majority of markets for the next few years, I think they’re going to be relatively flat. If you’re buying in a market that’s flat, but rents are going up, that’s still a good deal to me. Obviously, you still want to try and get a great deal, but if you can buy something at a good price and prices maybe don’t appreciate for a couple years, but rents are going up, I still think that has a lot of upside potential, and those are the kinds of markets and deals that I would still personally be interested in.
So that is one of my takeaways, but just a couple other takeaways before we get out of here. I personally believe affordability is going to continue to drive market divergence. This has been the thing I’ve been harping on for years, and I’m sorry if you’re tired of me saying it, but it’s still true. I will be wrong about many things, but I have been accurate about this, that affordability is going to drive market divergence, and I think this is still going to be true. And I encourage you to not just look at home prices, but look at total affordability because again, people might look at a $550,000 home in Providence, Rhode Island and say that’s not affordable, but for people who live there who make good salaries and where the tax burden isn’t as high as certain places, it is relatively more affordable. And I think this is what’s happening to Florida right now.
Prices went up, insurance went up, special assessments went up. It is expensive in Florida right now, and that is a major reason that we’re seeing those corrections there. So I would really, if you want to be a conservative investor, and if you’re worried about price declines, I really think affordability is probably one of the two best ways I would look at data to try and mitigate risk. So affordability is one, the second one I alluded to a minute ago, which is supply. You need to look at places that are not going to have massive increases in supply. The reason we’re seeing bad conditions in Florida or in Nashville or in places in Texas because they’re also overbuilt. They are having the combined issues of affordability and too much supply. That’s why they’re seeing corrections. And so if you want to find places to invest, I think looking for places that are affordable with limited supply risk is probably going to be the lowest risk potential for deals over the next couple of years.
But I want to call out that that’s not the only way to invest right now because if you’re a buy and hold investor, it really is a question of preference because with bigger risk often comes bigger reward. If you want to take more risk and pursue more reward with your own investing, now is a decent time to do it. There’s going to be risk, but can you buy something in Austin 10 or 15% off peak? Maybe. What about in California? In Florida, you might be able to buy something 20% off peak. I don’t know for sure, but those kinds of numbers are intriguing. And of course you’re going to have to set yourself up so that you have cashflow, you have sufficient reserves so that you can hold onto that for a long time, but that is not an unreasonable strategy right now. I think we’re probably going to see institutional investors that have a lot of capital start to try and do these things.
Looking at markets like Nashville that have been super hot over the last couple of years, if they could start buying those at 10%, they’ll wait three or four years till the appreciation returns. Not saying this is for everyone, but that is an option that you have as a buy and hold investor. Now, I’m not saying just go and buy in any of those markets. Don’t just buy the dip. Don’t buy in Punta Gorda, Florida right now. One of the reasons Punta Gorda is going down so much is because it doesn’t have an economic engine. It was a lot of people moving during COVID for the lifestyle, which is fine, but when that pulls back, when there’s return to office, that market got hit. Nashville, Austin, Denver, these are places with very strong job markets, right? These are places that have a high quality of life that people want to live there.
And so if you want to take these risks, look for the ones that have these strong fundamentals like the ones I mentioned, and those can be decent options for investing right now. That’s buy and hold. I think flipping is going to be risky right now, especially in correcting markets. But an interesting thing happens in flipping during corrections like this where the price of distressed C class homes go down more than A class homes. And so actually sometimes you get a widening margin, so the opportunity for flipping actually gets better. You just have to prepare for your property to sit on the market for three months or six months instead of two days or three days like we’ve seen over the last couple of years. Last thing I want to say is that I think just generally over the next few years, we’re going to be going back to more normal regional variation because we’ve seen some very, very abnormal stuff over the last couple of years.
It is not normal for all markets to be going up all the time. It is not normal for any market to be growing more than 10% year over year. It’s not normal for most markets to be up over 7% year over year. This stuff that we’ve seen over the last four or five years is not normal. I think instead what we’re going to see is a move back to sort of this traditional trade off that has almost always existed in real estate investing, which is the trade off between appreciation and cashflow. I think Midwest affordable markets are going to go back to being better for cashflow. They’ll still have slow and steady appreciation, but I’m not Sure, we’re going to see this outsized appreciation for years in the Midwest. I think if you want to sort of summarize it, I’d say the Midwest is going to be easier doubles, harder home runs.
Then you look at these other markets like the ones we’ve talked about in Austin and Denver and Vegas and Phoenix, these are markets where you could take bigger swings right now. You might hit a home run, but you could strike out. So you definitely need to mitigate risk in those markets, but I think that’s sort of what we’re going to get to. So that’s what I would prepare for. And to me, that’s good. I want that. I would love to just see a market that we could say for the next three to five years, we’re probably just going to see normal three to 4% appreciation. That would be fantastic. We’re not there yet. We’re in a correction. We don’t know when it’s going to bottom out. But my hope is that because this correction exists because affordability needs to be restored, that once we’ve been in this correction for a little while, we can get back to a normal housing market on a national level.
And to me, that also means we’re going to return to those normal regional variances where markets that have strong economic engines, strong population and household growth are going to see the appreciation, where the other markets that are still good markets are going to be more cashflow centric markets and that’s okay. And as investors, if it becomes predictable again, we can absolutely work with that. I would love to work with that. Let’s all hope that’s what we see after this correction in the next couple of years. All right, that’s what we got for you guys today on On The Market. I’m Dave Meyer. Thank you all so much for listening. If you like this show or think that your friends would benefit from knowing some of this information, please share it with them. Thanks again. We’ll see you next time.

Ashley:
If you’re thinking about getting into real estate, you’ve probably asked yourself, “Where do I even start?” There’s so many strategies, house hacking, flipping, a burg, 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 this 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’m Ashley Kehr.

Tony:
And I’m Tony D. 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 because 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 cash flow, 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:
Yeah. 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 have 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 cash flow and now you’re 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 wanted 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 from 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. It’s 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 kind of lifestyle that you want to live. It kind of ties into that first piece of the motivations, but like 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’s 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 like 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, like you said, short-term rentals, right? The niche that I’m in, we have a hotel. 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 the lifestyle and the time that you have available to kind of 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 with 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 like, 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 W-2 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 investor? 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:
All right, 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. All right, 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 kind of 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. ” You 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 kind of 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 kind of 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, Ashley, 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 don’t know, 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’re 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 like a poor DTI or potentially vice versa.
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 like, how much debt are you comfortable taking on? I was like scrolling through Instagram and I saw, who was it? It was Robert Kiyosaki and Kim McElroy. They were like 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, 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?
Well, actually, that’ll 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 so 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 a lender. You need a lender, you can go to biggerpockets.com/lenderfinder 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 in tourist areas, but long-term rentals are great and good school districts.
So knowing your market saves you from picking the wrong strategy. So

Tony:
A couple of questions to ask yourself here is, what type of housing 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? Is your backyard landlord friendly? I think Ashley 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 like, “Hey, where you live, which way does it lean?” But even still, and just as an example, even if … I’m in California, Ashley’s in New York, both states that are definitely lean more so towards a 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 your own 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 Ashley and I both probably think is potentially the best way for 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’re renting out the basement. It could be a single family home and you have in an ADU. It 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 NACA, which I’ve talked about a lot on this podcast where you can get them for zero down. So really, if you want to make sure that you’re getting the best kind of bang for your buck, house hacking is, I think, one of the best strategies.

Ashley:
So another great strategy for building wealth is to do a BER. So this can kind of go two ways where you’re finding a property that needs to be rehabbed or you need 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. So for BER, 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. So to purchase the property, there’s many different ways to actually purchase a BER deal.
You could use all cash, you could use a HELOC, 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 BER 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’re investing into the deal. So one of the cons I will say for doing a BER 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 like 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’re 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 cap as to like 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 BER2. 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 BER over and over again.

Tony:
And Ashley, you make a lot of good points around some of the challenges around Burr’s, but my very first deal was a Burr. And the way that 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 Burr properties in this exact market. I had a contractor who had been in the market for a long time, became 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 forums 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/agentfinder, biggerpockets.com/lenderfinder, those are the ways you go out there and start building the right team of people to support you with this 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, lived several states away and found a great PM to help rent it for me as well. Third strategy, short-term rentals. Obviously, this is kind of my jam my niche, but basically it’s the Airbnbs of the world, right? So you get someone who comes in, saves for a couple of days and they go home. And then someone else comes in, says for a couple 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.
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 and 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 in your day job. So definitely a big benefit. Look up these short-term rental taxes 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 like 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 off 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 in the low end. I’ve seen it as high as like 35 or 40%.

Ashley:
I was just curious. I remember when Airbnb was super big and like 2021, like 30 to 40% really seems like very, very common. Do you see that coming down now as 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 like full short-term rental management and just like the co-hosting model. And I think the coasting 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 like 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 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 rehabbed 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 risks. 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’m 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 where somebody else is the operator, someone else is finding the deal, they’re managing the deal, they’re operating the deal and you’re 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 RealBricks. So this is like fractional ownership of a property. And so what you do is you basically can take $100 and you can go and invest it at RealBricks and you pick your property you want to invest in and you own a small ownership of that property. And I think the minimum’s a hundred, but you could really invest as much as you wanted up to a certain amount too.
So that’s another way to passively invest your money also.

Tony:
So 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 who are looking for cashflow, 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 fill in the last piece of the puzzle here, which is for all of you, Ricky, 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 after word from today’s show sponsors. All right, so we’re back.
We want to finish off by talking about some of the big mistakes that we see Ricky’s 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 unquote education and all of that quote unquote 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 kind of advice here is that if you are at the point where you’re 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 know 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 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. Like you talk to them on month one, they’re like, “Yeah, I think I wanted to be a flipper.” You talk to them on month two, “Yeah, I think I want to be self-storage.” Talk to them, “Oh yeah, I think I’m actually going to do ground of construction.” And you talk to them 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 Burring 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, one 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 fail 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 burs 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 like 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 is 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 learned 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.

Dave:
We have made it to the end of 2025, but the housing market continues to change and shift and confuse as it has all year. But today, we are going to make sense of it. This is our December 2025 housing market update. Hey, everyone. It’s Dave Meyer. I’m a housing market analyst and I’ve been a real estate investor for 15 years and I am the head of real estate investing here at BiggerPockets. And it’s hard to believe last housing market update of the year. It has been a truly wild year in the economy and the housing market. We started with one that was rapidly cooling, rates were in the sevens, things were feeling stalled out, inventory was going up. And fast forward to today, although it might not feel like much has changed, a lot actually has changed. I see it in the data wherever I look.
We are very much in a different situation heading into 2026 as we were in 2025. And honestly, I think there’s some good news here. There are good opportunities starting to emerge, but of course, there are risks that need mitigating too. We’re gonna get into all of that, both the risks and opportunities in today’s episode. First, we’re gonna talk about home prices. Then we’ll talk about some good news finally on housing affordability. We’ll get into a new trend that’s emerging with sellers and how they are trying to wrestle back control of the housing market. And we’ll end talking about underwater mortgages and this article that I keep seeing everywhere in the news these days. I will address head on if underwater mortgages is a potential risk to the market going into next year. That’s the plan for today. Let’s get into it. First up, major headlines here.
What’s going on with prices? Everyone wants to know. Well, according to Redfin, prices are up 1.4% year over year. That’s still relatively good. We are not in any sort of crash. I would still call that a correction because prices are down in real terms. 1.4% is a little bit flattish to me, but not bad given where we started this year. Remember when rates were at 7.25, inventory was up 30% year over year. Everyone was saying that there was gonna be a crash. I did not, just for the record. I said we would be kind of flattish and I think that’s where we are. Just as a reminder though, just one year ago, appreciation rates were still at 5%, which doesn’t sound like much, but that’s well above the long-term average of 3.5%. It’s well above where we are today. So it is important to note that we’ve had significant cooling and appreciation rates over the last years, but we are not talking about declines, at least on a national level yet.
That said, there are major regional differences going on. According to Zillow, 105 of the top 300 regional markets are in a decline right now. So basically a third of the biggest metro markets in the country are seeing housing prices go down. And that number, the total of markets that are seeing a decline has gone up a lot. If you look back to January, it was only 31 markets. And by June, it had more than tripled up to 110. But now it’s actually back down to 105, so this is treading water and staying flat, and that’s really important. Obviously, the markets that are in a correction, you’re gonna have to take different tactics in those markets than the ones that are still doing right now. But I think the fact that the number of markets that are correcting is relatively even shows some stability to the housing market despite everything that’s going on.
Now, the depths of those corrections are wildly different. If you look at Punta Gorda and Cape Coral, these are kind of the poster child for the Florida crash that’s going on right now. Punta Gorda down 13% year over year, that’s a lot. That’s a crash in that market. Cape Coral, down 10%. I think if you’re losing 10% a single year, you could call that a crash. I wouldn’t argue with you there. We even see all four actually of the top markets seeing declines, I guess you’d call those bottom markets, are all in Florida. Punta Gorda, Cape Coral, Northport/Sarasota, and then Naples. Those are the top four. After that, we see Kailua in Hawaii, Austin, and Texas. Then it’s back to Florida. Then we got Tampa, Sebastian, Vero Beach, Daytona, Port St. Lucie. So 12 of the biggest corrections in the country, 12 of the top 14 are all in Florida.
So you can see that it’s highly concentrated there. The other trends are in the Gulf region. So Texas, uh, Louisiana are, are also seeing some of the bigger corrections. And then they’re sprinkled throughout the countries as well. Like there’s definitely markets in California. You see some markets where I live in Washington and Denver. Uh, there’s definitely corrections too, but like if you’re just looking for the trend, the Gulf region is where it’s mostly concentrated. On the other end of the spectrum, no surprise here, Midwest is still seeing some of the strongest, uh, appreciation rates, but those rates are coming down. So Chicago, you see Milwaukee, you see Cleveland, you see these markets are still up, but they’re now up like two or 3% instead of last year, six or 7%. So everything, appreciation rates are slowing down all across the country. So let’s move on to mortgage rates as this is going to be a very important barometer for next year.
It also tells us a lot about what’s been going on this year. This has been a positive story. I know people are not happy with six and a quarter percent mortgages, but they should be because a year ago, they were about 6.75. If we look at January, they peaked out at seven and a quarter. Now, they’re at six and a quarter. A 1% drop in mortgage rates over the course of a year is good news. That is a positive thing for the housing market. This is one of the reasons why the market has shifted this year. Like I said, we started 2025. People were very worried about a crash because mortgage rates were 7.25, horrible affordability, inventory’s going up. Well, maybe it’s not the banner mortgages that we saw during COVID, but the fact that rates have gone down, one full percent matters. That brings millions of people into the housing market.
That improves affordability for investors and for homeowners. And so that’s a really good thing. Where we go into next year, I’ve made my predictions about this. They will hopefully stay in the low sixes, maybe even get into the high fives. And there’s some encouraging signs about that, right? If the Fed keeps cutting rates, that could put more downward pressure if yields keep falling. The other good news, if you’re into this kind of thing is that the spread between treasury yields and mortgage rates is coming down, which is one of the things that has propped mortgage rates up. So I think there’s good momentum here that mortgage rates could keep coming down a little bit, but are probably not gonna be coming down in any dramatic way, uh, unless something dramatic happens in the economy. One thing I did wanna call out for real estate investors, just a piece of advice is that refinancing is starting to get a little bit more attractive.
I think when you go from seven and a quarter to six and three quarters, like people aren’t really that interested, but when you lose a full percentage point, depending on the price of your house, that could be hundreds of dollars per month in cashflow that you could be generating or saving if it’s your primary residence by seeing rates come down this much. And I know people might say, “Oh, Dave, you said rates could come down a little bit more.” You could wait. But I just wanna call out that just in this last year, there’s some data that came out from the mortgage monitor that comes out from ICE each month. They said that 3.1 million more mortgage holders are sort of in the money for refinancing over the last couple of year because they could reduce their rates by 75 basis points. I thought that was pretty interesting.
I didn’t know that math before, but if you can cut your rate by three quarters of a percent, so 0.75%, that usually makes it worthwhile for most people. And so if you are holding onto mortgages right now that are in the sevens, if they got a seven in front of it, if they got an eight in front of it, because investors might have one with an eight in front of it, you may wanna consider refinancing right now. You could wait a little bit, but things bounce up and down. Like it’s hard to know. I actually got a message on Instagram yesterday from a guy who said that I saved him $800 a month. I guess he has an expensive mortgage. I think he lives in LA. I saved him $800 a month because I told him to refinance before the rate cut because I said that mortgage rates were gonna go back up and they did, and apparently that saved him a whole bunch of money.
So I just wanna point out that waiting doesn’t always work and, uh, considering refinancing might be worth it. I think it’s at least worth talking to a banker if you have a mortgage with a seven or eight in front of it, something to consider. So I think high level housing market stuff, this is relatively positive. We need affordability to improve, and so seeing relatively flat prices, in my opinion, is pretty good. I don’t wanna see prices crash, but I don’t wanna see them explode again. I wanna see them stay stagnant. That’s really good. And mortgage rates have come down. They’re starting to come down a little bit more. I think that’s a great way to end the year in 2025 and bodes well for the beginning of 2026. We need to talk more about affordability though, because this is what everything in the housing market hinges on.
And we’re gonna talk more about new data on affordability right after this quick break. We’ll be right back.
Before the break, we talked about flat home prices, declining mortgage rates. What those two things mean though, when you take those two things in aggregate, they give us what I think is the most encouraging sign that we have seen in the housing market for a year, maybe more, maybe three years. Home affordability has hit its best level in two and a half years. That’s as of September, last time we have data for this, but this is fantastic news for the housing market, and it is driven by the two things that we talked about before the break. Rates are easing and prices are pulling back. Now, I know I said that prices are up 1.4%, but when it comes to affordability, what you need to measure is how do prices compare to inflation? And if they’re up 1.4% year over year, but inflation’s at 3%, they’ve actually gone down in inflation adjusted terms, and that means that it is more affordable for people, right?
Their wages are going up relative to the price of a home that makes housing more affordable. If you combine that with falling mortgage rates, we are getting improved affordability. This is great news. This is something I think is worthy of celebrating. Now, it is not the best affordability we have ever seen. It is far from it. We just, in the last year, we’re near 40 year lows. So we’re probably at 38 year lows for affordability. This is not like we should be celebrating because all of a sudden housing is affordable. We should be celebrating because you gotta start somewhere. The trend was moving in the opposite direction for so long. Housing was getting less and less and less affordable. That’s not good. It’s gotta bottom out, right, and start moving in the right direction. And fortunately, I think that’s the direction we’re heading. So that is good, right?
We are seeing that across the board. If prices stay flat or ish, decline a little bit, like I think they will next year, mortgage rates come down a little bit. That’s the affordability movement that we need. This is the whole premise of the great stall that I’ve been talking about for months or years now is that this is the most likely path for the housing market, and it does seem that it is true, at least as of now. So I think that’s a good thing. Just to build on this a little bit more, actually, out of the hundred largest markets in the United States right now, 12 of them, primarily in the Midwest, have now returned to long run average for affordability. I know that doesn’t sound like a lot, 12%. It really isn’t a lot. But given where we’ve been over the last couple years, where every market has been unaffordable, the fact that there are any markets in the US that are getting close to historic levels of affordability, again, is good news to me.
I know we have a long way to go, but baby steps, and we’re taking some baby steps getting there. Now that we’ve talked about affordability, let’s call it our main story for today on, on this housing market update is about the behavior of sellers in the housing market. This is really important to inventory because the story of this year in 2025, and really, honestly, for 2022, 23 and 24 has all been about what is happening with housing inventory. It is so important. It is the most important metric for really trying to understand where the market is today and where it might be going in the next couple of months. Because when inventory is high, prices face downward pressure. They might be flat, they might go down a little bit, but you have that downward pressure weighing on housing prices because there are more sellers than buyers.
When the opposite is true, when inventory is low, prices have upward pressure, right? There are more buyers and sellers. They tend to bid up the prices, and so prices tend to go up, and that’s how inventory influences the market. Now, during the pandemic was an extreme example, an example of super low inventory. But when we started 2025, we were starting to see that story unravel where we were seeing really high inventory growth rates. Now, inventory wasn’t high in some historical context, but the growth rate was up, like we saw in January, February, March, 25% year over year, meaning that in January of 2025, there was 20, 25, 30% in some markets, more homes for sale than there was in January 2024. That matters. That’s a big number. I’d like to call out that we, on the BiggerPockets Podcast, we’re not panicking and saying that the market was gonna crash like everyone else was saying, but it puts downward pressure on pricing and it’s something that is really important to watch because if you listen to the Crash Bros, the people who are calling for a whole crash in the housing market, they were saying, “Oh my God, look, inventory is up 25% year over year.
Next month it’s gonna be 40. Next month it’s gonna get 50 or 60.” And yes, that of course is feasible. But did that happen? No. If you fast forward to today, we are not seeing accelerating inventory. We are not seeing inventory spiral out of control month over month over month. Actually, we are seeing the opposite. If you fast forward today and look at the numbers for October of 2025, the most recent data we have for inventory, it’s not up more than 25% year over year. It’s not gone up beyond where it was in January, February, March. The opposite has happened. In fact, right now, in October, inventory was up just 4% year over year. So the growth rate in inventory has not exploded. It’s actually contracted. And not only has the growth rate slowed down, but we are still below pre-pandemic levels of inventory. If you look at what Redfin shows us, we are about 200,000 homes short in inventory of where we were in October of 2019.
So this is under control. This is a crucial thing for everyone to understand about the housing market because it’s one of the reasons why I think we’re gonna see roughly flat pricing next year, maybe a little down nationally, and it’s one of the reasons why I’m not super concerned about huge drops in the market right now. But let’s just take a minute and talk about where inventory might go, because there’s different ways that inventory changes, right? One way inventory drops is that demand picks up, right? If there’s the same amount of homes for sale, but more people wanna buy them, we’ll have less inventory because those homes that are for sale are gonna move quicker. The other way that inventory can drop is that new listings go down. That’s basically the number of people who choose to sell their property, that can actually go down, and that’s actually gone down quite a bit, right?
New listings, people are saying, “Oh my God, people are panic selling. Sellers are flooding the market.” No, they are not. That is just objectively not true. New listings are flat year over year. Don’t listen to any of that nonsense that you might see. People are calling for panic selling like, “Oh my God, everyone’s freaking out. ” No, that’s just not true. New listings are actually up 0.4% year over year. It is completely flat and that shift is not just one month that has been happening for the last couple of months. The big thing that has changed though, it’s not demand, it’s not new listings. The change that is happening right now is what’s called de- listings. And this is a new metric. We don’t talk about this a lot on the show, but it is important right now because de- listings, which is defined as just a property that was listing for sale that was pulled off the market for more than 31 days without selling or going under contract.
And the reason I’m bringing this up is because this is one of the new dynamics that’s kind of emerging and shaping behavior in the sellers, in the housing market. Basically what’s going on in mass is that sellers are looking at the current market. They’re seeing that sales conditions are not as good as they have been over the last couple of years, and they’re just saying, “Nah, you know, I’m kinda out on this one. I’m gonna wait this one out and see maybe if there’s better conditions for listing, or I’m just gonna stay in my property. I’m not gonna sell it. I’m gonna rent it out for another year, another two years, I gotta keep living here, whatever.” That trend is really high right now. Actually, home de- listings is at the highest level it’s been since 2017, and this increase in de- listings helps explain why prices are rising despite sort of tepid home buying demand, because inventory is falling because of this.
Remember, new listings are flat. If de- listings go up compared to new listings and demand stays the same, that means that we are getting more balanced supply and demand dynamics. Another reason why this is a sign of a correction, not a crash. If we look at the behavior of selling and what they’re doing right now, it is completely logical. If they are not getting the prices they want, if they don’t want to drop price and they don’t have to sell, they’re just choosing not to sell. And if you dig deep into this data, you’ll see that the areas where de- listings are going up the most are the areas where their strongest buyers market, where basically the areas where it’s the worst time to sell, that’s where people are de- listing the most. Now that makes sense, right? If you don’t like selling conditions, then you de- list your property.
And that’s why I say this is a normal correction because what the crash bros say is, “Oh my God, when inventory goes up and it becomes a buyer’s market, people panic and add more and more inventory to the market.” The exact opposite is happening. People say, “Oh, this is not a good time to sell. I’m not gonna panic and list my property for sale. I’m actually gonna just take my property down off the MLS and not sell it. ” This is what happens during a normal correction. It’s sellers reacting to selling conditions and saying, “I don’t want any part of this. I am going to de- list my property.” So just as an example, the markets with the highest percentage of de- listings are those markets that are correcting. It’s Austin, Miami, Fort Lauderdale, Dallas, Denver. Again, what you would expect because it’s logical. Now, of course, there is a big question mark here.
Is this just temporary, right? Are people just taking their properties off the market for a couple of months and then they’re gonna list them in the spring and we’re gonna all of a sudden get a flood of inventory? So far, we have some data on this and the answer is no. So far, only 20% of properties that have been de- listed have come back on the market, which in my opinion is pretty low. I was kind of surprised by that. But I do think that’s probably due to seasonality, right? Like no one is gonna de- list their property in September or October and then be like, “You know what? I’m gonna relist it on Thanksgiving weekend or right before Christmas.” Like, if you were gonna de- list it, you’re probably gonna wait till at least January or maybe you wait to sort of the hot months of March or April where there’s typically the most seasonal home buyer activity, you might choose to do that.
My guess is yes. I think we will see an uptick in re-listings in the spring. I think we’ll see that number go from 20% to something higher, maybe 30%, 40%, 50%. ‘Cause I personally know investors who are doing this. A lot of flippers, right, are saying, “You know what? It’s cooling off right now. I’m gonna wait and take my chances in the spring.” I think we’ll see more and more of that. But flippers make up a relatively low percentage of all the homes that hit the market. If you wanna understand the broad trends, you have to figure out what’s going on with home owners, right? Traditional homeowners, and we just don’t know right now. I personally, just, just my guess based on vibes of the market, I think re-listings will go up, but it won’t go up to 100%. I think some people are choosing to say, “You know, maybe I should stay in my existing home or I’ll rent this property back out.
” It really depends on what happens for homeowners. If they start seeing, “Hey, I can move at a better rate and affordability is getting better,” they might move. If not, they’re probably gonna stay in their homes. But this is something that we definitely need to watch because as I said, the housing market is gonna be built on affordability and inventory. These are the things that we watch most closely. Talked about affordability getting a little bit better right now. That’s great news. Inventorying, leveling out, depending on who you are, you might like this or not like this, but it is gonna provide some stability to the housing market. I think it provides that floor for where prices could fall. It can’t fall that much if de- listenings are happening. They can’t fall that much if inventory is leveling out. And so that to me, again, points to a correction, not a crash.
But there is one other thing we gotta look at. If you wanna understand how far the market might fall or where it’s gonna go, you need to look at distress, right? Because distress, foreclosures, delinquencies matter a lot when prices start to go down. And we’re gonna dig into the newest data that we have on that market stress, including into that article. Everyone keeps sending me that there are now 900,000 mortgages underwater. We’re gonna talk about all that when we come back from this quick break. Stick with us.
So far, we’ve talked about affordability improving. I love it. It’s great news. It’s wonderful for the housing market. We’ve talked about inventory starting to stabilize. Another good sign that the market is not in free fall. But the last thing we need to cover, which we’ve been covering a lot over the last couple months, is market stress. We talked about inventory dynamics and why it’s not supporting the idea of a crash on a national level, but of course, things can change. And we wanna know if the solid sort of foundation of the market could come undone. And to this, we need to look at market stress. And I cover this stuff a lot more than I used to because there’s just so much noise about market crashes that I feel it’s important for me to reiterate that if the market crashes, markets can crash, but there are warning systems in place essentially in the data, right?
We would see some of these things coming, unless there’s a black swan event, right? There could always be a COVID, a nine eleven, something like that that no one sees coming and causes the market to crash. I just wanna say those things are always possible. But all the people out there on social media screaming about a housing market crash, they’re all pointing to inventory and demand drying up. I just need to say those kinds of things we have data for, and I’m gonna go through it with you right now. First, let’s talk about mortgages being underwater, because there was some article that came out that said, I think it was in MarketWatch or something, 900,000 homes are now underwater on their mortgage. And that sounds scary. 900,000, that’s a lot. It’s one and a half percent of all mortgage holders, which may not sound like a lot, but, you know, that’s a reasonable percentage of the housing market when you’re specifically talking about distress, right?
You know, like those things can snowball. So is this a big deal? No, not really. Like, I don’t think so. To me, this honestly doesn’t matter that much. I know a lot of people are going to disagree and get mad about this, but hear me out, right? Mortgages being underwater is not a disaster. It is not an emergency. It is something that happens quite frequently. Anytime price is correct or drop in the housing market as a whole, some mortgages are going to be underwater. You haven’t heard this term, underwater just means that you owe more on your loan than the house is worth. So if you went out to sell that property, you would have to come out of pocket to pay back the bank or you’d have to go through a short sale. And that sounds terrible because it’s bad. It is bad. I am not saying that being underwater is a good thing.
It is certainly not. It is really bad. But it is not an emergency because just because your house is underwater does not mean that you need to sell it. It doesn’t mean that you’re gonna be foreclosed on. That is not how this works. This is a common misconception I hear people have all the time. They say, “Oh, the bank’s gonna foreclose because my house is underwater.” No. No, that is not how it works. Banks only foreclose if you stop paying your mortgage. So houses being underwater happens, and the most common reaction to that is waiting. You just do nothing. You just keep paying your mortgage each and every month, and then eventually the market will pick up again, and your house won’t be underwater. That is how normal corrections happen. And so I’ve said for months that we were in a correction. So am I surprised that some mortgages are underwater in a correction?
No, not at all. That’s what happens. What is an emergency, or what can become an emergency, I should say, is forced selling. What happened in 2008 and what would cause a crash again is if there are all these mortgages that are underwater and the people who own those mortgages can’t pay on them. That is a problem. Just in general, when people stop paying their mortgages, that is a problem. That’s when we really start to get worried about a crash. So I’m personally not so worried about mortgages being underwater, unless at the same time, there is force selling, because those two things together can be bad, but mortgages being underwater on their own is not so bad. It is not that big of an emergency. So let’s look at delinquencies. Right now, the data we have for August of 2025 is that delinquency rates did go up 16 basis points, so that’s 0.16% in August compared to where it was the same time last year.
That is the first time it’s gone up in a couple of months. Actually, it dropped year over year in June and July. And so I would count that as normal variance right now. We are still below 2019 levels. And again, the reason I say this pre-pandemic level stuff is because stuff got so crazy during 2020 and 2021 that you can’t really rely on the data for that. You know, there was a moratorium on foreclosures in 2020 and 2021, and for some kinds of mortgages, that extended almost into this year. And so the data for the last five years is really hard to rely on. So what I do in this situation is I say, “Hey, what was it in 2019? That was the last normal housing market we had.” And although we are still below those delinquency rates, they’re kind of coming back to that level.
So it’s not way better than it used to be, but it’s about where it used to be. So I think that’s really important because in 2019, no one was screaming about a housing market crash or a delinquency crisis or foreclosure crisis. It was just a normal market, right? And so I think that’s probably where we are these days. Now, if you dig into it and look at FHA loans, there are some increases in delinquencies in FHA and VA loans compared to last year. That is important to know, but those two types of loans had foreclosure moratorium programs in place until this spring. And so seeing them go up from last fall to now is not surprising because those programs expired, and so we’re gonna have some increases in delinquencies. But this is something we need to keep an eye on. I personally look every month when FHA and VA loans delinquency rates come out, because I do think this could be a warning sign.
Like I said, for crashes, there are some warning signs in the data. This is a warning sign. Right now, I don’t think we’re at warning emergency levels, but since it has been going up, I think it’s something that we will keep a close eye on, but you should know it is not at emergency levels right now. Now, delinquencies are one thing, and if they get serious, if we have a lot of serious delinquencies, that leads to foreclosures. Now, foreclosures are up year over year. They’re up 6% year over year. Again, we are coming from artificially low levels of foreclosures due to the pandemic, so I am not surprised to see that they are up year over year, and I am encouraged to see that foreclosure starts, which is kind of the beginning of the foreclosure process, is actually down 10% year over year. So again, this is not like it is spiraling out of control.
It’s sort of just to be expected that we are reverting back to normal in terms of delinquency rates and in terms of foreclosures. So is there stress in the market? Yeah, there is a little bit more stress than where it was a year ago, but we are not at emergency levels. And if we start getting towards those emergency levels, Trust me, I will be the first one to let you know. I look at this stuff every single month. I have no benefit for telling you that the market is doing well when it is not. I am just telling you, we are still below pre-pandemic levels. Things are starting to inch back up. Where we go from here is a question mark. It is something that we’re gonna keep an eye on, but as of right now, there are not significant signs of stress in the housing market.
Broadly speaking, American homeowners and investors are paying their mortgages and that is the best sign that we have for stability in the housing market. You add that on top of inventory moderating, you add that to affordability improving. It still looks to me like we are in a correction and not a crash. And to me, that is the best thing that can happen for the housing market because we need affordability to improve, but obviously we don’t want the bottom to fall out and it looks like that’s exactly what’s happening right now. That’s what we got for you today for our last housing market update for 2025. Thank you so much for listening. We will certainly be back with another episode soon, and we, of course, will be continuing our housing market updates in January of 2026 when we get into the new year. Thanks again. I’m Dave Meyer.
We’ll see you next time.

Ashley:
Hey rookies. On the show, we always talk about having a bias toward action.

Tony:
Our guest today never gave up on making real estate work for him. He partnered with other real estate investors and used co-living as his real estate investing strategy to be able to quit his W2 this year.

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

Tony:
And I’m Tony J. Robinson, and welcome to the show, Andres. What’s up, brother? How you doing, man? Good. How you doing guys? Thank you so much for having me.

Ashley:
Yeah, thank you so much for coming on. Andres, can you share a little bit of your background before we actually get into real estate? What were some of the critical steps you took in your current state before you started your real estate journey?

Andres:
Well, let’s start from the beginning, like they said. I came to this country when I was 18 years old, worked my way through every possible job that you can work as an immigrant. I started washing dishes, basketball, kitchen, eventually became a waiter, assistant manager, did ballet parking, cutting yards, some construction work. Put myself through college. After college, I got married and my wife is like, “Hey, we need to buy a house.” And at that time I was working full-time as a waiter, so I couldn’t qualify for a loan despite making good enough money. We were expecting to qualify for a house, we just couldn’t. And it’s upsetting because you’re making almost six figures and just because you get paid in cash, they don’t want to take it. So I made a quick Google search, how to buy houses without any banks, any credit. And as you guys know, that’s like Pace’s slogan.
So I found Pace. I started watching Pace’s videos. I found bigger pockets and a week later I was like, “I’m going to find myself a deal.” So I joined Pace’s mentorship and a couple weeks later I found my first house up too. And that was the beginning of my real estate journey. For a year, I did wholesaling with dad to build cash. And one of the last deals that I wholesale was to this guy who I didn’t know what he was doing with the house because the house didn’t really have an exited strategy. And when you wholesale creative deals, you got to make sure that your buyer is … They’re not going to default on the loan. So I went with him to the property, we walk it, his GC is there and he’s like, “I’m going to put a wall here. I’m going to put a wall here.
We need another bathroom here.” I was like, “Man, what are you doing?” He’s like, “Oh, I do room rentals.” I was like, “That doesn’t exist.That’s false.” So I went with a different buyer who was going to do an Airbnb in there, but that piqued my curiosity because he sent me his spreadsheet like, “Hey, we’re going to make 3,000 net in this house.” But I just couldn’t believe it because who’s going to share a room? Who’s going to share a bathroom? And then after that, I started researching room rentals because at this point, this is now December 2023, a year after starting wholesale, I’m like, “I need to buy my first house. I build this capital. I want to be an investor.” So I started researching that. I was like, “Okay, this sounds like a good strategy.” Because that year when I started real estate, when I was doing wholesaling, I really dove into short-term rentals and mid-term rentals because I thought that’s what I wanted to do.
It is so hard. I’m not a smart person. I don’t know how you guys do short-term rentals, minter rentals. I don’t understand how to run the numbers. I’ve joined a lot of coaching programs that I’ve paid for. I’ve seen every YouTube video possible. I still don’t get it.

Ashley:
Hey, we never let anybody on the show say they are not smart because you have been smart in some aspect to be able to made it this far in your real estate investing journey.

Tony:
Andres, there’s a couple things in your story too, because I want to get into it, how you made the transition over to co-living, but there’s a couple things I want to get into. First, you mentioned Pace. So for our Ricky, we’re referencing Pace Morby, and Pace actually wrote a book for BiggerPockets. It’s called Wealth Without Cash. If you guys head over to the BiggerPockets Bookstore, you can pick up a copy of that and learn about the strategy that Andres was leveraging to help them kind of get started in real estate investing. But it sounds like Andreas that you said you started wholesaling first, which is a way to generate some cash. And then you decided, “Hey, let’s get into actually owning the real estate as an asset.” And I just want to point out for a lot of our rookies that are listening, you might find yourself in a similar position where you have the desire to go out there and start building your portfolio, but from a cash perspective, maybe you’re not ready.
So even if you can’t necessarily put down 20% to go out and buy that first rental, are there other things you can do within the world of real estate investing to generate the cash, which would then eventually allow you to go out and buy something? So Andres, just really quickly before we get into the co-living, how long were you focused on that active income strategy before you had enough cash set aside to go out and actually get your first buy and hold rental?

Andres:
About 10 months, 10 to 11 months.

Tony:
10 months. Holy crap, that was a lot faster than what I was thinking, man.

Andres:
I wasn’t that successful, honestly. That year, I mean, at that point I was before that working full-time as assistant manager/waiter. So I was making pretty good money, but I was working seven days a week, 12 hours a day, no days off. If they call me, I have to be there. But with wholesaling, well, how I get into wholesaling, right? While doing the full-time job, I was flipping clothing online, like going to the thrift stores and selling it on eBay, postmark. I was flipping furniture, I was flipping appliances.

Ashley:
We love side hustle ideas on the show, and that is a great one.

Andres:
I’ve always hide hassle. When I was in the community college, my sister-in-law used to work for Beoworld, which is a company that produces those things for hot topic, the kind of anime, toys and backpacks. They would have a clearance every three months and sell everything for a dollar. So I would go buy a hundred things, put it in the trunk of my car and go to college, park right outside the arts building and sell it to all the taco guys there that play music and do arts. So I would pay my tuition that way. So I’ve always liked the idea of side hustling. If we go back to when I was a kid, reselling candy, deflating other people’s bicycles so I can sell them air. I’ve always had that mindset. I was four or five, don’t judge me.

Ashley:
I’ve seen this Instagram reel where a girl pranks her dad and she goes to her dad and says, “Yeah, I went to the mechanics and actually they have premium air there. It was only $100 and I got premium air in my tires just to get a reaction out of her dad of it. ” Is that you or are you selling the premium air?

Andres:
I’ve always had these little side hustles. In college, I run a poker room undertable until I got kicked out. But that mindset of always doing something on the side, I think that’s something my parents gave me because when you come from poverty, all you have is hustle, greed, and you cannot give up, right? The hopes of my ancestors lay on my shoulders, I got to keep going no matter what. So now we jump into wholesaling, right? I wasn’t very successful. I only do like six deals in one year, which is not a lot, but it gave me enough cash where I wanted to buy a house. And I decided to go with co-living because it sounded doable. I started putting some test ads to people. I was like, “Hey, yeah, I need a room. I need a room.” Studio apartments at that time in Fort Worth are going for 1,200, 1,300.
So if I can get somebody in a room for 700 to 800, that sounds like a good model.

Tony:
Sorry, just before we go on, I just want you to define what co-living is. We’ve had a couple of guests on the podcast who have kind of gone through this strategy, but for folks who are listening and they’ve maybe never heard the phrase co-living, what exactly is this and how does it differ from traditional long-term rentals or traditional short-term rentals?

Andres:
Because of various names, co-living, room rentals, a lot of people know it as pet split the same way we know short-term rentals as Airbnb because that’s the biggest platform that does it, but it’s pretty much renting a room inside a house and you’re sharing the kitchen. A lot of the times you’re sharing the bathrooms. Now a lot of people right now, a lot of the big coaches, they’re fighting into, oh, if there’s no community in it, it’s not a co-living, it’s just like you’re renting a room. I would say that’s the landlord’s taste depending on your tenants. A lot of people really try to do a lot of extracurricular activities for their tenants, like pizza parties and trying to do this, trying to do that. I don’t do anything like that. I just let them be. And I’ve had only one turnover since I started in 10 months, so I think I’m doing something right.
A lot of people don’t believe me. It’s like, “That’s not possible. You have 42 tenants and only one has left.” I was like, “Yeah, give them a good product.”

Ashley:
We’re going to take a quick ad break, but when we come back, we are going to hear more from Andres on his portfolio and how he cash flows from his co-living strategy. Okay. Now let’s get back into the show. So Andreas, I have a question for you as far as the co-living. I always think of co-living as college.That’s what everybody did in college. It was rent by the room. That’s how you got places. And you mentioned a couple places where you can list the apartment such as PadSplit and several others, and those are the Airbnb platform for co-living. What do you think is the big reason that co-living is becoming more popular right now? People talked about rent by the room throughout time, I guess, but it seems like this year, going into 2025, co-living is the hot new thing. Several years ago, it was Airbnb and then after that it was midterm rentals.
What do you think is the major shift that has made this a hot commodity right now for investors, but also for people who want to live in co-living?

Andres:
It’s real estate cyclical, right? 28, 29, the borrow was the biggest thing because you could get all your money out, you could get paid, you can get cashflow. 16, 17, Airbnb is a boom. Two years ago, everybody was like, “Oh, the interest rate is so low. Let’s get it at that low and resell it on a wrap.” Also at the same time, “Hey, let’s do traveling nurses, let’s do midterm rentals.” And now everybody’s failing on that. Now it’s like, “Oh, co-living because it’s secure cash flow.” The thing is that co-living is actually really good because just as a general economical principle, we’re targeting the people who make the least amount of money and we are taking care of the most principal need, which is shelter. So that’s always going to be there because what happens, studio apartments, which is the efficiency apartments, the cheapest thing that you can buy, those prices have gone so high that people can’t qualify for them.
For example, this studio apartment in this area that is 1,200, you need to make about 43, $44,000 a year to live in. What happens with the people who are making 36, 35? What happens to the people that are making minimum wage? Where are they living?
So even middle school teachers, high school teachers, they don’t make that much money. I have one teacher and then one of my properties. And when she came, she was crying and I was explaining to her like, “Look, this is not a group home.” There’s an engineer here, he was from home, there’s nurse, the other guys work locally because she couldn’t believe it. She went to college, she has a master’s degree and she has to share a bathroom with a couple guys. So it is what it is.

Tony:
Andres, let me ask, because you mentioned something that you did a little bit of a test before you actually dove into this strategy. And I’m just curious, what was that test? How did you try and validate this idea before you actually committed to it?

Andres:
Advertising because my biggest fear it was like, how long is it going to take to get full? Because at that time I was using other companies’ numbers. They’re telling you like, “Hey, it takes like this long. They stay for that long.” And then talking with investors actually in the platforms like, dude, we’re barely breaking even, right? As soon as you launch, they get you full, but then after that, they start taking tenants because so many people are diving in. And at that time there was no control, which is about a year ago, landlords can do whatever they want. So I was like, “Let me just run my own ads, do my own marketing, see if I can get my own tenants.” So I started researching how to do that. I found Sam Wigert, who’s probably the biggest investor in this market. He’s out of North Carolina or South Carolina, somewhere in there.
And then he does a five day free course where you can learn how to do this yourself for free. So I copied that and I started marketing on Zillow, apartment.com, Facebook Marketplace, Craiglist, all the room rental websites, Rumis, Room Sear, Sumper. I only got leads from Facebook Marketplace, but I started getting like 13, 14 messages a day.

Ashley:
Was it like, is this still available?

Andres:
All of them were still available. And a lot of investors told me, “Don’t do it because people just click on it and they will respond.” And I was like, “Okay, do you respond to this still available?” “No, never. “”Well, let me do it. ” So I started replying and guess what? People do respond, right? They don’t type room for rental just because they’re crazy. So I started having conversations with them and the property was barely under contract. I had just gotten out of contract with the seller and I was already people like, “I’m ready to move in. ” So I was like, “Okay, this works.” And then something else happened where the person who was going to onboard me into our company, they said a few things that my lawyer didn’t agree with. And that’s something a lot of colleaguing groups and investors don’t talk about, which is the legalities of it.
And that’s something we have to be aware of. Otherwise, your investment is going to go belly up.

Tony:
Yeah. It’s a super cool way to test this strategy before going into it fully. And I guess two follow up questions for me. Number one, what did you actually put into the post that you think garnered such strong attention? And then second, how did you actually land on the pricing for the room rental? Like you said, hey, for you, it’s difficult how to underwrite and analyze properties as a short term. I know how to do that really well because we’ve done it a lot. But like the idea of the single room rental, I feel like there’s a little bit less clarity around how to do that. So first, what did you put into the post to generate so much attention? And then second, how did you decide how much to actually charge for your rooms?

Andres:
Yeah. So the way you underwrite a room rental, you go from the comms in the area, right? You can go, you can use comms from Zillow. Silo’s great, realtor.com because it tells you what the apartments in the area are going for. So once you find that price in your area, let’s say it’s between 1,000, 1,200, you want to be within 65 to 70% of it because it has to be a deal. You’re telling people you’re going to share a bathroom, you’re going to share a kitchen, so it has to be a deal. So I started testing ads at 60%, 65%, 70%, 75% and 80% of the price of the studio apartment, which is at that time the cheapest available option. And I started getting responses in all of them. And I was like, okay, so it’s not about the price, right? Because now we’re talking about 750, 775, 800, 825, 850.
My cheapest advertising at that point was 600 and I started getting people who would not have qualified anyways. They just got out of jail. They have multiple felonies, DUIs. And one thing I really like about Facebook Marketplace is that you can click on their profile and see their pictures. As a general rule of thumb, if their profile picture is themselves holding a few guns with a lot of weed and a couple pit bulls, they’re probably not going to qualify. And so you don’t even have to waste time betting this possible tenant.

Ashley:
I’ve done that before too, is where when I haven’t done in a while, but I used to post long-term rentals on Facebook and I would go and I’d also look at their interactions with comments or if they had pictures of them in their own house trying to look like, “Is it kept clean? Is it nice?” You definitely can find a lot about a person by going through their Facebook page for sure.

Andres:
I think yes, because they are deliberately choosing that to be their avatar. They want the world to know them as that. So if you want the world to know just that, well, I might as well treat you like that. And there’s so much volume right now from my ad, so I can choose the better tenants. So right now I have a criteria where I’m really just looking for introverts and when they respond like, “Hey, tell me a little bit about yourself. I’m a night owl.” I keep to myself. That’s perfect because what happens before I was looking for building the community type of thing and that usually means you’re going to get people who want to talk to others. They might be friends for a month or six weeks, eventually they’re going to crash because you don’t know that person, you don’t know their background.
So while building my lease, I was like, “What is the middle ground where…” Because eventually they’re going to come to you if there’s a problem and you have to be the referee, right? You broke the lease, you’re out. So what happened? The people that have a good background check that we’re living with people who don’t have a good background check, they start texting me. So I was like, “What you don’t like about this? ” And I was like, “Man, they’re forcing us to do this. They’re forcing us to do that. They want us to buy the towel papers together, the toilet paper together. They want us to share this and that. ” I was like, “What would you like? ” I was like, “I just want to buy my own business. Done. You’re allowed.” And I kind of let each house self-regulate. Right now I have five closing one more in two weeks, hopefully we’re almost there.

Tony:
And Andres, on those five, can you just kind of walk us through in a little bit more detail? So you have five properties currently. How many rooms is that and how many specific tenants is that across all those rooms?

Andres:
It’s 36, 36 rooms. So about seven per house. One has eight.

Ashley:
Oh my God, those are big houses.

Andres:
Yes.

Ashley:
Did you buy these big houses or did you add rooms to them, like take a dining room and add?

Andres:
We definitely add rooms because it’s really rare to find a seven room house. And actually, I don’t know if my Instagram is going to be someone in here, but I have videos of there because now I’m the GC on the property. So I do walkthroughs of the properties, how to do the layout, how to do the construction quickly. A lot of people when they’re acquiring these properties, they have a three month holding period plus another month of renting. The fastest one we did was we closed on August 13. By September 1st, it was fully renovated, fully listed. So we didn’t have any holding costs. We added four rooms. We find all the people. My longest time has been three weeks, except for the first one. The first one, I went with a contractor and she stole my money. That’s how I ended up doing the construction myself.

Tony:
Well, you got to tell us a little bit about that story, Andres. I mean, I feel like every real estate investor’s got at least one bad contractor story. So tell us about yours.

Andres:
So she came recommended to me by another couple of investors in the area. I went to check her work that was close to my property. She was doing two full sleeps, full gut, changing plumbing. I was like, “Okay, that’s a big job. This is not a small time contractor.” And then they started doing my job and then the guys are not showing up every two, three days, which sometimes is normal when they have multiple projects. And then spring break hits and I asked for LPP flooring that was in the contract and I get to the home and I see the guys cutting the flooring with the meter saw and putting dust. So I was like, “That’s this wood. LBP doesn’t have any wood. This is laminate.” Then I see the brand and it’s the cheapest thing that you can find at a Home Depot. And I was like, “Hey, we didn’t agree on this.
” And she’s like, “Well, we already put it. If you want to leap here, I have to pay more.” And that was it. So, okay. Yeah, sorry, but I already knew that it was going to happen. But she immediately, three days later, she doesn’t deliver the rest of the flooring. She took it. It was about $5,000 worth of flooring. She didn’t pay the guys for two weeks that I didn’t know. And then they come to the house, it’s like, “Hey, she said you didn’t pay her. We’re going to destroy our work.”

Ashley:
Oh my God, geez. I’d be crying at this point, just so you know.

Andres:
I have to say at the property, right? The subs who did the tile work for the bathroom tried to break in a Saturday at 2:00 AM. So luckily I’m there. So I have to get on a fight with them. I have to call the police. So after that, I stay at the property every night and I had to finish the work myself. I’m kind of hundred and YouTube is your best friend. You can learn everything on YouTube right now. So I was going to Home Depot at 6:00 AM, buying material, going to work from 9:00 AM to 11:00 PM, going back to the job site, 11:30 to 2:00 AM, sleeping next day, for two weeks. So there was no delay in my first property. We were like, we’re going to go live April 1st, we are going to go live April 1st, no matter what.
Because I bought that house with other people’s money, so I cannot fail them. Even though I have the money to pay for another crew, at this point, because I don’t know how to hire them. I don’t know if what they’re doing is right. The only way that I knew that it’s right is if I can do it myself and I can see that they’re doing it like I’m supposed to do it, then they’re doing it right.
So that was a big experience. I almost have a heart attack during those two weeks. I had to go to the emergency room. My heart would just not stop because it’s a lot of stress. At the same time, I had some bad news with my wife. We needed to do an IVF treatment, so I had to put another 25,000 into there. So my reserves are like … So anyways, we went live, the property wasn’t even finished, and I already had five people moving in. So I made the rooms upstairs ready, the bathroom’s ready. I was like, “Look, the kitchen is not ready, downstairs is not ready.” Cool. They didn’t even see the room. So that’s, I think it was a blessing because now everybody wants to come see the rooms. But for the first one, it was all online. I didn’t even have pictures because the house wasn’t ready and these guys moved in.
They paid a deposit. They liked the area so much, they just moved in.

Ashley:
I have to say, I’m so impressed with your hustle. I mean, just all the side hustles that you’ve done throughout your life so far, but in this circumstance, not many people are willing to roll up the sleeves and to spend every night after working a full-time job, working on their property just to meet their deadline, to be able to pay back the people that invested with them. And that really does take some character and I commend you on that hustle. We had a similar experience happen and I’m very thankful. I had a partner on the deal who was the one that went in and did all of the work on it when we had to fire our contractors and had no one else to lean on. So just from watching him kind of go through that grind, I share a little bit of your experience, but I just want to commend you on that hustle.
And I hope everyone listening knows that sometimes things like this will happen in real estate where you are going to have these really stressful periods, but sometimes just working hard and putting in that labor, putting in that sweat equity, and that may not even be actually doing the physical labor of a rehab. That might be sitting behind your computer trying to find money or analyzing deals every single night. That grind is what’s going to get you through that hard time in your investing journey. Just like Andres just showed us. There’s light at the end of the tunnel as to renting out the whole house without even having pictures available for people to look at.

Andres:
That was a blessing. I don’t know how I got that. And actually, those guys are still there, right? So when I do my monthly check-ins, it’s funny, in January, everybody got sick. So I do my monthly check-in around January 3rd to go to the house and there are all of them sitting in the dining area drinking chicken soup. And I was sick too. So I sat with them and we’re talking about it. And I was like, “Do you guys remember when you walked in? ” And I was like, “Yeah, man, I don’t know how. I would never move anywhere else without pictures.” Because I would literally send them pictures and it’s a war zone. It’s a construction zone. We build the walls. There is drywall everywhere. It was a bad area. I don’t know how they did it, but it worked out. Thank God they’re still there.
It is what it is.

Tony:
Andres, you said that there’s not many just seven bedrooms laying around that you’re able to go out and purchase. So you’re converting a lot of these and adding the additional living space. So I guess as you’re sourcing your properties, what is it exactly that you’re looking for? What is your buy box? How do I know as someone who’s never done this before, what type of property is a good candidate to turn into a seven or eight bedroom property?

Andres:
Pretty much you’re going to go buy a square feet, right? Each room, you want to be around 250 square feet, so you can multiply that by seven. But a lot of the times, if you stay above 2,000 square feet, you’re going to make it work for seven to eight rooms, but that really depends on the mortgage payment. Again, I bought all of these creatively. They are all sub two seller finance. So we have 3% interest rate, 2.75% interest rate. Our PITIs are pretty low for Texas, 1,900, $2,000. So we get a good spread on the end. So even though I can put eight rooms, I stay at seven, just to give it a little bit more space. And parking is really important. So if I had to define my buy box, it would be minimum three bedrooms, two bathrooms, 1600 square feet plus. So if it’s 1600 square feet, I need a PI to be at 1600 or less.
If the PITI is above $2,000 a month, I need the square feet to be above 2000 as well because I need to add a seventh to make the cashflow work. And given all the work that you have to put into this, I think you need at least 2,000 net every month. Otherwise, the property is not really worth it. And I pass on a lot of deals because it’s like, oh, 1800, 1700. And I was like, “Yeah, no, I need 2,000.” Because a lot of work and I do everything myself right now. I’m still training my replacement, but it is very hands-on. I think to me, that’s one of the biggest things when I talk to other Collibra investors. The moment they tell me it’s easy, I stop talking to them because that means that they just started a month, they only have one property, they haven’t gone through it yet.
But just think about it, right? And you’re going to see it in the comments. You have seven people from seven different backgrounds now sharing a house, right? You are the referee for everything. Everybody’s going to be texting you this and this and that. And now when I do coaching, it’s like the first three months, you’re going to be very intense because you have to put some people in line. You have to other people let it go until you find the right fit. But after three months, like my other houses that have been open for six, nine months, I don’t get a message for two 60 days because those three months were very intense. I was on top. I was checking the security cameras outside like, “Hey, you parked in the wrong place, this and that, no guess, blah, blah, blah.” But once you set up the culture of the house and you have like two or three guys there with the culture of the house like, “Hey, we’re clean, everybody parks in the right place and this is how we do it.
” Then the new people that move in, they’re going to follow that.

Ashley:
We have to take the final ad break, but we’ll be right back after this. While we are gone, make sure you are subscribed to the Real Estate Rookie YouTube channel. Okay. Welcome back from our short break. So Andrea, as you kind of mentioned there that you are doing all of your rehabs. Are you still working a W2 job?

Andres:
No. So I quit my job two days before Thanksgiving last year.

Tony:
Congratulations.

Andres:
I just couldn’t do it anymore. We were setting up a house. At that time, I had three houses under contract for December, so it was going to be a lot of work. And I don’t have any money in my saving accounts for the rookies listening to that. At that point, I had $300 in my cashflow.

Ashley:
And you quit your job?

Andres:
And I quit my job. And when I said I bought my first house with my own money, I used credit cards. I didn’t have cash because we’ve missed a lot of like all my savings went away with my wife’s treatment and my heart problems, right? Every penny that I saved since I was 18 to this point when I’m 30, every dollar, every night I didn’t go out, every saving that I was like for my investments, it went away in three months because of health issues, but I had to keep going. And I quit my job, I got another property, and that’s how I kind of started doing side jobs as a general contractor because now I have good subs and a lot of people wants to do co-leaving. So I kind of help them with the layout, helping them with the construction, I make some money there.
Now from the properties is enough cashflow to cover my basic needs. So it’s the first stage of financial freedom where if I really don’t want to get out of my house, I don’t have to, but we want to keep going.

Ashley:
And you found a business that integrates well with your real estate too. For a long time, I was a property manager and I did it for myself and I did it for another investor and it worked out really well having that income alongside my real estate investments also too. So now that you’ve started this GC business, how are you becoming bankable or what are you doing without your W2 income to actually finance deals?

Andres:
Well, so all the deals, even the first one were bought with OPM. So for the rookies, that means other people’s money. So I actually got paid to buy each house, right? Because I’m acquiring the deals myself. So I have my wholesale fee there or acquisition fee. Now I call it a management fee. So because all of these are creative deals, we buy themselves too. We don’t have to go to bank. We don’t have to talk to anybody. We just go to title company, direct to seller, direct to agent, and we acquire the houses, right? So each deal comes out around 65 to 80,000 total from acquisition, repairs and to furnishing, and I usually bring a private money partner to each deal and then we split the deal half and a half. So they bring all the money to closing and they do everything else. That’s That’s why also I don’t think a property is worth if I don’t make less than 2,000 a month because I have to split that with my prior money partners.
So their cash on cash per property is between 40 and 50%. That’s a lot. You don’t find that laying around. That’s why I’ve had so much success raising money at the beginning because that’s really hard to find. And people that have money to invest, they want to make sure that it’s in a recession proof kind of investment and affordable housing is always going to be around.

Tony:
Andres, let me ask, have you ever thought about doing co-living but through ground up development? Just buying a plot of land or redeveloping small house, tearing it down and just building something built specifically for co-living?

Andres:
Yes, that’s the next stage. And if we go back, I’m pretty new in real estate. I still don’t know how to do the better. And that’s what I’m saying I have to do right now. I still don’t get it. How do you guys refinance those properties? Those numbers are so wild because I get to the ARB, but then the appraisal is going to give me a different number. I really don’t get it. It’s a lot harder than creative financing. But yes, ground up is going to be the next step. So right now I have five closing six. I want to get to 10. And then after that, do only ground up. Because at that point, the cashflow is good enough where I can feel free and I can focus on funding land and develop that.

Ashley:
Well, Andres, thank you so much for coming onto the show today. Just real quick before we wrap up here, would you just give us an overview of what your monthly cash flow is off of these five properties that you’ve been able to generate?

Andres:
Yes. So in total, we make a little bit over 10,000. So depending month, 10,500, 10,400, and once I split that half and a half with my private money partners, they get their half, I get my half. I’ve had this year 97% occupancy rate. I have only one turnover. Yeah, it’s been great so far. Honestly, I don’t see me slowing down with this. The only thing that slows me down is finding good deals because parking is very important here in Texas. Almost everybody drives a car and I don’t want to bother the neighbors.

Ashley:
Well, you just gave everybody shiny object syndrome looking to get that type of cash flow and everyone’s going to be looking into co-living. So Andres, thank you so much for joining us. Where can people reach out to you and find out more information?

Andres:
By Instagram is probably the best way. My handle is Andres Martinez, like my name underscore C. And you can leave a question here in the comments. I’ll try to be here and respond because I have also some videos on YouTube, so you guys can go sit there and check and just reach out if you have any questions. Be ready to work because if you tell me you’re lazy, I’m not going to respond.

Ashley:
Yeah. Love that motto. Thank you so much for watching this episode of Real Estate Rookie. I’m Ashley and he’s Tony, and we’ll see you guys on the next episode.

Dave Meyer:
These were the BiggerPockets Podcast episodes that defined real estate investing in 2025. Hey everyone, Dave here. I hope you’re all enjoying the holiday season with your friends and family. It has been another transformative year in real estate. The market continues to evolve and the investors who are thriving are the ones who’ve adapted their strategies to match current conditions rather than waiting for things to go back to normal. On today’s show, we’re going to recap some of the biggest investing trends and topics we focused on in 2025 by replaying portions of the year’s most popular BiggerPockets podcast episodes. These are the shows that resonated most with the BiggerPockets community when they were first published. And so I hope revisiting them today will help inspire you as you plan for investing in 2026. We’re going to republish a few other popular episodes of the show and from across the entire BiggerPockets network over the next week, and then we will return with brand new podcasts starting on January 2nd.
The first episode I’m going to revisit today is back from January because last year I started off the year by sharing my upside era framework for the first time. The idea behind it is that we are in a new era of investing. And even though real estate may not be as obvious as it was a few years ago, it is still the best path to securing your financial future, and it’s better than any other way to invest your money. This episode was called The Real Estate Financial Freeda Formula Has Changed. It was released in January 2025. And I think my conversation with Henry Washington holds up just as well now as it did almost a full year ago. I think the problem is that we treat financial independence as binary. It’s like either you’re financially free or you’re not. When reality, it is a path.
And the goal, at least for me, has always been to just become more financially independent. Every deal you do, every financial decision you make will hopefully put you in a better financial position so you have more flexibility. For some people like Henry, that flexibility might be going to Europe and just not working for a couple weeks. For me, I rest easy knowing that if BiggerPockets decided to fire me tomorrow, I could not work for a couple of years and be very comfortable. And to me, wouldn’t consider myself fully financially independent because if I left my job today, I would need to figure out active income just like you, Henry. But I am more financially independent than I was 15 years ago before I started investing.

Henry Washington:
Absolutely.

Dave Meyer:
And I am more financially independent this year than I was last year and the year before that and the year before that. And I feel like that really needs to be the goal is just to keep moving in that direction because honestly, your definition of what financial independence is going to change. The amount of money I thought that I would’ve needed to feel comfortable when I started 15 years ago, I passed that number a while ago. And my expectations, I try not to have lifestyle creep, but when you get older and you just have a more sophisticated life, your expenses just go up. And so that’s why I feel like setting this goal and saying I am financial independent or not, it’s just not realistic. The goal is just to keep making progress.

Henry Washington:
Yeah, that’s absolutely true. I was one of those people when I got started that I thought I would buy enough rental properties to produce enough cashflow in current days
That I would be able to take the cashflow from the rental properties. And then when that number of cashflow hit the number of money I made per month in my day job, that I could leave my day job and live off of my cashflow. But as I started to buy properties, I started to realize that that wasn’t necessarily going to be a thing. I was absolutely buying properties that cashflow, but your business and your properties, they don’t function linearly. It’s not like you buy it and then it cash flows and nothing ever happens or goes wrong. It just makes you just print that money every month and it’s perfect and the world is great. But that’s not the case. The more properties you buy, things break at different times, things break all at the same time, people move in, people move out. There’s this constant flow of money that it’s hard for you to be able to say, “Okay, well, I bought 10 properties and each property cash flows $500 a month.
And so now I have $5,000 every month that I just will take out of this account and spend on my bills.” And the money is flowing too fluidly for that to be a reality. And so I realized that if I truly want these properties to pay me cash flow that I could live off of passively, then it’s going to happen far into the future
When these assets are paid off. And so I had to pivot my strategy to think, okay, well, how can I use real estate to still buy rentals, but also make cash now so that I can A, continue to grow my portfolio, but also stabilize my portfolio and then start to aggressively pay off those properties so I can hit that goal sooner. That wasn’t what I thought starting out.

Dave Meyer:
Totally. Yeah. And I want to ask you about how you pivoted your business, but I’m just curious first, was that disappointing to you realizing that?

Henry Washington:
You know, that’s an interesting question. I don’t remember feeling disappointed about it just because I was actively in the business at that point and I had the foundational skill, which is I know how to go buy a good deal. All I had to change was the way I was monetizing that deal, which was flipping it and getting more cash upfront versus holding onto it and taking a couple hundred dollars here or there. So no, it wasn’t disappointing because I just love the business of real estate.

Dave Meyer:
Feels like people are avoiding getting into real estate because we, people who are real estate educators, BiggerPockets is part of this, have been saying, “Hey, you can get real estate financial freedom in a couple of years.” And like I said, during the 2010s, it was always difficult, but it was easier than it was today. It was

Henry Washington:
Easier.

Dave Meyer:
For sure. But I guess I still feel like the prospect and the value of real estate investing is still so strong that it frustrates me when people are like, “I’m not going to get in because now it’s going to take 10 years to be financially freedom or 15 years to financial freedom.” That’s incredible. It’s amazing. Career in the United States is like 45 years. So you’re saying you cut it into a third. If that doesn’t get you excited, I don’t really know what would, but I do feel like, I don’t know if you hear this too, but I hear people saying like, “Oh, I can’t find cashflow, I’m not going to get into it. ” But the fundamentals haven’t really changed. This is kind of always how it’s worked.

Henry Washington:
The fundamentals haven’t changed. They’re more important now than they’ve ever been. It’s the fundamentals you have to stick to now in order to be successful, but yeah, this is the best way to accelerate that path in any manner that a normal person could. Can you do it in other pathways? Can you do it in the stock market? Yeah, but you got to get really good at trading stocks. But the average person in real estate can do this without being a professional real estate investor, and that’s incredible.

Dave Meyer:
Given this, given the reality, it sounds like we agree that it’s going to take you 12 to 15 years to do it. In my mind, that’s fantastic. And you can sort of be agnostic, at least to me, about how you pursue that active income. I think there’s a good argument to be made that you should just pursue whatever active income makes you the most money. And for me, that’s continuing in a regular job, but it sounds like for you, why did you make that choice knowing that you needed active income to do it through real estate rather than … You had a good job, right? You had a good corporate job and you chose to leave that.

Henry Washington:
Yes, I did have a great corporate job and I enjoyed my job. That’s why I kept it as long as humanly possible. I was going to do both until I could not do both anymore until someone was going to stop me from doing both. And I did. That’s what happened is I quit when it cost me money to have the job when they wanted me to work more hours and I just couldn’t give them more hours because it would take away from what I was doing in real estate. But the answer to your question is I had to choose the real estate because I’m throwing all out here. I was making $110,000 a year, which isn’t a ton of money, but it’s good money, right? It’s good money. It’s hard not to choose real estate as your full-time income path when I’d have to trade 40 hours a week for 12 months to make $110,000.
If you count my bonus, I was probably making closer to $140,000 when I could flip two houses and make that, and I could flip two houses in the same month. Yeah.

Dave Meyer:
Would you put it that way? Right,

Henry Washington:
Right. We just sold a deal and made 70K last week. And yeah, it took us five months to make 70K, but that wasn’t the only house I was flipping. I had to choose the real estate. It made more financial sense. And also, I love it so much more than I loved my day job. I liked my day job. I love doing this.

Dave Meyer:
So that was me and Henry on episode number 1069 from January. Our next episode today was our most popular show of the year on YouTube. It’s an investor story with Deandra McDonald. This episode really struck a chord with many of you because it proves you can start investing in real estate and change your financial trajectory from almost any starting point. DeAndra had $35,000 in debt and got rejected by a lender the first time she tried to buy a property. She eventually got her first deal though with a down payment of less than $4,000, and four years later, she was able to quit her job and become a full-time real estate investor. This is an incredibly inspiring story of taking incremental steps to improve your financial position, one property at a time. Here’s my conversation with Deandra McDonald from episode 1105 back in April. What did you buy?
Because you said you wanted to live in it. Were you looking for a house hack kind of situation?

Deandra McDonald:
Exactly, because that’s all I had. With all that savings, that extra two years, I still could come up with about $5,000 because I had to pay down the credit card debt and just live.That was also a necessity. But my first purchase was a two bedroom townhouse, just half a duplex where the plan was just to lower my rent. But what actually happened was I moved in, I took the smaller room and I rented out the second room to a roommate, which covered my mortgage. And that started the full addiction to this whole process of like, “Oh, I see. Okay. Yeah.

Dave Meyer:
” Yeah. I would imagine that generating that income or saving that money was a lot easier than lifeguarding parts.

Deandra McDonald:
For

Dave Meyer:
Sure. So you didn’t get to quit your job fully, right? I imagine you were still working full-time, but sounds like at least improve your quality of life just off that first deal, right?

Deandra McDonald:
Yeah. Even just I got to stop lifeguarding.

Dave Meyer:
Yeah.

Deandra McDonald:
Even just that. I had weekends again. I had a day off that I wasn’t thinking about how can I pick up an extra shift? How can I make an extra $20 this weekend because that adds to the pot? I could rest. So even if it was just that, my goodness.

Dave Meyer:
I think this is so important because I think of this industry, a lot of the focus has been turned to just quitting your job, but I love hearing stories like yours where you show that every incremental deal can improve your financial situation and can improve, like you’re saying, your quality of life. You actually had this tangible benefit to your life just by buying a single real estate deal. And I really encourage everyone, maybe if you haven’t gotten that first deal yet, to think about that because it’s a lot less daunting to think about how do I replace my full W2 job. It’s like, well, just think about how can you work a little bit less? We’ll give you a little bit more peace of mind just to get that first deal. It sounds like you did that, but then you got the bug. So what did you do after you got first house hack?

Deandra McDonald:
I kept house hacking for a while. I got a better job where I was making more money, but didn’t change my lifestyle. And so every year on the dot, we used to have a joke that I have boxes that didn’t even bother on packing because it was like, I’m going to be gone in a year because now I have this system in like, oh, I live here for a year. I rent it while I’m here. I rent it when I leave. All that extra money goes into the next property so that every property is bigger, better, more efficient than the last one. I can fix stuff up as I go. For years is just what I focused on.

Dave Meyer:
What area of the country is this?

Deandra McDonald:
I’m in Central Virginia, specifically Charlottesville.

Dave Meyer:
Okay. And it sounds like that first deal, did you just put in five grand? Was that all you had to come up with?

Deandra McDonald:
I think we looked at the numbers and wound up being like $3,800.

Dave Meyer:
Yeah. Oh my God, that’s amazing. And so everyone listening to this is jealous. But just as a reminder, back then it was a lot harder to get a loan to, as Deandra mentioned, there were trade-offs to every time. So was that sort of the amount you were shooting to save every single year? Could you repeat the strategy you were using just saving up $3,800, $5,000 a year and buying something new?

Deandra McDonald:
Exactly. It was like, “Hey, there is an abundance of properties here under $1150,000.” I remember now times are different. Like Dave was saying, I remember having a $200,000 budget and being picky going in and say like, “I don’t like those cabinets. Show me something else. I don’t like the wall colors.” And that was okay because you had other options. And I want to say this, in certain parts of my state, that is still very true.
My area has gotten very, very popular. It got very, very popular after the world kind of shut down in 2020, but it wasn’t that popular six years ago where it was still like you had options. And there are surrounding counties and surrounding cities where there are still plenty of options if you were to walk in right now with $200,000 and a desire to live there. But yeah, what happened was I was paying 700 a month in rent. So I went from paying 700 month of rent to nothing. So all I did was save that money. So now instead of saving 3,000, I can save a lot more per month. I took out HELOCs as I would shift from place to place. My Airbnbs would do well. All that money just kept being saved and going to the next property.

Dave Meyer:
And how long were you doing house hacking? When did you start doing something else?

Deandra McDonald:
I was house hacking exclusively for about three years. On year four is when I started experimenting with midterm and short term because I had duplexes or I had quads that sometimes I would have two or three months between when this tenant ended and the next tenant who wants to come starts. So what do I do in this timeframe? Oh, I could rent to a traveling nurse for two months or put it on short-term rentals because I had some extra furniture. And they’re like, “Oh, this is great. I can play with all of these whenever I need them instead of sticking to one thing.”

Dave Meyer:
That was my conversation with Deandra McDonald on BiggerPockets Podcast, episode 1105. We’ll be back with more of 2025’s defining episodes after a quick break. Managing rentals shouldn’t be stressful. That’s why landlords love rent ready. Get rent in your account in just two days, faster cashflow and less waiting. Need to message a tenant? Chat instantly in app so you have no more lost emails or texts. Plus you can schedule maintenance repairs with just a few taps so you’re not stuck playing phone tag. Ready to simplify your rentals? Get six months of rent ready for just $1 using promo code BP2025. Sign up at the Lincoln Bio because the best landlords are using rent ready. Henry, it’s holiday season. What do you get a real estate investor for the holidays?

Henry Washington:
Well, if that real estate investor is me, you can get me a 15-unit apartment building.

Dave Meyer:
Oh, does that work? Do people just send you apartment buildings?

Henry Washington:
They are now.

Dave Meyer:
Well, I got a suggestion actually. If you are looking for a gift to get a real estate investor, buy them a ticket to the upcoming Texas Cashflow Roadshow. We’re going to be in Texas. We’re going to Austin, Houston, and Dallas from January 13th to 16th, and we’re going to be having meetups, workshops, live podcast recording. We’d love to see you all there. So if you’re thinking you got a friend in the Texas area and they’re trying to get into real estate investing, they’re trying to scale their portfolio, go to biggerpockets.com/texas and go buy them a ticket.
Welcome back. Today, we’re revisiting some of the show’s most popular episodes from the year that was. Our next clip has a similar theme. Antoinette Monroe was feeling unfulfilled with her corporate career when she fell into real estate investing almost accidentally. Investing, however, not only gave her the financial freedom to ultimately leave her job, but it also gave her a sense of purpose when she began operating assisted living facilities. Like DeAndra, Antoinette’s story shows that even a small portfolio can make a huge impact on your financial future and your community. This is me with Antoinette from episode number 1120.

Antoinette Monroe:
So I spent that entire first year kind of digging through all of the BiggerPockets forums, listening to all the podcasts to understand, okay, what do you do next when you’ve done this? I learned about house hacking. I realized that that’s what I was doing, but then also the birth strategy. And that is how I got my second deal. So in 2019, I purchased an off-market deal from my neighbor in the neighborhood I grew up in. So I had a direct connect to the seller and that deal I was able to get under contract for under 200,000. It only needed about 30 or 40 worth of work. And through some tips that I got off the bigger pockets for them, I was able to refinance that house and get all of my cash back within 45 days of closing.

Dave Meyer:
Wow. Amazing. I’d love to dig into that because I think this is one of these deals that people listening are going to be like, “I want one of those.” Give me that. So tell me a little bit how the off-market deal comes up because we always hear about off-market deals, they’re great and they kind of are just this magical thing. And I think how did this one come about? Did your neighbor know you were buying houses or tell us about it?

Antoinette Monroe:
Well, no, because at the time I wasn’t. I just had the one house. But my mom knew that I was learning to be a real estate investor and I wanted to do that. So talking to her one day, she mentioned, “Hey, the neighbor across the street, she’s planning to move to Georgia to be with her kids because she’s getting older.” And I was like, “Ah, I know what this is. I heard that podcast. This is a wholesale deal.” So I was like, “Give me her number. I’m going to call her.” And so I called her, found out what she was interested in doing. I went through all of the steps of the things that I learned about from a wholesale deal. I was not a good negotiator. So I was just like, what is it that you want for it? I’ll agree to that because

Dave Meyer:
The numbers worked out. Yeah. Which is kind of a win-win situation, right?

Antoinette Monroe:
Yeah. And so she still talked to a couple different wholesalers and I explained to her, I was like, “They’re going to give you offers. Then they’re going to come and look at it, and then they’re going to whittle that offer down based on the expenses that they have. So they’ll do whatever to get you under contract.” But ultimately, I think I was able to get that deal because of the personal relationship and she was getting the price that she wanted and that was enough for her. So it’s one of those, sometimes the right place, right time. You never know when that deal will come, but if you’re putting out what you’re interested in or what you’re looking for, then people usually try to help. So I told my mom, I want to be a real estate investor. I want to buy more properties. So anytime, now her ears are open when she hears about opportunities, she’s going to think of me and give me a call.

Dave Meyer:
Well, I love that. Good for you. That’s amazing story about sort of this combination of serendipity and circumstance, but also being prepared for it.

Antoinette Monroe:
Being prepared. Yes. If I hadn’t been listening to the podcast, if I hadn’t been doing the research and understanding, that opportunity would’ve came and I wouldn’t have known what to do with it or how to actually make it work.

Dave Meyer:
Yeah. Your mom would’ve said, “Hey, our neighbor’s moving.” You’ve been like, “Oh, cool. I hope they enjoy Georgia.” You wouldn’t have been thinking about how could you potentially create a mutually beneficial situation for yourself and for this person. So it was a single family home, I assume, and your plan was to turn into a rental?

Antoinette Monroe:
Yes. So it was a single family. I put it under contract before I saw it. I just had the memories. I’d been in here before as a kid, similar to my house. That’s kind of fun. But once I closed on it, I came down and saw that they had done an addition to it that made it a much larger single family than I knew. And the layout made it conducive for a split, which is what I did with the first house. I bought a single family, split it in half and kind of made two units out of it right up to the line of being in trouble with code. Just-

Dave Meyer:
Just towing

Antoinette Monroe:
That line.

Dave Meyer:
Yeah. Okay.

Antoinette Monroe:
Yeah. So I saw this opportunity in that house as well, and I did the same thing. I just dropped a wall through the middle of it, made a one bed, one bath studio in the back with a kitchenette because kitchens mean code issues, and then kept the three one in the front. And I was able to rent both sides out, one to a family member, because anytime you’re doing something, there’s always somebody watching. So immediately one half went to a family member, and the other half I used a realtor to get rented out.

Dave Meyer:
Okay, great. You said you bought it for under 200 grand, you had to put 30 or 40 grand in. How did you finance all of that?

Antoinette Monroe:
So with the first project, I had improved it and then added 700 square feet. So there was a good bit of equity in that home.
Nice. I learned on the forms that I should pull home equity lines of credit. So I had one existing and ready to go on that first home. So I was able to buy this outright in cash using the equity from the home equity loan. And then I borrowed private money from my brother-in-law to complete the renovation on that second home. So it was a combination of all the things you learned. There was that home equity line of credit, there was borrowing money from my brother-in-law, and then the hack that I use is my strategy to make single families have twice as much cash flow.

Dave Meyer:
That’s great.

Antoinette Monroe:
Which is splitting them in half.

Dave Meyer:
If you want to hear more of Antoinette’s amazing investing journey, make sure to check out episode 1120. Next up is a conversation I had with Henry Washington in August about the BRRR method. Popularizing the BER is one of BiggerPockets’ biggest contributions to real estate investing. It’s an extremely powerful strategy that allows investors to recycle their cash and scale quickly. But there has been a narrative recently that the BRRR is debt. Some people say it’s outdated in an era with mortgage rates over 6%. So Henry and I wanted to talk this through and discuss whether that’s true and how you can update the BER to still make it work today. This is from episode 1165.

Henry Washington:
It was a whole lot easier to find deals to BER three years ago. We still find them now, but less frequently. Flip numbers tend to make more sense in this market than rental numbers, but because we’re looking for deals in volume and we’re finding deals in volume, every so often we get one that makes a great BER. And then I think you have to put some parameters around BER, mostly like a timeline because you can buy, renovate, rent, and then refinance in a short period of time, or you can do it in a much longer period of time. I’ve refinanced multiple properties this year and pulled cash out of them when I bought them three to five years ago and I just put them on adjustable rates and that adjustable rate now came due. I refinanced it into a 30-year fixed and pulled cash out.
And those long-term BERS are still BERS.

Dave Meyer:
Hernia, that’s a great point. I think it’s a really important caveat because I’ve been calling it the delayed BER or people in YouTube gave me new ideas of what to call it because I suck at this, but I couldn’t come up with a better name of it. We’ll call it the delayed bur. But I think there’s two different things that you can do. One thing I’ve been doing is delaying the renovation. You buy something that’s actually fully occupied rather than vacant and not trying to do the BER on this flipped timeline. Because as you said, there is this approach to doing the BRRR method, which is like, I’m going to do this in six months or whatever. I’m going to get in there, I’m going to renovate it quickly, I’m going to get rent up to market rate, then I’m going to do this cash out and I’m going to go acquire the next deal really rapidly.
And that did work really well for a while. I think it’s hard to line up two deals. Like you’re saying, I can’t do it right now realistically, but even you, Henry, it sounds like it would be hard to even line up to Burr’s in that timeframe where it would even be advantageous for you to even do that. And so what you could do is either take sort of the more delayed approach, which is getting the occupied units and opportunistically renovating when there’s time, or doing the renovation upfront, but not refinancing until you need the capital. I’m actually looking at refinancing a deal I bought like six years ago because it’s cash flowing well, but I think that there’s going to be good deals coming and I’m seeing more deals coming and I just might want to free up some capital. And so I’ll just do the refinance, but it’s way

Henry Washington:
Later. Yep. I think when Burr was originally pitched, it was pitched as a way to scale a real estate business because you could line up back to back Burr’s and you could repeat this process and you can still repeat it. I think the timeline for the normal investor is just going to be longer.

Dave Meyer:
I think that’s right. There is this assumption in this question, and I get this question all the time. I’m sure you do too. Do BER’s work? Is it dead? There is this assumption that the only reason to do a BERR is that you can refinance 100% of your capital out.

Henry Washington:
Full BERS. You got a full BER.

Dave Meyer:
Right, exactly. You need the quote unquote perfect Burr or full BER. But that is not that common. Maybe if you’re doing Henry’s kind of deals and you’re in the right market at the right time, that can be common. But I think if you just kind of like reframe the conversation and don’t assume that you need to take 100% of your capital out, then I would say Burr is absolutely still a way to grow your business. You’re still able to refinance some of your money out and you’re buying, ideally, if you’re doing it right, a cash flowing rental property that you have built equity in, you’re getting some of your money out of it to go scale again. That’s still a win, even if it’s not perfectly super 100% recycling of your capital like it was for that brief moment in time.

Henry Washington:
Can I give you a hot take?

Dave Meyer:
Yes. That’s why you’re here.

Henry Washington:
Even when Burrs were easy to do, I didn’t really like doing them.

Dave Meyer:
Really? Why?

Henry Washington:
I didn’t like pulling my cash out. I liked the cash flow.

Dave Meyer:
That’s the other thing. Yeah.

Henry Washington:
When you refinance a deal, what’s essentially what you’re doing is you’re getting a new loan at a higher amount and that new loan at a higher amount comes with a mortgage payment and that mortgage payment is going to be higher than the previous one because now it’s a higher mortgage. When you get a new mortgage, they front load the interest in the first five to seven years,
And so most of your payment is going to interest. And so you put this money in your pocket and a lot of people, especially the casual investor, may not have had the next Burr lined up. They pulled the cash out of their last Burr and then they blow a chunk of it before they get to their next deal. And then it kills the purpose. What I was doing and what I still like to do is instead of refinance, I just get access to a line of credit on that equity and then that way I don’t get a new loan at a higher amount. I keep my lower mortgage payment, which keeps my cash flow. And then I have access to the money in the event I need it instead of just pulling it out and starting to pay on a new loan and then not spending that money wisely.

Dave Meyer:
Yeah, because that’s a great point. If you don’t immediately reinvest your capital that you pull out, you’re essentially just reducing your cashflow for no reason.

Henry Washington:
Yeah, right.

Dave Meyer:
That to me is a really important thing. If you want to hear more about the slow bur and how Henry and I are both using it in our own portfolios, make sure to go back and check out episode 1165. We’ll be right back. We’re back on the BiggerPockets Podcast going through some of our best episodes of 2025. One of the reasons I personally love having Henry on the show is because he brings so much knowledge and experience when it comes to renovations and value add investing. You heard it on that previous BRRR episode before the break, and you’re going to hear it in our next clip too. Adding value to your properties is one of the key skills for almost every investor making deals right now, because in most places, you can’t just go out there and buy properties off the MLS and get a lot of cash flow.
But with just a little bit of effort, a little bit of improvement, you can drive up values and rent at the same time and make deals work. That’s what episode 1088 from February was all about. Here’s me and Henry again.

Henry Washington:
Now, before we move on, you can sometimes add direct value for under five grand if your property is set up for you to do so.

Dave Meyer:
Yes.

Henry Washington:
An example of this that we did recently, this was in a flip, but could have been a rental, right? And so what happened was we had a two bed, one bath house, and that one bath house had a laundry room, and that laundry room was very big, big enough that it could have been a small bedroom. This house also had a sunroom. Now, this sunroom was not heated and cooled and was dilapidated. And so what we were able What to do was to move the laundry into the sunroom. We finished the sunroom by just putting insulation in the walls and drywalling the ceiling because it was just kind of like an open beam ceiling. We added insulation and drywall in the ceiling. We painted the concrete floor. We moved the laundry in there, and then we added a mini split air conditioning unit into that sunroom.

Dave Meyer:
Nice.

Henry Washington:
So by doing that, we were able to spend probably about five grand. And so we added square footage. Even though it was already under roof, that square footage wasn’t counted in the heated and cooled square footage of the house because there was no air conditioning. So by adding a mini split, we added about 200 square feet to the house. And by moving the laundry into that room, we were able to create a third bedroom. And so that $5,000 allowed us to sell this house for $220,000 instead of $200,000. So I spent five and I sold it for an extra 20. So that’s $15,000 worth of additional value for spending 5,000.

Dave Meyer:
And not that much work. And not even that. Now that’s time.

Henry Washington:
So if you have a property, if you’re listening to this and you have a property and you’re considering doing something like this, do you have a room in that property that is not under roof? Do you have a room in that property that could be a bedroom instead of a dining room? People don’t really use formal dining rooms. I like to convert those to bedrooms.

Dave Meyer:
I just did that in a property the other day. There was a front little thing. I just put a door up. It costs like $600. I’m getting probably two, 250 more a month in rent because of that.

Henry Washington:
Boom. Can you convert a garage? A lot of the times, single car garages, people don’t use to park in. They use to store stuff. I have a couple units in Joplin, Missouri where there’s single car garages. And when I bought the properties, every single one of the garages was stored stuff. No one was parking in it. So we spend about five grand, convert the garage into a bedroom, and now we get an extra three to $500 a month of rent out of each one of those units.

Dave Meyer:
This is really sort of the best advice because I think it’s important for people to realize that this isn’t luck. It’s not like Henry bought this house and was like, “Oh, I found this sunroom and I can convert it. “This is the stuff you need to be looking for when you’re actually going to buy properties because anyone can theoretically add a bedroom. But if you’re popping a top and taking off a roof and rebuilding that, that’s going to be a very expensive proposition. That’s going to take a long time. Or you can find these properties that are set up for it. Those are good examples. I did something very similar with my short-term rental. I wanted a four bedroom house. I needed that to get my revenue. All of them were super expensive, but I found a three bedroom house that had a 400 square foot second living room.
No one was using it. And it’s in a walkout, but it already had an egress window built. So I didn’t even have to do that. It had a closet. It was basically all I needed to do was put up drywall, another bedroom, especially if you’re new to value add. These are the kinds of properties that you can really start to target. The other thing where I invest a lot of places at basements and finishing them out is kind of a no-brainer. You look for ones that have the right ceiling height,
That have a good foundation, that have big enough windows for egress. You don’t want to dig out the foundation, but those types of things, that’s just really easy types of value add that really have a tangible, measurable, proven way of adding value.

Henry Washington:
One of the first things you want to look for are look for homes that have bedroom and bathroom counts where the square footage seems too big for that bedroom and bathroom

Dave Meyer:
Count. Yes. Yeah. Like a 2,400 square foot with two beds.

Henry Washington:
Yes,

Dave Meyer:
Exactly. That’s not right.

Henry Washington:
If you’ve got over 2,000 square feet, two bedroom house, there is room to convert something to a bedroom. There is room to add some value. If you’re looking at a three bed, two bathhouse and it’s got 2,500 to 3,500 square feet, there’s probably room. Look for properties that have sunrooms. Sunrooms typically are not heated and cooled. And you can easily add some drywall and add some flooring and add some insulation and a mini split air conditioning unit and you can get added square footage.

Dave Meyer:
No, sorry. I’m just laughing because this is just bringing up my childhood. My dad did this where he converted a sunroom to my bedroom. I just think he skipped the insulation and adding heat part because it was just freezing my entire life. And this was in New York. I was just always cold. There was never heat. I think he might’ve missed that critical step.

Henry Washington:
Yes. Yes. Sunrooms, we have made a lot of money by converting sunrooms to heated and cooled square footage. And they’re easy properties to find. It’s typically called out on the MLS listings that they have those features. And so you can literally search for them. A lot of them are not heated and cooled. And yes, you can look for properties with basement units. And Dave is absolutely right. When you’re looking at properties with basements, you want to make sure you check that ceiling height and check the egress size of the windows because you want to be able to legally get somebody in and out of that window in the case of an emergency for it to be counted as an actual bedroom. And then you can also look at properties with single car garages because properties with single car garages give you the option. You can convert those single car garages to bedrooms.
But when you’re looking for that, you want to make sure you check the competing properties in that neighborhood because you don’t want to be the only house with a converted garage. You want to make sure that that is something that is happening within the neighborhood because if you’re the only one, then your desirability goes down.

Dave Meyer:
My personal favorite these days that I’ve been looking for, and I’ve done this in the past too, is I love a basement that is the ceiling height that has a separate entrance.

Henry Washington:
Oh yeah, absolutely.

Dave Meyer:
Especially now with all the upzoning that’s going on in areas, you could turn places into second units. Check the zoning, but the upside of adding a whole nother unit
Is just enormous. And yeah, we’ve sort of gone on a tangent here. We started with five grand. Now we’re just talking about the best value. That’s 30 grand, 40 grand, something like that. But a whole unit, I mean, that’s going to pay for itself in a year or two. That’s an incredible return on your investment. So that’s something I definitely look for. All right. Those were highlights from our top episodes of 2025. I hope you all enjoyed revisiting these great episodes as much as I did. I hope you are all enjoying the holiday season as well with your friends and family. We will be back in the new year with brand new episodes starting on January 2nd. I’ll see you then.

Ashley:
Welcome back to another episode of Real Estate Rookie. I’m Ashley Kehr. We are heading into the final stretch of the year. The gifts are piling up under the tree, and while everyone else is winding down for the holidays, we are teaming you up for what could be one of the most important market conversations of the next few years. But before we do that, I want to thank the rookie audience for another wonderful year together. To all the guests that have taken the time to share their story, successes, and lessons learned, the rookies listening wouldn’t be where they are today without you. I am so inspired all the time by the action taken by you all, the honesty, the vulnerability, and the community. I can’t wait to see what 2026 brings us all. Today’s rerun is from the podcast On The Market. This episode features Redfin’s head of economics research, and she talks about the housing market having a full reset in 2026.
Not a flashy overnight change, but the start of a long, steady ship that could finally bring buyers the affordability and normalcy they have been waiting for. In this episode, Chen walks us through 11 predictions her team believes will define the next cycle. We break down what could happen with mortgage rates, home prices, rents, refinancing opportunities, and overall transaction volume. We even talk about how AI might soon become a matchmaker for American home buyers. And if you are an investor or landlord, pay attention. Hidden inside these predictions is one trend that could directly impact your cashflow in a very good way as we head into 2026. Settle in, grab a holiday cookie and enjoy this timely rerun as we look ahead as to what could be the beginning of a new chapter in the housing market.

Tony:
2026 is shaping up to be the start of what Redfin calls the Great Housing Reset. A long, slow period where affordability improves and the market normalizes, not a quick flip or a recession. I’m Dave Meyer, and today I’m joined by Redfin’s head of economic research, Chenzao, to unpack their new annual predictions report. We’ll dive into each of their 11 predictions and walk through the headline calls from rate cuts to sales inching up, rents reaccelerating, and which markets are likely to heat up or cool down. This is On The Market. Let’s get into it. Jen, welcome back to On The Market. Thanks so much for joining us again.

Chen:
Thanks so much for having me, Dave.

Tony:
This is one of our favorite shows of the year hearing what Redfin has for predictions. So maybe just start by telling us sort of like big headline, what are you seeing? What’s the big top level narrative about the market in 26?

Chen:
I’d say the headline is that we see the housing market taking a bit of a turn. I think it’s already starting a little bit this year, but we think is going to continue next year. And it’s going to be a bit of a longer, what we’re calling a reset of the housing market where we think affordability will start to slowly change. And affordability really has been the big challenge for the housing market, as we all know, but there’s no silver bullet, there’s no magical fix. It’s going to take a while, and we think next year is the start of better affordability for home buyers.

Tony:
That is music to my ears. I think I saw something you all put out that affordability was the best it’s been in two or three years, just in the second half of 2025. So it seems like that trend is already emerging.

Chen:
Yes. I think we’re starting to see the beginnings of that trend in the second half of 2025. So namely, the two important factors are mortgage rates and home prices. So we know that mortgage rates have come down a little bit. We expect them to stay lower. We can get into more of that. And then home prices, we know the home prices are not growing as fast as they were.This has to do with the shift from a seller’s market to a buyer’s market. And we can talk about how we expect that to continue for the next few years and what the underlying forces are.

Tony:
All right, great. Well, I tend to agree with the overall sort of thesis here. I think you guys called it the housing reset. I’ve called it sort of the great stall where I think prices just kind of stay stagnant for a while, but let’s get into the specific predictions that you all have. So what is the first one?

Chen:
The first one is about mortgage rates. So right now, mortgage rates are in the low sixes, 6.2, 6.3%. We think they’re staying here. I think another way of putting this is that we don’t expect mortgage rates to get into the fives, not for any sustained period of time. We know that mortgage rates fluctuate. Sometimes you get a little bounced down, but I don’t think it’ll stay there. We also don’t really expect mortgage rates to get back up to 7% either. I think the important thing they’re here to focus on is, of course, always the Fed and what they’re thinking about. And they’re always balancing this dual mandate that they have. So is it preventing high inflation, just trying to keep inflation low and steady, and also trying to keep unemployment from going up. So right now, the economy is in a very delicate balance. We know that the higher tariff rates have slowed economic growth.
They also threaten to increase inflation, even though we haven’t seen as much of that so far. But that means that the Fed has a really unique challenge on its hands. So even for the meeting that’s happening next Wednesday, it’s a bit of an open question. What are they going to be doing going forward? But because they’re in this delicate balance, there’s not much room for them to cut a lot, but we also don’t think they’re going to be hiking. So that means we’re sort of stuck here with where mortgage rates are. And then the other thing you have to keep in mind is that there’s this big transition happening next year with the Fed. The president will be nominating a new chair of the Federal Reserve. The chair is only one of 12 votes on the FOMC. So contrary to some of the stuff that you see in the press, the chair of the Federal Reserve does not set interest rate policy.
He or she is one person on that committee, but it is a very important person. And that transition is something that we also have to keep really close tabs on.

Tony:
Got it. Okay. So not expecting a lot of movement either way. It does seem kind of stuck. We have these dual, I guess you would call threats to the economy right now where inflation has been … We don’t have a lot of inflation data for the last couple of months, but inflation prior to the government shutdown had been ticking up a little bit and job losses, it seems like every print tells us a different story. So it’s just really hard to understand what’s going on there. And until we get clear line of sight on one of those things and which one is really going to be the bigger issue or which one gets cleared up first, I agree with you that it’s not going to move much. I’m curious, just the last couple days, the Fed stopped quantitative tightening. Do you think there’s any chance that the Fed does something more dramatic next year to impact mortgage rates, like maybe quantitative easing or something like that?

Chen:
I don’t think so. I think that the communications that we’ve gotten from the Fed is pretty clear on this, that they want to pivot away from mortgage-backed securities and pivot towards a portfolio of treasury securities. And this idea that’s been floated a few times, I’ve seen some op-eds about it saying, “Hey, look, higher mortgage rates is really killing the housing industry. Can we do something for housing? Maybe that means the Fed buys MBS.” It’s really hard to imagine that they would choose to do something like that when you still have so much lingering inflation risk from higher tariff rates because you have to remember that housing is still the largest component of course CPI or PCE, whichever your favorite measure is. And so if you were to stoke the housing market right now, what you would see is that home prices would just shoot up.
And they really just, after all the stars and PTSD from the last few years with high inflation, I just can’t imagine that they would really choose to do that. And Chair Powell has been asked about this a few times in his press conferences, and he has said each time very consistently, “The problem in the housing market is that there needs to be more supply.” And we all know this very well. We say it all the time. That’s a very hard problem to solve. And put another way, I think, another way to look at it is in the housing market, what we need is for prices to come down. We’re in a new economic era now after the pandemic where rates are just going to be sitting higher. I often like to talk about this in terms of people’s metabolisms. As you age, your metabolism changes.
You need to change what you eat, and it’s a little bit like that for the housing market. So we actually do need to just see lower home prices. That’s the right way to get the housing market back to a healthy state.

Tony:
I agree with you there. So do you think that’s going to happen? Maybe I’m skipping ahead on your predictions, but do you think that will happen that we’ll see home prices decline?

Chen:
We’re already starting to see it this year. So we started the year with home prices increasing about 5% year over year. We’re down to about two, three-ish percent, depending on exactly how you want to measure it, what specific metrics you want to look at. So it’s come down a lot, and it came down a lot because the change of home buyers to home sellers has changed. So Redfin has this proprietary metric that we put out that we call active buyers and sellers. So sellers is really easy. It’s just amount of inventory in the market. The number of buyers is something that we impute from some of our proprietary data where if we can see how many homes are selling and we know how long it takes people to find homes and how long it takes to sell homes, we can put all that together in a model and say, “This implies that there are this many buyers in the housing market actively looking right now.” And what we saw was that that gap got really large in the spring of this year.
There was about 37% more home sellers than home buyers across the country, and most housing markets were tipping from being seller’s markets to being buyers markets. So that ratio of sellers to buyers has a very close relationship to home price growth with a lead of about six months or so. So what we’re seeing is that that shift has led to home price depreciation really slowing down. And it’s hard to imagine as we continue to follow this metric and that gap continues to be historically large, that it’s hard to imagine that home price growth will accelerate again. And then especially if you layer on top of that, what we see happening with demographics. So we know that immigration into this country has were more or less halted. We also know that the underlying demographics of the country means that there’s going to be smaller populations going forward, that it’s really hard to imagine that home prices will actually be appreciating that rapidly in the near or medium term.
But on the other hand, it’s also difficult to imagine that home prices will really be falling dramatically because as we all know, people don’t have to sell their homes. You can choose to rent it out, you can choose to continue to live in it. And we actually put out a report, I believe it was last week, looking at de- listings, and we saw that the fraction of homes that are being de- listed in 2025 was about 5.5%. That was up from about 4.8% last year, which doesn’t sound like a huge increase, but that fraction has been very constant, like below 5% for the last eight to 10 years. So that means that that increase is actually meaningful. It doesn’t sound like a huge amount, but it’s a pretty meaningful increase. And what we saw was that the homes that are being de- listed are people who bought more recently.
They don’t want to sell where buyers are willing to pay right now. So buyers and sellers are just sort of far apart. And so as long as home sellers aren’t willing to go where buyers need them to go, it’s actually very hard for prices to also fall.

Tony:
Yeah. I actually, we did a whole show on that report about de- listings because I think it’s super interesting. And to me, it just reflects that sellers are responding appropriately to the market because I think a lot of the crash narratives that you hear about are there’s going to be panic selling or there’s going to be this sort of downward spiral of increasing inventory, but what you’re seeing is a normal reaction. People don’t want to sell at a loss, and they don’t have to. There’s no forced selling going on, so they’re just choosing not to sell. I think it’s personally, I’m curious to see if they come back on in the spring, because I have a lot of friends who are house flippers, a lot of them are pulling them off and we’ll do it in the spring. But I think that to me is a sign that you’re correct that it’s going to be sort of a boring year price-wise for the housing market.

Chen:
Yeah. I mean, we’re going to continue to publish this de- listings data pretty regularly, and we will also be publishing who is de- listing and are they relisting the home? So we should see that in the spring if they are coming back on the market. It is boring, I guess in some sense to say, look, home prices are going to maybe increasing 1% or 2%, something very low. But it’s actually a meaningful change for buyers because what that means is that home prices are growing slower than wages. And that is what buyers actually need. They need time for wages to catch up to where home prices are. Because home prices are not going to be falling, this is the only mechanism that we have in order to get to this place where we need to go where homes are more affordable for people where their incomes actually are.
And that’s what we think will be happening next year.

Tony:
So that is your second prediction, right, for next year?

Chen:
Yes. Essentially that home prices are going to be growing slower than wages. And this is the step that you need for affordability. But importantly, this kind of progress is very slow. So it might not even be very noticeable to a lot of buyers after the first year. We don’t expect affordability to all of a sudden jump back to where it was before the pandemic. It’s going to be a slow process, maybe five to six years. It might take a while for buyers to actually notice, “Hey, affordability has gotten better.”

Tony:
That makes sense. And just for everyone who is listening, we’ve been talking about this on the show recently, but what Chen is talking about also reflects the difference between nominal and real home prices because Chen said prices might go up one to 2%. That’s the price you see on Redfin if you were going to go look. But when you actually compare that increase to inflation to wages, they’re actually negative. And I know that sounds negative to some people, but that means affordability is improving. That’s how we’re actually getting affordability. And right now it’s baby steps towards affordability, but we can get back towards meaningful improvements in affordability over time. If real home prices stay kind of flat and wages keep growing, that’s a normal way that we get affordability back into the housing market. All right. So we’ve gone through our first two predictions from you, which was first about mortgage rates dipping into the low sixes, but staying there.
Prediction two, home buying affordability will improve as wages grow faster than prices. What’s the third one?

Chen:
The third one is about sales. So we think that sales will inch up just slightly next year. So we’re thinking about existing home sales very specifically. It’s been about 4.1 million. It’s going to be 4.1 million again this year-ish. Next year, we’re forecasting 4.2 million. It’s not a lot. Historically, it’s very, very low actually. It’s only up about 3% from where we think we will end this year. I think that the increased affordability means you just get a little bit more activity in the market, but by and large, what we’re describing with buyers and sellers really just being at the stalemate means that you’re not going to get this huge pickup in the housing market next year.

Tony:
I hope you’re wrong about this, but I agree with you. I just think for this whole industry, it would be great if we had more sales volume. It just feels like it’s been so sluggish and slow. And for anyone who’s a lender, an agent, it’s been a tough slog. And hopefully though, at least this is a sign in the right direction. It’s got to bottom out at some point. And maybe this means that we’re moving towards better home sales volume, maybe not in 2026, a little bit better, but maybe in the years after that, we’ll start getting towards a more normal level of sales volume. Chen, what is the fourth prediction Redfin has this year?

Chen:
It’s about rents. So as we all know, rents have been really flat to slightly declining for a number of years now. We think that next year, rents will start to tick up just a little bit, probably towards the back half of the year. We know that multifamily construction has really slowed. There’s also increased demand from people not buying a home for renting. So the combination of those two things means that we probably just get the smallest uptick in rents. It might mean that you were talking about this difference between nominal and real price growth. Right now, rents are falling on a real basis once you adjust for inflation. By some metrics, they’re actually falling on a nominal basis. We think we might get to somewhere where it’s flat on a real basis. So rents are keeping up with inflation in other words.

Tony:
And that’s based on mostly just the supply glut that we’ve sort of been in from multifamily dissipating.

Chen:
Exactly. I think that’s the main motivation here, but we also think that this continued affordability challenge, that just doesn’t take a long time to work through on the purchase side means you just get higher demand still. We also know that the economy has gotten a lot weaker. The labor market’s weaker. We’re sort of on the edge of a recession, probably won’t fall into a recession, but that will keep enough people renting rather than buying.

Tony:
That’s interesting because I noticed the same thing. I saw some stat that the unemployment rate for people under 25 is like 9% right now. These kinds of numbers that I don’t know if we go into a recession or not, but it made me wonder if it will weigh on household formation because I think you’re right, we’ll have a higher percentage of people renting, but for rental demand to keep up, we need household growth, but I’m curious if you have any thoughts on that, if that’s going to slow down or where that will go.

Chen:
We do think that the slower economic growth will weigh on household formation a little bit, but the economy, there’s a lot of headlines right now about the negative jobs data that we’re seeing. The government shutdown means that we just haven’t gotten great official jobs data, so we still need to wait for that. And the reality of the labor market is that it has slowed down a lot, but it’s still staying afloat and the economy is still staying afloat. So that makes me think that we won’t get a huge impact yet on household formation, but housing costs remain high. So we do think there are going to be some impacts on things like household formation and also on things like people deciding to start a family. So our fifth prediction is that affordability means people have more roommates, we say fewer babies, meaning that maybe you want to get into a bigger home before you start to have kids, but you’re finding that to be really challenging.
So you’re going to delay that for a little while. And as I was saying before, we do think housing affordability will improve, but it’s going to take a number of years. So that will weigh on some of these factors for families.

Tony:
Got it. Okay. I mean, that makes sense to me. I do think people are stretched and it’s going to be hard for people to go out and form a new household. Just for everyone knows, household formation, it’s a little bit different than population growth. It’s basically measuring the total demand for housing units. So for example, if two roommates are living together, then they each decide to go out and get their own apartment. Doesn’t change the population of a city or the country, but that adds one more household and that adds one more unit of demand. That could happen when a young person moves out of their parents’ house or if two people split up and they decide to have two homes. So that’s what we’re talking about. And that’s just an ongoing question I have, particularly as it relates to rents. So we actually, we got a twofer on that one.
We did prediction four and five at the same time. So what is prediction six?

Chen:
Prediction six is about policy. So housing affordability has become the paramount issue in policy. I think for what we saw in the last election cycle is that it is the decisive issue actually, or it will be in a lot of elections. And I think both parties know this and candidates who are running for office also know this. So our prediction is that there will be a lot of serious proposals brought forward. It is, as is always the case in policy, some of them will be useful and some of them may not be that useful at the end of the day. We know that in order to really address housing affordability, you have to build more supply, but that is really, really hard to do because it’s controlled by thousands of local jurisdictions. A good portion of the population has a vested interest in not allowing there to be more supply.
So this is a very tricky problem to solve and it’s going to require really innovative policy solutions because quite frankly, no one’s really solved this problem. And it’s been a problem for a long time. We know that the country is short, many millions of housing units, but across the country when you’re looking at election results, you can see that this really is the main issue that’s on the minds of voters.

Tony:
Well, I hope you’re right. I do hope that we start to see some sensible policies here. I was getting interviewed the other day and I was saying, I feel like the real hard thing here is that policies that actually help are not really well aligned with the election cycles in the United States because adding supply takes years. We could start now and it could take three years, it could take five years, it takes seven years. And politicians, both sides of the aisle, they’re trying to get reelected every two years or every four years. And so oftentimes I think what frustrates me is the solutions that get the most traction are the short-term ones that might maybe make a dent in the short run, but aren’t really kind of going after the supply issue. I’m curious if you have any thoughts on what’s some good policies or any examples of policies that could actually help here?
Because I totally agree this is a huge problem for the country and needs to be fixed.

Chen:
To me, I think there are local jurisdictions that have made some progress by making it easier, taking away red tape, maybe introducing ADUs or manufactured housing, all these different types of innovation to try to add some supply. It’s not a silver bullet and it’s not enough supply, although we shouldn’t discount that there is some progress being made. I think in order for there to be a consolidated federal push, the difficulty is that the federal government is involved in the housing market mostly on the financing side. It’s not on the supply side. But the federal government has a lot of sticks and carrots that it can use when talking to local jurisdictions because local governments get a lot of funding from the federal government. I think if there was a way to use these carrots and sticks and ties and funding to outcomes in local jurisdictions, that could be a really promising solution.
I don’t know that this has been tried very much in a sort of meaningful way, but that would be something to explore. Most of the proposals that get put forward are on the demand side. And as we all know, that’s not actually what is helpful. We just have to address what is actually happening on the supply side.

Tony:
Yeah, that makes a lot of sense because just as an example, demand side policies, if you subsidize buyers or you lower mortgage rates or to figure out some way to help people buy, that can be helpful for a minute, but then it just pushes the price of homes up and you still have the same long-term structural affordability challenges, right?

Chen:
Exactly. It makes the problem actually worse in the long run. It’s very myopic and it’s really honestly the last thing that we need. I often do, when I’m thinking about housing policy and the affordability issue, we have to take our medicine. You can’t have your cake and eat it at the same time. At some point, you have to take your medicine. And I think that’s the really hard part because no one really does because most people who own homes, the majority of their wealth is in their home.

Tony:
So it’s hard. Yeah, I get that. People want more affordability without making their home go down in value. That is a tricky thing to pull off. I’ve said this on the show a few times. I like your saying, take your medicine. We’re in an unhealthy place in the housing market, and to get back to health, there’s going to be some pain somewhere. You don’t get a magic redo. And so I personally think the slow, you guys are calling the great reset or call the great stall, I think that’s kind of a good balance personally. If we can add more supply gradually, if wages can go up, this is a tolerable way for affordability to get restored without the bottom falling out of the market and homeowners losing a ton of equity and wealth. And so I’m encouraged by some of the market dynamics, but I do think the policy thing is still the missing piece.
There’s no coherent policy from anyone. I’m not blaming one party or the other. There is no coherent policy from anyone about how we’re going to do better.

Chen:
Yeah. And it’s an incredibly tricky problem to solve.

Tony:
All right, let’s move on to our seventh prediction. What do you got?

Chen:
So our sum of the prediction is that more people will refi and remodel. So when we think about refi, I think we’re thinking about it in two different ways. One is simply that over the last few years, actually a lot of people have bought homes at really high mortgage rates. So right now about 20% of people who have a mortgage have a rate above 6%. So as rates fall into that below sixes, you actually have a healthy number of people who will be in the money for a refi. So we do expect that refi volume will increase about 30% next year. Oh, wow. So it’s off a very small base, so we have to remember that. But that is meaningful because 6.3% mortgage rates sounds pretty high. But if you remember that we were at 6.8%, then 6.8%, then I think this year was 6.6% probably average for the year.
We’re coming down very, very slowly and it’s enough of a change that you will have people who are going to be in the money for a refi. The other is just that, as we all know, a lot of people have a lot of equity in their homes, but they’re also still stuck. They can’t afford to move on to a bigger house. So a lot of them probably will start to, if they haven’t already, tap into that home equity. I think renovation will continue to be a hot topic where people are going to be trying to make the space that they have work for them.

Tony:
Let’s keep moving. Chen, what is prediction number eight?

Chen:
So prediction number eight is about different regions of the country. So we think that the markets that are going to be hot in 2026 are really a lot of these suburbs around New York City that right now are some of our strongest markets. Also, some of the metros in the Midwest, which are among the more affordable places. On the flip side, we think that the places that we’re really seeing that are among our weaker markets in the Sunbelt in Florida and Texas, these are going to continue to be the weaker markets in 2026. So there is this back to office return to office trend that is just continuing to happen. It is, I think, going to be more of a trend in a weaker housing market because employers just have more of the upper hand. Right now, people who are looking for jobs are having a really difficult time finding jobs.
So when they say three days is now four days, four days is now five days, or you just have to … I think there’s going to be more of that happening, but still some people will remain hybrid. So not everyone’s going to be looking to move to Manhattan, but a lot of people are going to be looking to move to Long Island and New Jersey or Westchester. And so these are the markets that are sellers markets, even though most of the country is made up of buyer’s markets at this point.

Tony:
And how do you see the spread here? Over the last couple years, we’ve seen dramatic differences. If you looked at 24, 25, there are markets like Milwaukee were up seven, 8%, there’s Austin down 78%. That was a pretty big spread between the top and bottom performing markets. Do you see that consolidating a little bit?

Chen:
Yes. I mean, there are places, especially in Florida and Texas, these are your weakest markets right now. When you compare them to what’s happening on Long Island, they’re worlds apart right now. But what we’re continuing to see in places like Florida and Texas is that a lot of these metros have 100, 150, sometimes 200% more sellers than there are buyers.

Tony:
Oh my

Chen:
God. And as I was saying, that metric tends to be forward-looking by about six months. So that means that probably over the next six months to a year, if we continue to see this spread between buyers and sellers being so big, these markets are going to continue to be pretty weak.

Tony:
And what about the hotter markets? Is this modest growth, two, 3%, or something higher than

Chen:
That? It feels like these markets, if anything, are actually heating up a little bit. Not a ton. Demand is kind of slow in general.That’s an overarching thing everywhere, but it’s still, relatively speaking, they seem to be heating up. And a lot of these markets like Boston or Long Island around New York City, these are places where you’re still maintaining a healthy distance where there’s more buyers than sellers. And so that feels like it’s something to sustain the price growth that we’re seeing.

Tony:
Well, this will be an interesting one to watch because the market is … We talk on the show all the time about the national market, but clearly as Chen just pointed out, we have very different markets. And as an investor or homeowner, you need to be looking at what’s going on in your individual market to formulate your strategy. All right, let’s go to our ninth prediction. We’re flying through these. Which one’s that, Jen?

Chen:
It’s about climate migration. So we think that this is going to be more of a local story than a cross-metro story in 2026. So we know that with climate change, that this has become more on the minds of buyers. So people are paying attention to climate data when they see it on real estate portals. We know that insurance has become a real issue when it comes to affordability in the housing market. But when buyers are thinking about where to live, they have so many different issues that they have to contend with. They think about where’s your family? Where are the jobs? So instead of saying people aren’t going to be living in Florida, maybe they need to be in Florida for some other reason. They might be thinking about, I need to live in this part of the city rather than this other part of the city, which might be more prone to disaster risk.
So I think that feels, I think, more realistic for home buyers who have to contend with a number of different factors when they’re thinking about where to buy a house.

Tony:
How do you measure that? How do you know people are … If you see someone move within a city, how do you know it’s because of climate risk?

Chen:
I think one really good way to do this, and it’s hard to have all the data in place in order to really do this analysis well, is to look at insurance costs because really when talking about climate risk, it’s manifested through insurance costs. So I think if you were able to look at insurance costs and then tie that to housing market activity, and we have a pretty good measure of demand in the housing market right now through our buyers and sellers metric, that could help you to see this relationship clearly even within a broader metro area, I think.

Tony:
And I’m curious, you said you see this happening just in 2026. Do you think there is potential for cross-metro migration in the future or do you not have that information?

Chen:
I think if you’re thinking further out when you’re thinking about disaster risk or insurance costs, this is, I think, one lingering big risk for the housing market. It’s a little bit hard to know exactly where it goes many, many years from now though. I think it really depends on what we actually see happening in insurance markets, what mortgage companies decide to do in terms of thinking about the risks and who’s owning the risk for the properties that are mortgaged and have this disaster risk. So it’s a little bit harder to see, but certainly I think it wouldn’t be out of the question for there to be a cross-metro migration.

Tony:
Thank you. All right, we have two more predictions to go. What’s number 10?

Chen:
So number 10 is really about the industry. We think that with so many MLSs out there, the National Association of Realtors is going to just take a little bit of a step back, let the MLSs set more of their own rules. This is something that’s really already starting to happen. So it’s more of a continuation prediction than a change. And NAR is really going to, for its part, actually spend more time on advocacy instead.

Tony:
Oh, okay. Interesting. Do you think it’s just given a lot of challenges NAR has faced in the last couple years, they kind of have to pick and choose where they’re going to spend their energy?

Chen:
Yes, I think so. I think it makes sense as a continuation of the turmoil in the industry that we’ve seen over these last few years.

Tony:
I think that makes sense, just being a casual observer of how much … Yeah, like you said, there’s been a lot of turmoil in the industry. So that brings us to our last prediction, number 11. What do you got?

Chen:
Well, number 11 is about everyone’s favorite topic, AI. Can’t

Tony:
Escape AI, right? Yes, got to talk. I can’t go through a podcast without talking about AI.

Chen:
Of course. Yeah. So 11 to prediction is that AI will become a real estate matchmaker. We’re already starting to see this. AI is infiltrating basically every aspect of our lives. We think that AI is really increasingly going to help people decide where to live, which homes to buy. It’s just going to start to play a bigger role. Redfin has conversational search now on our website. We’ve seen that a lot of the users who are using it are really happy with the results because it means that instead of going through the search filters, you can have a conversation and describe what you want in your home search. And that’s very appealing to a lot of people. People are also going to use AI to just do research and look into which cities or which towns have the characteristics that our family is looking for. So this is still technology that’s very much in its early stages, even though it seems like it’s dominating the news all the time.
But over the next few years, it’s hard to imagine that AI wouldn’t play a much bigger role in real estate search.

Tony:
I think so too. I think the search part really makes a lot of sense. That seems right up AI, Zali. I’ve seen some predictions that people are saying they’re going to help negotiations or coordinate transactions. What do you think about that side of things?

Chen:
That feels like if that happens, it has to be further down the road. Because when you bring AI into a role like that, I think there’s also a bit of a trust issue where people … When you’re thinking about what is the difference between AI and a human, most humans will probably say, “Well, I trust another human more than I trust AI.” Like I was saying, the technology is still in its early days. There’s so much for us to learn about it right now. So the search component feels like the obvious place where it can really make a positive change right now, but a few years down the road, who knows?

Tony:
I agree with you. Long-term, probably going to disrupt everything. But right now, I think a lot of people are sort of saying AI can do things that can’t yet, at least not in a reliable way. But I think search, research, gathering data, those kinds of things it is already pretty good at. And so this makes a lot of sense to me. All right. Well, thank you so much, Chen, for being here. This is a lot of fun. It’s always fun talking through these predictions and seeing how they play out through the rest of the year. Thank you for being here and for all the amazing research you and your team at Redfin put out. We are always talking about your work here on On the Market.

Chen:
Well, thanks so much. It’s always fun coming on here, so thank you for having us.

Tony:
Absolutely. And thank you all so much for listening to this episode of On The Market. We’ll see you next time. I