Dave:
Real estate investing is about to get easier, much easier in 2026. Deals are getting easier to find. Homes are sitting on the market longer. Rates are actually starting to come down and buyers finally have more choices. But the average American may miss this. Many people are looking at the housing market and they don’t like what they see. Meanwhile, small investors, they’re buying, they’re building wealth, and they’re more optimistic about 2026 than ever. So what do they know that the average American doesn’t? What opportunities are appearing in the market that you don’t want to miss? We’re breaking it all down today in the 2026 state of real estate investing. I’m going to give you the exact strategies that are primed to work in 2026. I’ll share my vision of the housing market and where we’re heading, and I’ll explain why waiting for a crash may be the single most expensive mistake that you can make.
The 2026 state of real estate investing starts now.
Hey, everyone. Welcome to the BiggerPockets Podcast and happy new year. I’m Dave Meyer, investor, analyst, and head of real estate investing at BiggerPockets. It is so great to start a new year here on the BiggerPockets Podcast with all of you. This is an exciting time of year. It’s time to set ambitious goals, to map out your plans for the year and to put yourself on track towards the life you want for yourself and for your family. But I want to just start by saying, I think there are good opportunities coming for real estate investors in 2026. These are better opportunities that I’ve seen honestly in years, and it just gets me excited in general to be in this industry at this time. So in our show today, that’s what we’re going to be covering. I’m going to run through my state of real estate investing report as I do every year.
It’s basically my outlook for the housing market and investing conditions for the year. I’ll share my personal strategy that I am working on for 2026. We’re going to talk about better inventory that’s on the market, better deal flow, better cash flow possibilities out there. Yes, that is absolutely happening. We’ll talk about improving affordability, the outlook for housing prices and mortgage rates, whether you should wait for a crash and more. We do have a packed episode today and I want to get right into it, but first, I just have a little bit of a teaser for you because on Wednesday show, the next show that comes out, we have a fun announcement to make. I personally could not be more excited about this announcement. It is a huge win for this show and the BiggerPockets community, but I will say no more. You got to tune in on Wednesday.
So with that, let’s get into our 2026 state of real estate investing. So what is the state of real estate investing in 2026? If I had to pick just one word for it, I always try and just narrow it down to one word. And my word for 2026 is improving. Things are getting better for real estate investors after several tough years. I doubt I need to tell any of you this, but deals over the last couple years, they’ve been pretty hard to find. Cash flow has been tough. Financing is hard. Uncertainty has been super high and nothing is perfect. We still have a long way to go in the housing market to get back to normal, to get back to healthy, but it does in many ways feel like we’ve turned a corner, at least from my perspective. I am personally not super bothered by a modest correction in the housing market like the one I think we’re in.
I actually think this is a step in the right direction to a more affordable, a more predictable, a more productive housing market. And at the same time, those changes makes investing easier for real estate investors because every single market has its trade-offs. When things are going up like crazy, like it was during the pandemic, yeah, it can boost returns. That is the benefit of that kind of market. But there’s also a downside to those kinds of market where deal flow was hard. Cashflow was harder to find. Now we’re transitioning and we’re sort of getting the opposite, right? Maybe appreciation is not going to be great over the next couple years, and we’ll talk about that. But that means at the same time, there’s better inventory. Great assets are on sale right now. There’s less competition. So let’s look a little bit at some of these specific things that are improving for real estate investors.
The first one, like I said, is deal flow. I think this is the thing that gets me really excited right now because it has been a slog looking for deals since at least 2022, maybe even earlier. Even during 2020 and 2021, it was hard to find good deals. But right now, inventory is getting better. That means there are more homes for sale on the market. It’s not crazy. It’s not like we’re seeing some flood of inventory that’s going to lead to a crash, but it’s getting better. That means there are more options for us as real estate investors to choose from. Affordability is going up. This one just honestly, it warms my heart. We have had years and years of declining affordability. You’ve probably heard me say this on the show, but housing affordability the last couple years have been near 40 year lows. And although we still have a long way to go, don’t get me wrong, housing is not affordable yet.
Just this last data that we have from October of 2025, it is the best affordability we’ve seen in three years. As investors, this really helps. We’re also seeing days on market go up. This leads to better negotiating leverage. When sellers are seeing their properties sit on the market longer and longer, it makes them more likely, more willing to cut a deal that also benefits us as real estate investors. The next one might surprise you, but cashflow is actually getting better. If you think about a correcting market like the one that we’re in, even if home prices in your local market are staying stagnant, but rents are continuing to grow, which on a national level they are. Most of the forecasts I’ve seen for rent expect modest rent growth in the next year. That means that cashflow prospects are getting better. Now, I’m not saying it’s back to 2019 levels.
It’s slow, but they’re starting to get better. And competition is going down because there’s just more homes on the market. Demand actually hasn’t come down that much, but since there is more supply on the market, that means relatively there is less competition. All these things combined, these are things that we can and should be celebrating. It is a reason, in my opinion, for optimism. And I am not the only one here. I look at these things and I don’t see, oh man, the housing market might be flat. Maybe it will decline a couple years and think, “Oh, this is risky.” I don’t see this so much as risk as I see it as opportunity, reason for optimism. Now, again, not everything’s great. Like with any market, there are trade-offs and this market is no exception. Prices are pretty stagnant. Prices might fall in some places.
So appreciation is going to be lower. I personally think the risk of a crash is relatively low. Affordability, even though it’s getting a little bit better, it’s still pretty rough out there. And rent growth, although I think most forecasters are saying it will go up a little bit, probably not going to be a banner year for rent growth in 2026. So given these trade-offs, the fact that deal flow is getting better, but there are some downsides to the market. How do we invest? How do we move forward in a market where there is both opportunity and there is risk? What do we do? Should we wait to get more clarity? Some people might advocate for that, but personally, I don’t think that’s the right strategy. First of all, and this is kind of always true, no market is without risk. That’s just not how it works.
That’s not how investing works. There is always risk. So just remember that you can’t wait for a perfect market because it’s never going to happen. And the second thing is that financial freedom isn’t going to find you. It’s not going to present itself all wrapped up in a perfect package. You have to go out and get it. And in my opinion, now is as good a time as any. So waiting, especially because I don’t personally think there’s going to be a crash, is not really going to help you. Instead, what you got to do is focus on what tactics and what strategies are going to work well in 2026. So we’re going to pivot our conversation to that, what works well in 2026, but we do need to take a quick break. We’ll be right back. As a real estate investor, the last thing I want to do, or the last thing I have time for is playing accountant, banker, and debt collector all at once.
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Welcome back to the BiggerPockets Podcast. I’m Dave Meyer delivering the state of real estate investing for 2026. Before the break, I talked about why I feel like real estate investing is getting a bit easier. Deal flow is better. There are opportunities out there for investors who are willing to study the market, to learn from what has worked historically and to apply that to their own investing decisions and portfolios here in 2026. So let’s do that. Let’s talk about what’s going to work. Now, you’ve probably heard me say this before, but I think the housing market is in what I call the great stall. Affordability, although it’s getting a little bit better, is still pretty low. And to me, this is the major thing that drives the housing market. I talk about this all the time, but affordability is the big thing driving what happens in the housing market.
Now, some people point to low affordability and say, “Oh, this is the reason the market is going to crash.” That hasn’t happened yet. Affordability been low for three years now, and that hasn’t happened yet because there is an alternate way that affordability gets back to the market, and that’s what I call the great stall. Rather than seeing something dramatic or crazy like a crash in housing prices, you actually see a slower restoration of affordability through a combination of things happen. Number one, prices remain kind of flat for the next couple years. Now, they could be up 1%, they could be down 1% in the next year, but that’s, I call all of that relatively flat. I think the main thing that we need to look at here is whether on paper they go up 1% or down 1%, they are going up slower than wage growth.
And that is happening in the market right now. Wages are growing faster than the prices of homes. And that brings back affordability, right? Because if prices stay flat, but people are making more money, that slowly brings back affordability. That’s not something that’s going to happen super quickly because wage growth is something that happens relatively slowly, but that is going on right now. And hopefully that’s what’s going to continue into next year. On top of that, we’ve seen mortgage rates come down. I know not everyone’s super excited about it, but one year ago in January of 2025, rates were at seven and a quarter. They’re 1% lower now at six and a quarter. And that’s obviously way higher than they were during the pandemic, but that is a significant improvement. That brings millions of people back into the housing market. And this dynamic of slowly improving affordability in the housing market is what I think we are in for in the next year or two.
This is why I call it the great stall because I don’t think it’s quick and I don’t think it’s going to be dramatic. I think prices are kind of just going to stall out for another year or two, might be even three. I can’t predict that far out, but I wouldn’t be surprised. Let’s just put it that way. I wouldn’t be surprised if we saw real home prices, inflation adjusted home prices kind of be slow, kind of be flat for the next couple of years. Now, what is happening, this great stall could be called a correction. I have often called it that because when real home prices are down and have been for a few years, I think that’s a correction. But before we get into what strategies work in the Great Stall, because there are tons of strategies that work in the Great Stall, I think we have more options now as investors that we have.
This market actually works for a lot of different strategies, and we’ll talk about that in a minute. But I do want to address the crash fear because this narrative is just constantly out there. So I understand this narrative because the last time we had a correction in the housing market, it was a crash.That’s what happened in 2008, but that is not normal. And since the Great Depression, we have had one time where the market has really crashed, that’s in 2008, but corrections where real home prices go flat for long periods of time, that is not just something that’s possible. It’s actually quite normal. You can Google this, but you can go look at real home prices over time. Seeing periods of flat home prices is the normal way where affordability is restored to the market. So I just want to say that there is precedence for this.
The other thing I want to say is that there is just no evidence right now that a crash is going to happen. If you look at inventory levels, they were rising last year, they’ve kind of leveled out for right now. New listings, those have leveled out. They’re about even year over year. Delinquencies, a crucial predictor of a crash, remain below pre-pandemic levels. Foreclosures remain below pre-pandemic levels. Credit quality for the average American homeowner is high right now. People are paying their mortgage and demand is actually resilient. The last reading we have for, it’s back into 2025, showed that demand for housing is actually up year over year. I know people say, “Oh, there’s a crash no one’s buying.” That’s not true. We actually had an increase in home sales in 2025 over 2024. The reason I’m telling you this is that the fundamentals of the market are holding up.
They’re not supporting rapid appreciation. I’m not saying that, but the idea that the bottom is going to fall out of the market is not supported by any data. It’s not supported by any information. It is fear that is driving those ideas. And as investors, we can’t make our decisions based on fear. We have to base it on data and information and experience, and that’s what we’re going to do. So we are in a correction, and yeah, some people might see that as negative, but I don’t. I think it means we’re getting assets at better prices, right? And although the risk of a crash is not zero, it’s pretty low and prices will eventually recover. And that’s why I see this as a buying opportunity. I think we’re in a good time to start acquiring assets if you are a long-term buy and hold investor. If you’re a flipper, there’s going to be some risks because selling right now is a little bit hard.
But if you are a buy and hold investor, I see this as a good time and I am not the only one here. So if you’re sitting there thinking about 2026, feeling optimistic, feeling like it’s the time to buy, that it’s a great time to get into real estate, you’re not alone. The aggregate BiggerPockets community is feeling the same way. I am feeling the same way. I get to talk to professional real estate investors all the time and they are feeling the same way. But we got to talk about how you do this right. How do you grow in 2026 in a way that moves you towards those goals that takes advantage of these opportunities, but while still respecting and recognizing some of the risks that are out there, because you got to respect the current market and you got to take what it’s giving you.
And here’s what I think that looks like. I’ve been using a framework or a playbook that I’ve been talking about for a little while now, and I want to share it with you. It basically combines four basic principles. It’s what I’ve been doing since 2025, and it worked for me in 2025, and I think it’s going to work for me in 2026, so I’m going to keep doing the same thing. No need to change it up if it’s already working. Number one is, yes, the market is uncertain. There is chance that it will decline a little bit. There’s chance that we’ll have a melt up, but I think the most prudent decision right now is to plan for the great stall. You got to plan for slow or no appreciation and rank growth in the next few years. Now, I know that doesn’t sound exciting, but if you plan for it, it’s totally fine.
The worst thing you can do is go out and invest, assuming that we’re going to have amazing appreciation and rent growth and basing your underwriting and investing decisions on that. Maybe I’m wrong. Maybe that will happen, but basing your decisions on that optimism is not what I would do. I’m optimistic about the market because I think there’s better deal flow, but I am not particularly optimistic about appreciation or rent growth in the next couple of years, and that’s totally okay. We have to mitigate that risk. We do it upfront. We do it as we’re looking for deals. We do it in our underwriting. If you address it right up here and say, “Hey, appreciation’s probably going to be slow,” then it’s okay. You just don’t want to be caught flatfooted in a year or two and say, “Oh my God, I bought this deal, assuming there was going to be appreciation and there isn’t, and now I’m in a bad spot.” You can avoid that.
You don’t need to take on that risk by planning for the great stall and assuming that appreciation and rent growth are going to be slow. We can absolutely invest around that. That’s what we’re talking about right now. So that’s pillar number one, plan for the great stall. The next pillar of investing in 2026, the framework I’m using is to have modest short-term expectations. I personally think that even in the last couple of years before things started to get better, the biggest challenge in real estate has not been the market or deal flow or high mortgage rates. It has been expectations. People have been chasing returns that are not coming back. Sorry to say it, but the deal you can do in 2018 or 2021, it’s probably not coming back and that’s fine, right? That was a magical time. I call it the Goldilocks era because everything was perfect during that time.
And just because we’ve moved from perfect to normal does not mean that you can’t invest. So what I want people to remember is that having modest cashflow in the first year of your portfolio, that’s normal. Having modest appreciation on an average year, that’s normal. The average appreciation rate in the United States is 3.5%, whereas inflation is two, 2.5%. So when you look at the average of appreciation compared to inflation of long-term, it’s like 1%. That is normal. And these are the expectations that we need to have. And if you’re thinking that’s not good enough, well, real estate investing has worked for decades, for centuries with exactly these kinds of conditions. And even with these modest short-term expectations for returns, they’re still going to beat the stock market. They’re probably still going to beat what else you can do with your money. It’s still the best way to pursue financial freedom.
So I encourage people to adjust their expectations in the short-term, but keep your long-term expectations high. So those are the first two parts of the framework, probably for the great stall, and have modest short-term expectations, but keep your long-term expectations high because that’s the game. That’s what we’re actually going for. The third pillar here is to underwrite conservatively. I’ve been saying this a lot recently, but I know a lot of people say you shouldn’t play scared. I think you should right now. I think that it makes a lot of sense to be very, very picky. This is part of planning for the great stall, but I am underwriting with no appreciation next year. I’m going to underwrite for probably no rent growth, no market rent growth. If I do a renovation and bring markets up to market rent, that’s a different story, but I am not assuming that there are going to be macroeconomic conditions that are going to give me this tailwind to boost my rent, and that’s okay.
There are deals that work with these conservatively underwritten ideas, and those are the ones you want to buy. For me, that’s what gives me confidence in this kind of market, because we’re in a market that’s correcting. Prices could go down next year. They could go down one or 2%. Vacancies could go up this year. Rents might not grow. And again, all of those things are okay if you bake them into your assumptions. If you go into that and say, “My business plan is to buy a great asset, and even if rents don’t grow for a year or two, I’m okay because I’m still getting cashflow and it’s going to be a great asset in five to 10 years,” that’s the right mindset. This is not the market to go in and have rose tinted glasses. You don’t want to go into this and say, “Oh my God, there was this one comp that’s getting $2,600 a month.
I think I can get 2,600 a month too.” No, don’t do that. If everyone else is renting at 23 or 24, put your expenses underwrite at 23 and 24. Be conservative in your underwriting. This is the way that you protect yourself against downside risk that is in the market, but still take advantage of the inventory, the deal flow, the negotiating leverage that’s going to give you good deals this year. That to me is absolutely crucial. The last pillar of my strategy is to focus on upsides, right? I’m not just doing this to get average deals with conservative numbers, right? I am comfortable with those deals because they still make me money. If I underwrite conservatively and I’m doing this right, even in a bad year, quote unquote, bad year in the housing market, I’m still earning a positive return with those conservative deals. That’s awesome.
But I want to give myself a chance to take this from a single or a double to a home run, and that’s where the upsides come in. Those I’ve talked about on the show, I’ve put out multiple shows about what I consider the upside era. These are things like looking for areas where you can build in the path of progress. This is things like areas where you can bring up rents to market rents. That’s a really good upside. These are things like zoning upsides, or my personal favorite right now, which is really buying below market comps. I think this is a real key, a real hack for buying in this kind of market, because if you’re concerned that prices are going to go down two or 3% year over year, reasonable concern, then buy two to 3%, at least by 5%, buy 6% below market comps right now.
This might sound pie in the sky like, sure, everyone wants to buy under market comps, but it’s possible right now. This is the benefit of the great stall. Things are sitting on the market longer. You get to negotiate. Not every seller’s going to do it, but some of them are. And I want to call out, I’m not saying that you should focus on buying below list price because people can list their property for anything they want. You need to do your own analysis, figure out what a property is worth, and buy 5% below.That’s a great hack. And if prices don’t come down 5%, you’re walking into equity. That’s an upside. This is a way both of mitigating risk and gathering upside. But there are plenty of different upsides that you can look at, adding capacity, like I said, path of progress, rent growth, zoning upside, owner-occupied strategies to save on living costs.
These are all ways to take your deals that you underwrite conservatively that have modest short-term expectations and give you that opportunity to hit a home run in the long run. Our long-term expectations stay high. And the way you get a deal that works now in this era, low risk, but you hit those long-term expectations is by focusing on the upsides. So this is the framework that I’ve been using. It’s been working for me for a while, and I’m sticking with it. But within this framework, there’s a lot of different things that you can do. Notice that I didn’t say you got to do Burr or you can’t flip or you can’t do short-term rentals. Many of these strategies are possible. Many of these strategies can work, but some of them may not. So let’s talk about which tactics and which strategies actually fit within this framework because there might be more than you actually think, but we do have to take one more quick break.
We’ll be right back. 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 the BiggerPockets Podcast. I’m Dave Meyer talking about the state of real estate investing here in 2026. And as you know, since you’ve been listening, I am optimistic about it.
I’ve shared with you my outlook for the market, which is the great stall and my framework for investing in the great stall, which is to plan for it, to have modest short-term expectations, but high long-term expectations, to underwrite conservatively and to focus on upsides. Now, within that framework, there are a lot of tactics that could work, and I want to talk about which ones I think are going to work the best. These are in no particular order, but I’m just going to give you some tactics that I think you should consider in 2026. Number one is value add investing is going to continue to be important. Value add, which some people call sweat equity, some people called it forced appreciation, but it’s basically just the idea of buying something that is below its highest and best use. It’s not optimized and optimizing it yourself. And usually, if you’re doing it right, you can optimize it in a way that you are building more equity than it costs you to make that optimization, right?
This is the entire idea of flipping. You buy a house that needs work, you renovate it, and you drive up the equity buy more than what it costs. And I just think generally speaking, value add investing is going to be important during this year. Now, this can take different forms. This can be in the form of Burr. This could be for flipping. We’ll talk about that a little bit because there are risks in flipping, but I think the Burr is going to be really good strategy here in 2026, but it’s also true for existing portfolios too. If you have properties that you own and you want to optimize them, value add is still a great way to drive up equity and increase your rents for rental property investors. Value add works, I think, in almost any market conditions, but one thing that happens in a correction in a great stall is that properties that aren’t up to their higher and best use, those prices tend to fall.
But the properties that are really good, that are really nice, tend to maintain their value better. And that creates a bigger spread, right? Bigger spread between what you can buy properties for and what you can sell them for or rent them out for. That’s a great tactic for 2026. I think it fits well into my framework. A second strategy that works is some of these cashflow accelerants. Now, cashflow has been hard to come by. I think it’s going to get better for long-term rentals, but that’s going to come slowly. There are some ways that you can sort of supercharge that from co-living and midterm rentals. I think these are interesting ideas right now. The midterm rental market is a little saturated in some places, but there are definitely still markets where this can work. And if you want to be a little bit more active in managing your portfolio, midterm rentals can work.
The other one is either co-living or rent by the room. They’re the same kind of thing, but basically you take a single family home, for example, has four or five bedrooms, and rather than leasing it to one tenant, you lease it to four tenants. They each rent their own bedroom. And this is a way that you can generate more cash, more rental income for your properties and boost your cash flow. This just definitely works. Doesn’t work in every market. You have to find markets where there is demand for this kind of housing, usually big, more expensive markets. You have to be willing to take on a little bit of a management premium. It’s going to be a little bit harder to manage these kinds of properties, but if you want to boost your cashflow, this could definitely work in 2026. Another tactic I really like is looking for zoning upside.
You’ve heard me talk about this before, but I think DADUs, adding ADUs are a great way to go. Here in Seattle, there’s a lot of split level homes. You can take split levels and section them off into two different units. That’s a great way to add value to boost your cash flow, or a lot of cities are completely rewriting their zoning code to allow for more density in their cities, and these are great upsides. If you can buy a property that is cash flowing in day one, but has the potential next year, even five years, 10 years down the road to add another building, to add more units onto it, that’s a great way to take a good deal today and turn it into a home run in the long run. I love that. I mentioned this earlier, but I I personally still think burrs are great.
I think this is just 101 real estate investing. Buy a rental property, fix it up, rent it out, and then refinance it. You know this. If you listen, I love the idea of a slow bur. I do not have the expectation that I’m going to be able to refinance 100% of my capital out of these deals. I’m not even in a hurry to do it. I buy deals where there are tenants in place and I let them live there as long as they want. And when they leave, I will renovate it and bring market rents up to market rate. I might do some structural rehab to make it a better quality property for tenants who want to stay a long time. But it might take me a year or two years to fully stabilize this property, but it takes so much risk off the table.
I can buy these properties using conventional financing. That is such a big advantage. If you do a Burr, there’s no tenants in place. It’s really structurally unsound. It needs a lot of work. You might need to get hard money for that. That’s a 12%, 13% interest rate. You’re going to need to pay two points upfront. You’re paying a lot of money in holding costs. When I buy one of these BERS, I’m getting a conventional mortgage on it. I’m paying six and a half percent. That saves me so much money. It allows me to get cashflow and allows me to take my time because I’m making cash flow. I’m amortizing. I’m getting tax benefits. I’m getting all of that in the meantime while I’m opportunistic about when I do my BER. So if I had to pick one strategy for 2026, that would be it, the slow BER.
So just as a mindset, value add, BERS, midterm rentals, co-living, I like all of these tactics. Other tactics can still work, but I do want to be honest that there is a little bit more risk here. Short-term rentals, people still do it. People are still successful with them, but the short-term rental industry is struggling right now. I think we’ve all seen this. There is a lot of supply on the market right now. It is pushing down occupancy, is pushing down average daily rents. I have a short-term rental. I’ll tell you that in 2025, it did not perform as well as it did in 2024. And I expect that to continue. You also see markets that are saturated in short-term rentals seeing the steepest corrections. Now, if you are a long-term investor, that could mean opportunity, but you have to be careful. So I think short-term rentals can work, but I would really stick to those principles that I said before about underwriting very conservatively.
If I were buying a short-term rental right now, I wouldn’t even count on my occupancy rate being the same from 2025 to 2026. I would assume a decrease in occupancy rate. I would assume a decrease in average daily rents just to be safe. This is an industry that has risk in it. Doesn’t mean there’s not opportunity. Those things go together. Risk and reward go together. But I would be very careful about short-term rentals. The second thing is commercial real estate. We’ve seen crashes here. Prices are good in commercial real estate, right? But there is still risk. We don’t know where the bottom is coming in commercial. And unlike the housing market, which I think has a solid floor, I’d be surprised if we saw national home prices go down more than three or 4% next year. I’d be surprised. But commercial just has more to fall.
There’s more upside here too because it could rebound. So I’m actually personally kind of excited about commercial real estate. I’m going to be looking at bigger multifamilies in the next year, but I am going to be very careful about it. And I recommend people do that as well because there are some really bad deals out there. There are really overpriced commercial real estate properties right now, but I think there will be more and more good deals. So this is something you can consider, but with caution. Same thing for the last strategy here, which is flipping. I flipped two houses last year. I actually knew it was going to be a rough market and I did it anyway because I wanted to learn how to do it. Managed to make some money off of those, so I’m happy about that. But the market is weird right now.
People’s buying demand is up and down every single week. And it’s hard in flipping because you need to be able to sell into a correcting market. And even though I’ve been optimistic this year, the reason I like 2026 and say it’s getting easier is because it’s getting easier to buy. It is not getting easier to sell. It is getting harder to sell. And so that is a consideration that you need to think about if you’re flipping a home. You need to be able to take advantage of what the market’s giving you and buy lower than you have in the last couple of years because when you go to sell it, it could take longer. You might not get the ARV that you were expecting. And so flipping still works, but do it cautiously and again, be really picky about those things. So those are the tactics that I think will work, some that I think are going to be a little bit riskier, but I also wanted to add just a couple other things here too that don’t fall under the traditional buckets of strategy that we talk about.
And that’s just kind of mindset. I really encourage people. What’s going to work right now is a long-term mindset. Thinking about buying assets that you want to hold onto for a long time is great. I’ve sold some assets in the last year that they weren’t performing badly, but I’m thinking, “Hey, how do I stock up on the stuff that I want to own in 2040?”That’s kind of the mindset I’m thinking about right now. When I do a Burr, when I buy a rental property, when I consider commercial properties, that’s the mindset that I’m taking. And I’ve said before, I only buy cashflowing properties. I’m not going to buy something that doesn’t cash flow after stabilization. Not saying that you should go out and speculate, but I am saying look at deals and look at their long-term potential more than thinking about whether they’re going to maximize your cash on cash return in the next year.
Another mindset thing, like I said, buying under market comps, I think that’s a tactic that’s going to be super important right now. And then fixed rate debt. I love fixed rate debt. I know some people will be tempted right now to get adjustable rate mortgages because it comes with a slightly lower mortgage rate. But I’ll just be honest, I think it’s a toss up. If you look five to 10 years from now, it’s a toss up if mortgage rates are going to be higher or lower. I don’t think people think it’s going to be lower, but that’s a recency bias. I just want to call that out. Mortgage rates have been much higher in the past. And if you look at our national debt and some trends that are going on, I think there’s a very good chance that mortgage rates are higher in a couple of years and that’s okay if you plan for it now.
Like I said just a minute ago, my whole approach is long term. What do I want to own 10 years from now, 15 years from now? And the last thing I want is to own a great asset that I want to hold onto. And then when I get my arm comes up and my rate adjusts in seven years, all of a sudden I can’t afford to hold onto that. I don’t like it. I want to buy with fixed rate debt because that way I know I can hold onto it for 10 years. I have no concerns that I’m going to be able to hold onto this 10, 15, 20 years from now. That’s what I want to be focused on. So that’s just another thing I want to caution because people talk a lot about what assets they’re buying. The financing is really important. And I have done interest only loans.
I have done adjustable rate mortgages in certain circumstances. But I think for most people, if you’re buying a rental property that you want to hold onto, heavily consider fixed rate debt. 30-year fixed rate is a great loan product and it is what I recommend to most people most of the time. So those are generally the tactics that I think are going to work. I’ve kind of tell you, but I’ll just reiterate what my plan is. I don’t really have any big reveals year. I’m going to do what I’ve been doing in the upside era so far. Plan it for the great stall. I have low short-term expectations, but I am still buying only things that cashflow after stabilization. I don’t have to have day one cash flow, but after I renovate them, they need to have solid cash flow. And I’m going to be very picky about looking for those deals.
And I target three to four upsides in every single deal. That’s the playbook. That’s what’s been working for me. And I think it’s going to keep working. I’m not a super high volume buyer at this stage of my career. I have a solid portfolio. It’s been working for me, but I look to keep buying. I’m probably going to buy maybe two to four new properties this year, ideally small multifamily properties. That’s kind of my goal. I might buy a bigger property. I’ve been looking at some eight units, some 16 unit kind of things. I would consider those as well. And I’m mostly going to look at slow burs. Might not be sexy to everyone, but to me, that’s what works. I like sticking with what works. I don’t need to take on any additional risk. I just think that’s a low risk, high upside way to invest, and that’s what I’m going to be pursuing.
I may also flip another property or two. I did too in Seattle last year that went pretty well. I allocate some of my portfolio money each year into what I would call risk capital, and I may choose to put that into flips this year, but I don’t need to do them. If I don’t find any deals, I’m not going to be thirsty. I’m not going to stretch for these deals. I’m going to keep playing my long game for sure, but if a screaming deal comes my way, I’m going to take it. So that’s the state of real estate investing in 2026. Things are going to get a little bit easier. The market won’t be sexy. Mainstream people might not see these opportunities, but there will be opportunities. Deals are going to be easier to find. Cashflow prospects are slowly improving. Negotiating leverage is back. You can afford to be patient and it is vital that you are because there is some short-term risk.
There are things that you have to mitigate, but you absolutely can if you follow the framework I’ve put forth in today’s episode. And just keep remembering, the long-term outlook remains strong. There is no such thing as a perfect market. Every market has trade-offs. It is your job to figure out what the market is offering you. And I hope this episode gets you off to a great start to 2026, but rest assured, we are going to keep you updated on what tactics are working, how to mitigate risk, and how to pursue financial freedom in a solid, predictable, but exciting way each and every week here on BiggerPockets for the rest of 2026. Thank you guys so much for being here for our first show of 2026. Remember to tune in on Wednesday. We have a fun and exciting announcement for the BiggerPockets Podcast community. I’m Dave Meyer.
We’ll see you next time.

Ashley:
Our guest today was at navigating life as a full-time caregiver to her daughter battling leukemia. But when a Zillow listing popped up during a medical trip to New Orleans, she found a $60,000 house and a whole new future.

Tony:
And today’s guest, Jane Ing, went from an accidental $8,000 wholesale to building luxury short-term rentals and now cash flows over six grand per month. And she did it all while raising not one, not two, but three kids and never stepping foot inside of her.

Ashley:
This is The Real Estate Rookie Podcast. I’m Ashley Kehr.

Tony:
And I’m Tony J. Robinson. And with that, let’s give a big warm welcome to Jane. Jane, thank you so much for joining us on The Rookie Podcast today.

Jane:
Thank you for having me.

Ashley:
Jane, your real estate story really starts out with something heartbreaking. Your daughter was diagnosed with leukemia. Can you take us through that moment of when you got that news and how did that news shift everything for your family and for you personally?

Jane:
Yeah, it’s a moment that as a parent you could never prepare for. Especially as a mother, it was the first time in my life I felt completely helpless. And I knew that in that moment there’s nothing I can do to change our reality and there’s no amount of money or education or knowledge or connections that we had that would change what we just heard. She has leukemia. It is what it is. And yeah, honestly, I’ve never felt so helpless in my life.

Tony:
Jane, first, thank you for sharing that with us because I’m sure it was a difficult time. I’m sure it just kind of makes you reassess everything when you get that kind of news. I guess before that diagnosis, what did life kind of look like for you and what changes did you have to make afterwards as you guys navigated this new reality?

Jane:
So my husband and I were both working, pretty demanding W2 jobs. At that time, we just had two kids. So Ashley, my daughter who was diagnosed, she was three and a half. My younger daughter was two. Our son wasn’t born at that time. And because my husband and I were so busy, our girls were in daycare from 7:00 AM to 6:00 PM. And in hindsight, I can’t imagine them now that they’re all much older. I can’t imagine them being out of the house for 11 hours a day, but that was our reality. We were both so busy, both climbing the corporate ladder. And to be honest, we both enjoyed our W2 jobs. And I know most people get into real estate because they want to leave their W2, but we really enjoyed what we were doing. So I have a background in hospitality and in business.
And so after grad school, I worked for different hotels. One of them was Caesar’s Entertainment where I learned … It was actually really fun because we learned everything about the hotel side, the gaming side, restaurants, spas, golf. You learn everything and it’s super, super exciting. And I worked for smaller boutique hotels, but right before my daughter was diagnosed, I was actually working for Uber and my team was in charge of launching Uber Eats in different cities. And so we were working with the general managers of each different city and figuring out which restaurants we wanted to target and how the operations of all of that work. So it was really fun, so dynamic, but I had to give it up all in a matter of seconds.

Tony:
So Jane, as you’re climbing the corporate ladder, and obviously it seems like you and your husband are both doing well, and this news comes in and kind of shifts everything for you. Obviously the first priority is just focusing on your daughter’s health. And I guess give us an update, Jane, how are things today before we even talk about the real estate further?

Jane:
Yeah. So it’s been 10 years since the diagnosis, and thankfully she is alive. She’s doing relatively well, but she suffered a lot of complications during treatment. And this is one of those things where all the doctors we had, they’re like, “Oh, this stuff, it’s not even in the medical books, the stuff that she’s going through.” And when your child’s diagnosed, they give you different sheets of paper that say, “Here are some of the potential side effects of the chemo that she’s getting.” Most likely she might have fevers and rashes and they have … So they categorize it by most likely, likely, and here is a less than 1% chance she’s going to have these symptoms. She had symptoms that were not on the paper. And a lot of what … So without going into all the details of her story, she had leukemia, but she had a very specific type that was resistant to chemo.
So not only did she have to go through three times the amount of chemo, most leukemia patients would go through, but that wasn’t enough. They said chemo wouldn’t kill the cancer, so she needed a bone marrow transplant. And thankfully that put her in remission. And I was actually her donor because we couldn’t find a perfect match. And so UCSF, the hospital we were at, they were doing clinical trials that allowed a parent to be a donor because by definition, you are like half mom and half dad. So my husband and I were both like a 50% match and it put her in remission, but she was left without an immune system for maybe six months. And during that time, she caught a virus and most of us are able to, you have a little cold or runny nose, her body just couldn’t fight it. And that virus went straight to her brain and it just started causing all these issues.
And we didn’t know because there’s no way of knowing that there’s any brain damage other than, “Oh, this kid is acting a little weird.” So she was sleeping 20 hours a day and it just didn’t feel right. And so after all these tests, we did an MRI and they saw tumors, bleeding, so much pressure. The amount of pressure her brain had at that time was already past the threshold of what a person could handle. And so they immediately put her in the PICU for safety. And I think my husband, this happened so quickly. We didn’t realize what this meant. We’re like, “Why are you putting her in the PICU?” And they said, “Well, we fear for her safety.” We’re like, “Well, what do you mean? She’s barely moving. She’s not going to … ” I thought they meant she’s going to fall off her bed or something like that type of safety.
“No, we’re not sure how many days she has left.
“And it was a shock. We didn’t know that’s how bad it got and got there very, very quickly. So we had a couple options. We had one option to keep her comfortable with just a steady drip of morphine and just kind of wait till the last day comes, or we could try a little bit of radiation to her brain and spine to see if that’s going to kill the virus and at least stop everything from getting worse. And of course, that’s the path that we chose. And they’re like, ” This is not guaranteed at all. We’re really just kind of trying whatever we can think of, but it worked. “And so that was kind of when her recovery started, but the brain damage was so severe that even though they say kids’ brains are plastic and you can relearn a lot of these things, basically the way they explained it to us was all the freeways in her brain where information passes, the freeways are broken.
And so information just can’t pass from one cell to another cell. It’s hard to pass. And so today she has basically every disability you can think of, like physical, intellectual, social, developmental, everything. She goes to a special needs school, which is amazing. They take very, very good care of her. But my husband and I had to come to the realization that she’ll never be an independent adult. And so we will always have to care for her in some form. And so that’s just something that we had to realize and accept. And she’s 13 now, so we’ll just figure out what happens, what happens next for her.

Tony:
Parents. And I’m getting choked up listening to your story because I can only imagine the emotions you guys felt as you went through that. But I mean, just kudos to you guys for saying positive through all of that. I think the question that I have for you is, and this isn’t even necessarily about real estate investing, but so often we find ourselves at moments in our life where it can feel maybe a little hopeless or it’s just like, ” Why me? “And we can kind of fall into that trap of feeding into those negative thoughts. How did you guys push past that? And this is just a life lesson for everyone that’s listening because maybe not to the extent that you guys did, but we all have challenges that we end up facing in life. And I think how we respond in those moments is so indicative of what life looks like on the other side.
How did the two of you just together have that dialogue to say, okay, here’s how we’re going to move past this?

Jane:
Yeah, it’s a really good question because we’ve certainly met a lot of parents in similar situations along the way and everyone handles it a little bit differently. And we’ve kind of seen how if it’s kind of not the glasses half full thought, it could be very, very detrimental. So my husband and I, we’re both Christian and for us, our faith was pivotal. And without it, I don’t know where we would be today. And so as much as the situation sucked, we truly believe there’s a reason and that’s outside of our control, obviously, but also beyond our comprehension. I don’t know why.
That was basically, I think, trusting that and knowing that, okay, this is the child that God gave us and no matter what happens to us, it’s our job to be the best parents we can be for her. And if we are sad and angry and upset and depressed and going through all these negative emotions, we cannot show up for her the way she needs us because even the days where she couldn’t speak in the hospital, she can very much sense our presence and she can read the room very well. If we’re all having very serious conversations, her face changes a little bit. But if we’re playing music and singing and dancing, and even though she can’t participate, her face looks a little bit different. There’s a little bit of joy in her face. And so we knew that she was so, so young, we knew that we had to show up for her in a way that she needed.
And also for our other daughter at that time, she was two. She has no clue what’s going on. And Tony, I know your girls are really young, so I don’t know exactly how old they are. Maybe they’re roughly the same age, but so you can imagine, right? They’re so young, they cannot comprehend what’s happening. And so we knew for their sake, both of them, the one that’s sick and the one that’s not sick, we just have to show up for them in the best way that we can.

Tony:
Incredible, I think, resilience and just mindset from you and your husband. And I’m literally kind of holding back tears here as I hear you talk through this because it is really a moving story and just … I hope people can listen and find solace in their own challenges that if you approach it with the right mindset, it doesn’t necessarily take away from how difficult the situation is, but it does, I think, allow you to move through it with the mindset of like, we can figure out a way to get through this. So I appreciate you sharing that story with us. Now, as you went through this journey, at some point, the corporate ladder wasn’t as important to climb and you made the transition into real estate. How did that even come about as you guys were going down this path of caring for your daughter?

Jane:
Yeah. So I realized as she was going through treatment and in this season of her life and also my life, my desires and my corporate dreams were just not important whatsoever. So that all went on the back burner. And to be honest, all I had the emotional capacity for was my family. I just didn’t have time to think about myself or anything else. It was just my daughter, my sick daughter, my healthy daughter, and my husband.That’s all I had the capacity for. And I was okay with that. I accept, this is not going to be the rest of my life. This is a season of my life where they really need me and I will be the mother, the wife, whatever in this situation for this season. And as she started getting better, we were no longer in this hyper scary situation where it was life or death.
We knew she was going to survive and we were going to bring her home, and now we’re just figuring out different therapies and treatments for her. In the back of my mind, I kind of thought, well, I would like to do something. I knew that I could never go back to the same type of corporate job because I would have to commute or I would have a boss. And because of all of her complications, she sees so many different doctors that I just can’t ask for permission every time to take her to those appointments. And I also like, those appointments have to come first over anything else. I can’t reschedule because I have to work.

Ashley:
And you’re not always given an option as to when your appointment can be either for a lot of those. Yeah.

Jane:
Yes, exactly. And so I knew I had to be my own boss and have some kind of a job where I dictated all the terms. I could work how much or as little as I want to. And my daughter and I were in New Orleans for a two-month medical treatment. And this is one of those things where obviously in hindsight, had she not gotten sick, we would not have been in New Orleans and none of this would’ve happened, but it all happened. So we were there for two months. The treatment made her super tired. And so during the day I would drive around, she’d take a nap in the car. I would just pull over wherever I was. I happened to pull over in a decent neighborhood right in front of a foresale sign. I looked it up on Zillow because I had nothing else to do.
And it was a decent three bed, two bathhouse for $200,000. And coming from the Bay Area, to be honest, I just didn’t know that those price points existed. And I know people living in most other parts of America are like, no, it’s pretty common. $200,000 is actually not that cheap. But for the Bay Area, I mean right now, even a fixer-upper is probably a million dollars. And so it was the first time I thought, oh, hey, we could afford real estate. We could afford an investment property in the Bay Area, we just couldn’t. And so I went down this rabbit hole of learning as much information as I possibly could, and it was all through BiggerPockets. I mean, this was back in 2020. So podcasts, I don’t think the rookie podcast existed at that time, but the main podcasts, books, blogs, I just absorbed myself in as much information as possible.
And that’s kind of how our journey started, but I didn’t plan to get into real estate. It was just kind of an accident.

Ashley:
So was that the property you ended up buying or was that just the one that led you to-

Jane:
No, no, because after I started doing my research, I realized, wait, $200,000 is expensive. This is actually not a good deal.

Ashley:
So Jane, you ended up taking on a rental in a new market, but what happens when this new market has some bad weather, bad tenants and burnout all before your first short-term rental? We’ll dive into it right after this break. Okay, so we’re back from our short break. Thank you guys so much for taking the time to check out our show sponsors. So Jane, what did you do next after seeing that listing? What made it feel like it was time to pursue your first deal?

Jane:
So I just became obsessed and I was on Zillow all the time. And since I knew I was physically in New Orleans for the next two months, I wanted the opportunity to actually see some of these homes if I could. So my first deal was an unexpected wholesale deal. I saw a property on Zillow for $120,000 and everything I learned from BiggerPockets told me if it has been often on the market multiple times or if it’s been sitting on the market for a really long time, then you can negotiate. Then the seller’s desperate. So I didn’t know anything about construction or renovating or anything, and I offered 60,000 and they accepted. And I was blown away, my realtor was blown away. But what happened next was I tried to get a loan because I was going to borrow it. It was going to be a pretty big construction project and I was trying to get a loan and none of the local lenders would lend to me for two reasons.
One, I was out of state and they just went through Katrina. And so they were a little bit traumatized and burned by what happened with Katrina. And so they were very, very cautious working with new out- of-state investors. So I was a new out- of-state investor and I had no track record. So those two went against me pretty, pretty hard and I couldn’t get a loan. So I talked to my realtor and I was in a position where I either had to move forward or get out of contract, but I knew it was such a good deal. I just couldn’t let it go. So my realtor and I found another investor who was interested for $68,000. So we did a same day double close, which I didn’t even know existed until that moment, where I bought it from the seller for 60 and the investor bought it from me for 68, and then a few days later I got a check in the mail for a little under $8,000.

Tony:
That is amazing that your very first deal was an 8K accidental wholesale transaction. And honestly, shout out to your agent for helping you find a buyer on the backend because there are a lot of agents who are like, they kind of looked down on wholesaling almost. So the fact that he or she was open to that and educated you on how to actually do that, I think was great. Let me ask Jan, and this is more of a technical question. Was it one closing where you just got an assignment fee or did you actually have to somehow fund that initial 60K purchase and then literally an hour later fund the second transaction for 68K because in the first scenario, you literally don’t need any cash because you’re just like a line item on the closing statement. But in that second scenario, you’ve actually got to have the 60K to close in that first deal to then turn around and resell it for 68.
So which of those two was it?

Jane:
It was the first scenario, so I didn’t have to bring anything to the closing table.

Tony:
That is fantastic. Man, what a great first deal. So I think a lot of people maybe would’ve stopped there. They’re like, “Eh, I jumped in, couldn’t figure this out, ” but you didn’t. So what happens after this 8K wholesale

Jane:
Deal? So I was even more fired up to get a property because this was not planned and I just made $8,000 from something I didn’t really plan on doing. And so I was like, “Hey, there’s a lot of things I can just figure out as I do it. ” I have BiggerPockets has given me enough background and education and knowledge, maybe like 80% and the 20% I just have to learn from doing it as I do it and different roadblocks happen, I just need to figure it out. So now I knew what wholesaling was because I just did it. So that same realtor introduced me to a local wholesaler whom I never met, but she sent me a deal for $50,000 in a little suburb outside of New Orleans and that was because it was wholesale had to be all cash, but it could have been fixed up, but it didn’t have to be.
So we chose not to. We did a cash out refi because I think it was worth like 75,000. So we got all of our money back. I had a tenant in for 800. Six months later, she stopped paying rent, so I had to evict her. And at that point, we did the renovation.

Ashley:
And how much did you have to spend on the renovation?

Jane:
I think 35. So we were all in about 85. And after the renovation, I rented it for $1,100 and a year and a half later we sold it for 110. Wow. That’s a pretty good one. And you were cash

Ashley:
Flowing, I

Jane:
Assume? Yes, we were cash flowing. Yes. And we also bought the two homes right next to it from the same wholesaler, and it was roughly the same numbers. Yeah. So our first handful of deals did pretty well.

Ashley:
Were you self-managing those properties or did you hire a property manager in the area?

Jane:
I had a property manager because I didn’t know about the self-managing thing. I just didn’t know that was even possible. In hindsight, I would’ve probably self-managed, but the property manager, their office was maybe three minutes from the house. And so it was just so convenient to hire them and they were great.

Ashley:
Yeah. That’s interesting that you say that, that you didn’t know that was an option. And I think sometimes we forget about those things because I didn’t know when I bought my first property that you could get a loan. I thought you either had to pay cash or borrow money from a friend or someone. I did not think that you could go to the bank and get a loan unless you were living in the property. So Tony, maybe we need to do an episode on some of these things that you may not know. And that’s a great point of you may not know that you can actually self-manage and there’s rental property management software out there that helps you do a lot of it. So now with these rentals, did you sell just one of them or did you end up selling all three of them and why did you decide to sell?

Jane:
I did sell all three of them. So I owned them for about a year and a half. And in that year and a half, we went through two hurricanes and that was two hurricanes too many. And the second hurricane, I don’t remember what it was called, but it literally went through my street. And thankfully it missed our homes by like 20 feet, but it was too scary. And so I just wasn’t interested because I knew these weren’t going to be the last hurricanes, right? It’s Louisiana. Hurricanes are going to happen. So we decided to sell them. We did 1031s into two different assets. So we invested in long-term rentals in Little Rock, Arkansas. So we still have three homes there. And then we also decided to buy our first short-term rental in California.

Tony:
Janet, I just want to ask a few follow-up questions. First, can you define for folks that don’t know what a 1031 exchange is and why it’s beneficial for real estate investors?

Jane:
Yeah. So a 1031 exchange is basically when you sell an investment property and you have a capital gain. Instead of paying taxes on the capital gain, you would basically roll it over into a like- kind property and there’s some nuances there that you have to follow, but that allows you to defer the capital gains taxes from that first property until you kind of sell the second property. But the goal is to continue 1031ing until, I guess. Swap to and drop. Swap, swap to be dropped.

Tony:
So you guys were able to unlock some of that equity that you’ve built up through these renovations and the burrs to then go buy some other properties. And then it sounds like the other part of the reason that you guys sold was maybe more the emotional component, like you mentioned the hurricanes. Was there anything else aside from the weather that was kind of like gnawing at you from holding that portfolio? Was it really just the risk of are these properties going to stand the next hurricane?

Jane:
Yeah, I think hurricanes was probably 80, 90% of it. The other 10 or 20% was maybe the neighborhood. So I initially thought it was maybe B minus class. It was more C class. And I knew with my first tenant who stopped paying in six months and she was doing things in the house she wasn’t supposed to be doing. And I just didn’t want to deal with those tenants. There’s certain risks that come with that and I wasn’t interested in that.

Ashley:
So now you’ve pivoted to short-term rentals and you said you bought one in California. Walk us through this deal. How did you find it? How much was it?

Jane:
Yeah, so it’s interesting because if I were to buy short-term rental today, I would not follow the same process, but this was 2021 and all the podcasts I was listening to, everyone talked about STRs. I think no one even called it STRs back then. It was just Airbnbs, right? Everyone was buying an Airbnb. It was cash flowing so much. And the more podcasts I listened to about it, I realized, oh, this is like running a hotel. And no one was talking about it that way, but because I have a background in hospitality and in business, for me, I was like, oh, I’d just be a general manager of this one room hotel, even though it’s like four bedrooms or five bedrooms. I’m like, “This is my one room hotel.” And the way we decided on this market and we found this place, we’re in the Bay Area, my brother and his wife were in LA and for my kids’ spring break in April, we wanted to meet in the middle.
And it was 2021. So people are still a little bit weary of travel after COVID. And so we didn’t want to get on a plane anywhere. We wanted to drive. And so we were looking at places that’s kind of in the middle. So three and a half hour drive for both of us is Central California. It’s near Paso Robles, San Luis Obispo, Pismo Beach, that area. And I was looking for Airbnbs and they were all really ugly, not just the design and the home, but the photos were really bad. It’s almost like they purposely closed the curtains before taking pictures. The listing description was bad. The price was like $200 every night, 365 days of the weekend. So just by looking at what was available, I knew most operators were not treating it like a business. Most operators were not doing this professionally. And so if I were to enter this market, I would do better than almost anybody else.
Not because I have so much experience because I had none, but I would just take it more seriously. You can tell these people were not taking it seriously. Things have changed a lot since then, but this was back in 2021. And so the next thing I did was try to understand the licensing requirements in all the cities in that county. And I picked, I think, two cities where licensing was relatively easy, easy to get or the STR permit. And I reached AirDNA, I don’t even know if it exists. Actually, I think it did exist, but I found a realtor by reaching out to other hosts on Airbnb. So I reached out to three people just to be like, “Hey, I’m interested in buying in this market.” And you guys know because you guys have Airbnbs as well. When you get this inquiry, it looks like someone’s booking your place, right?
So you get really excited, but then they’re asking a question that’s like, “Hey, I want to be your competition. Can you help me out? ” Although I asked it in a really nice way. And so of the three people I messaged, two never wrote back to me. And then the third person happened to be a realtor. And so she was like, “Hey, yeah, I’ll help you. ” And so she just told me her name. She said, “Google my name.” So I did and I got her phone number and I talked to her and within a week we were under contract.

Tony:
Wow. That’s incredibly fast. So Jane, let me ask a couple questions here because I think a lot of folks … Now granted, you already had some experience in the long-term rental space, but a lot of folks I think are hesitant to pull the trigger and get second analysis paralysis. How did you move so quickly? What allowed you within seven days to be under contract on your first short-term rental?

Jane:
So a couple things. I felt like we were not the only ones with this mindset of, “Hey, I want to see friends and family, but I don’t want to get on an airplane and I don’t want to stay in a hotel. I want to drive there.” And so where are some popular driving destinations from the Bay Area and from Southern California where people can meet? And Central California was just so easy. There’s beaches nearby, there’s so many things to do. I also know it gets super hot there and this property had a really large pool. And so even though the house itself was kind of ugly and we had to do some renovations, the pool and it also has a really big in- ground hot tub and you normally don’t see inground hot tubs, you see the aboveground hot tubs, but this in- ground hot tub can very comfortably have 12 people in there.
It’s like a mini pool. And so So those two things, if I were to put in myself would cost hundreds of thousands of dollars and it was already there. And so that was the biggest thing, but this wasn’t a market where other Airbnb investors were looking because it’s a city that most people haven’t heard of. And to be honest, it didn’t look very nice. I bought it from two people who had lived there for 40 years. So it kind of looks like they had been living there for 40 years. There were three different colors of carpet. So yeah, I felt like the pool and just the demand at that time of people really wanting a drive market would make it successful.

Tony:
And what city did you say it was in, Jane?

Jane:
This is Atascadero.

Tony:
A Tascadero, but you said it’s near San Louis Obispo.

Jane:
Yeah. So it’s right in between Slow and Paso Roblos. It’s like 20 minutes from each.

Tony:
Got it. So I just looked at that city on Airbnb while you were talking here. I know St. Louis Obispo, but I’ve never heard of Atascadero. And even still to this day, a lot of the … And I’m looking for larger properties and a lot of them still kind of suck. So maybe there’s an opportunity there for a lot of people that are looking for kind of a coastal town to go buy near San Luis Obispo. So the property itself, what was the purchase price on it?

Jane:
The purchase price was 722,000.

Tony:
722. That’s a big swing for your first one. Yeah, from 50. Yeah. And what kind of debt did you use on that one? Did you use a second down or second home loan, 10% down, or what was the debt?

Jane:
Yeah, we did a 10% second home loan.

Tony:
In 2021, I mean, rates were starting to creep up, so what was your rate at that point?

Jane:
3%.

Tony:
Okay. So you got a sweetheart deal. All right, there you go. So that one worked out well. So now you’ve got this background, Jane, in hospitality. You worked for boutique hotels, some of the biggest hotel chains literally probably on the planet with Caesars. How did that shape how you approached this short-term rental versus someone who maybe didn’t have that experience?

Jane:
Yeah. So I thought of what I learned in grad school. So at Cornell, the hotel program they have, there’s a hotel there. It’s called the Statler Hotel, and it’s mostly for undergrad students to do all the grunt work. They do housekeeping, they do operations, they do everything. As a grad student, we weren’t able to do that, but I was able to talk to a lot of the undergrad students who did that and kind of pick their brains on like, “Hey, why did you sign up to do this? And what did you learn?” And things like that. And I realized you have to do all the work of a hotel to be a really good general manager. Well, you don’t have to, but that experience is super, super helpful and important in understanding what your team eventually does. And so when we bought this property, I had the mindset of, okay, I’m the general manager of this hotel and hotels have housekeeping, they have operations, revenue management, sales and marketing.
So I was thinking of all the different aspects of running a hotel and this home is three and a half hours from my house. So I couldn’t go for every check-in and neither I didn’t want to go for every check-in. But I wanted to know, when I was getting quotes from cleaners, I wanted to know why they were quoting me a certain price. It’s going to be three people and it’s going to take three to four hours to clean. I’m like, why? Why is it taking nine to 12 hours to clean a four bedroom house? That doesn’t make sense to me. But what I wasn’t incorporating was I have seven beds there and to do the laundry for seven beds and all the towels and the bath mats, and we have separate pool towels, that takes a lot of time. And oftentimes if we have a same day turnover, they need to take it offsite to do it.
And so one of the things I did early on is I did the laundry myself. So I was like, I want to know how long this really takes. And not only does it take a lot of time, it’s exhausting and I don’t do it very well. It takes so long to make the beds. I fold towels a certain way in my own house because no one cares whether or not it’s pretty. It just needs to be folded. But I was trying to figure out how do I fold these towels in my Airbnb? So I had to YouTube it and then I had to pick the type of folding that I liked best and then I had to learn how to do it and how to set it up. And I was like, okay, now I know why I pay my cleaners a premium. I understand the job of a cleaner, but I wouldn’t have understood that if I didn’t do the work myself.
And so the first property was a lot of DIY, not necessarily to save money, but just so I understood what my team was doing and to make sure that I’m also properly compensating them for their work.

Ashley:
I also did the laundry when I first started my short-term rental and it was a Airbnb arbitrage and it was in an apartment complex. So they had laundry rooms. So we would go and take over one of the laundry rooms, fill up three washers, and then we’d have to wait around to switch it over to the dryer. And yeah, it was awful. And making the beds, we had bunk beds doing the top bunk and … Oh God, yeah, it was awful. And we’d always have to make sure we had quarters too, because they were coin operated too. And you forgot your quarters, you’re back out to your car digging through the cup holder.

Tony:
I unfortunately have never done laundry to him my short-term rental. So shout out to my cleaner for holding it down that way. Jane, how fast did you get the property up and running? So I know it took you seven days to find it, another 30 days or so for closing. How long after closing did you actually get it up and running and welcome in that first guess?

Jane:
Yeah. So in hindsight, I did it pretty quickly. So we had to do a big renovation. We redid all the flooring, paint, redid the kitchen, redid some landscaping. And my contractor, he’s incredible. Not only did he finish on budget, but also on time. I think he was off by a couple days. So we closed on May 10th and the property was done by early July.

Ashley:
Let me ask you something about that real quick with the contract during the timeline and lining it up. So your contractor was able to start right when you closed. How did you get your contractor into the property to actually get you all the estimates and to understand, did you do that during your due diligence period? Did you ask to have permission for him to come through?

Jane:
Yeah. So during our one-month period where we were under contract, I think as soon as we were okay with the inspections, I asked the seller if I could just have a day at the house to interview contractors and just to figure out what I needed to do. And they were very gracious and allowed me, I don’t know, 8:00 to 5:00 or something. And my realtor had to sit with me the entire time because I couldn’t be there by myself. And we had maybe five contractors come through, gardeners come through. I interviewed pool guys. They did all that stuff in that day. And they gave me a scope of work and then I chose my guy from there. So he literally started the day after we closed.

Ashley:
Think about how efficient that is. And all you did was ask and they said yes.

Jane:
Yes, absolutely.

Tony:
How did you find the potential contractors to interview? Was it just Yelp? Were you in Facebook groups? Was it your agent? How did you get those folks to even line up to come give you the potential scopes?

Jane:
Yeah, I used Yelp and Google and I’ve learned that in some markets, more people use Yelp and in some markets, more people use Google and you don’t really know until you start searching in both, but that’s how we found every night. I did ask my agent for referrals, but those referrals ended up not panning out.

Ashley:
So now that you’ve got the renovation done, what were some of the things that you did during the setup process that maybe would stand out compared to other short-term rental hosts when setting up the property?

Jane:
Yeah. So I knew with Airbnbs, especially because now we’re in summer, right? I knew time was money and even getting it ready one day sooner would probably make me an extra 500 or $1,000. So I was in a race for time to get this property ready as soon as possible. And we were actually, now that I think about it, 4th of July weekend, we were in New York visiting family and that’s not something that we could have changed. And so I was gone for a week, which drove me crazy, but we were gone for that time. So towards the end of construction, I started having things sent to the house. The furniture we were going to do, the linens, all that stuff, I had it sent to the house because there were people there and they would just put it in the shed until I got there.
A few things that I did at … Now it’s a little more common back than not so much. I like to label everything, and I know this doesn’t seem like a big deal, but maybe a third of our five star reviews mentioned the labels. And this is also, because it’s a process that I go through after a home is ready, I close the front door from the outside and I literally walk in, I close my eyes, I open it. I’m like, okay, if I’m a guest coming in here for the first time, where do I go? What do I look at first? Where’s the light switch? And if I turn that light switch on, what does it actually turn on? And a lot of that stuff is pretty confusing. And sometimes you see a light switchboard where there’s four or five light switches together and you just kind of turn all of them on.
And so every light switch in the house is labeled. All the kitchen cabinets and drawers are labeled. And this is also because I’ve had an experience where I went to a pretty large Airbnb and I was literally looking for a cup. I just wanted a cup of water. And I think I opened 12 cabinets before I found the cup. And this is not the host’s fault at all, but after that 12th cabinet, I was a little bit annoyed. Why do I have to open 12 cabinets to find my cup? Again, nobody’s fault. And I don’t want my guest to just even feel annoyed for any reason if I can control that. So that’s something I do at all of my properties that I think stands out and it’s a little bit more guest focused. But going back to setting up this first property. So once the furniture got there, my husband and I spent various amounts of times getting it set up.
We listed it end of July. So we closed May 10th. We listed it end of July because I remember I had a full month of revenue in August and that first month we grossed $14,000. And

Ashley:
What’s your mortgage payment on this property?

Jane:
3,000. That’s P-I-T-I. It includes taxes and insurance, $3,000.

Tony:
Yeah, those 3% interest rates. If we could go back to those days. So Jane, I mean, obviously you guys crushed it with this first one, and I know you continued to kind of scale up from there. And I know that your next deal did significantly more revenue than this first one. So I want to get into that deal after QuickWord from today’s show sponsors. All right, we’re back here with Jane. So Jane, you talked about the 14K you made in your first month with that first short-term rental, but the next one, even bigger. So tell us about this deal. You bought a luxury short-term rental for, I believe it was $1.1 million, right? So even a bigger step up in purchase price. What made you decide to go so big with this one?

Jane:
So with this property, it’s located about an hour and a half east of San Francisco, maybe almost two hours, I think. And I was really looking for something that was different. So I feel like in some markets, Airbnbs are getting a little bit saturated. You can’t kind of have the same cookie cutter four bedroom home with fancy designs. There has to be something that … You have to have something that most people don’t have. And so this property had two things. One, it’s big. It’s 4,000 square feet and you can comfortably sleep 16. And not a lot of homes can … They don’t have beds for 16 people. And it had four acres and only about half of that was being used, maybe less than half of that. And so we had space to put in a pickleball court, bocce ball, fire pit, barbecue, all that stuff.
But at that time, there were not a lot of properties, if any, around the Bay Area that had a private pickleball court. And this is when pickleball was going crazy a couple years ago. So those two … So the three things. One, proximity to where a lot of people live who have the capital to spend on a nice vacation, right? So within a one or two hour drive. Two, it could comfortably sleep a large number of people. And three, there’s amenities that a lot of other Airbnbs don’t have.

Tony:
Jim, we can touch on the amenities here in a moment, but I think just from a strategic business decision perspective, once you get above a million bucks, you can also start buying smaller boutique hotels. And given the experience that you already had in your W2 life of living and being a part of those boutique hotels, what made you decide to go for luxury single family versus maybe just buying a smaller boutique hotel somewhere else?

Jane:
I think because I’m already familiar with short-term rentals, this was an easier way to try luxury Airbnb because I haven’t tried it before. I think eventually I will buy some sort of a hotel. And even though I do have a background in it and experience, as you know, Tony, underwriting is still very different, right? The process of buying a hotel is very, very different. And so I wasn’t ready for it at that moment.

Ashley:
And I think that’s what’s made you successful, is that you’re not getting shiny object syndrome because of what a lot of other investors are doing or seeing that, that you’re sticking to what you know when you’re building that solid foundation and sticking to your strategy, even though a hotel would be a shiny object and is something new to learn about and exciting is you’re sticking to what you know and building that foundation before you actually make that pivot into doing a hotel. I mean, Tony, how many short-term rentals did you do before you built that solid foundation to pivot to doing a hotel a lot, right?

Tony:
Yeah, absolutely. And I think for us, because we were at that similar point where our hotel that we bought was a million bucks. And I was personally going back and forth between, okay, do we just buy a luxury single family short-term rental or do we go with the hotel and we opted for the hotel. But I do think that there’s benefits to both. And just trying to weigh what makes the most sense, I think is what I was trying to get at from you. But going back to the amenities piece, because you touched on that, you added a lot, right? You said botchy ball, pickleball before is even cool. How did you decide which ones to add? And I think more important, how do you make sure that you don’t over amenitize? I mean, you could add everything, but at a certain point, it doesn’t necessarily add additional money to the return that you’re getting.
So how did you make that determination of how much to add and which ones to add?

Jane:
That’s a good question. And to be honest, I don’t know if I have the best answer for that. I think the thought around pickleball is because everybody was talking about it. It was almost overwhelming. Too many people were talking about pickleballs, and one day my husband and I were like, “Oh my gosh, what if an Airbnb had a pickleball?” The thought just popped up out of nowhere. And when we saw this house, there’s a perfect rectangle for the pickleball court. And so it was just a matter of ROI, right? Is this actually … And obviously there isn’t a precise way to figure out dollar for dollar. How much more am I going to make with the pickleball? All you know is that there were very close to San Francisco. There’s a lot of people with money, a lot of people play pickleball. Would they pay a slight premium for a private pickleball court?
I think everybody would have said yes. And this is a property we’re planning on holding for a very long time. And so we were confident that the ROI was there. And we’ve had people do pickleball tournaments. There’s only one court and it’s nothing fancy. It is an official size pickleball court, but it’s really nothing fancy, but people, they’re like, because there just isn’t enough space in the Bay Area to have a pickleball court where it doesn’t feel like it’s cramped in somebody’s backyard.

Ashley:
Now with this property, did you get the same 3% interest rate or was this different? And how did the numbers turn out on this? What are you cash flowing?

Jane:
Yeah. So this was not only our most expensive purchase price, but it was by far the highest interest rate we’ve ever had. So our interest rate is 7.75%. And so this is, for everyone listening, don’t be worried about the interest rate because there’s still opportunity. This property on average, we cash flow about $6,000 a month.

Ashley:
We just recorded a rookie reply where that was one of the questions, should we wait until interest rates lower? And here’s a perfect example of like, you can make a deal still work even with a high interest rate. Cash flowing $6,000 a month.

Tony:
Six grand a month, right? So we’re talking about 72 grand a year in cashflow. What did you guys actually spend to acquire the property and what do you think you invested in total to actually get it set up, design, furniture, amenities and so on?

Jane:
Yeah. So this one, because it was a jumbo loan, I think we had to do 20%. I don’t remember if it was 20 or 25% down payment. So this one we had to have a little bit more cash upfront. We did do some renovations. We added two bathrooms and did paint and just some light fixtures. The bigger renovation was adding the two bathrooms. And then we turned the garage into a game room. And so that was about $100,000, but we actually didn’t have the cash, but we knew we had to do the renovation. And so we opened a few 0% APR credit cards and we put all the renovation on the credit cards. And so two of them was 0% interest for a whole year and one of them was 0% for nine months. But in that time period, we cash flowed enough where we can pay that off.
And so essentially it wasn’t for free, but we didn’t have to have the capital upfront. We let the cash flow from the property pay for those credit cards and the renovation.

Tony:
So you guys were all in for 200K, give or take on the down payment, maybe tack on like another, I don’t know, just call it maybe 250, closing costs and whatever else maybe went into it, another 100K. So 350 all in. So we’re still looking at, even with the 7.75% interest rate, about 20% cash on cash return. That is phenomenal, absolutely phenomenal with an interest rate of almost 8%. Thank

Ashley:
You. Now, Jane, before we wrap up here, I just want to ask, how has real estate changed your life? How have you been able to be there for your daughter to make every appointment, to do everything you need to do with your family and everything and be present in your life and enjoy it, but also be able to fulfill that career almost. As you said, you had loved your job, but you did what a lot of mothers would want to do and be able to leave that job, leave their career whenever their child needed them. And you did that, but there had to be some part of you that missed that creative outlet, that missed that dream, that goal, that desire that you had all through your career to reach. So tell us how real estate was able to make that happen for you where you could still be there for your daughter and you could still live some part of the life that you wanted.

Jane:
I mean, it’s really been a dream. And I don’t just, I know a lot of people say that, but the flexibility that comes from managing short-term rentals, and I know it’s not passive income, but as you guys know, you can have systems and automations in place where you can do everything from your phone. Well, if I’m waiting for a doctor’s appointment with my daughter or I’m waiting in car line to pick up my kids or in between sports practices and I have to respond to something, I don’t need to be in front of my computer. And the cash flow is more than what we could have imagined. I initially started it kind of as like a little side hustle hobby and it’s really, it replaces most people’s full-time income and so much more, right? It’s become such a powerful cashflow tool and wealth building tool for our family.
And I think especially for moms, whether you work full-time, part-time, stay at home, and you want more time, right? Whether it’s time with your family or maybe just time for yourself, right? Time to go to the gym during the day without being interrupted, time to meet a friend for coffee. Moms always are craving more time, right? This is such a perfect way to have more time and also support your family. And with short-term rentals, there’s also co-hosting, there’s so many different things you can do within short-term rentals that are super, super powerful and also just really fit the mom’s schedule really well.

Ashley:
When my kids switched to a different school, like during COVID, they went to the school because it was still in person and we switched them to that. And I remember saying to a friend, “Ugh, but I have to drive them to school every day.” And that person said to me, “That’s awesome. You get to drive your kids to school every day.” Not everybody has that choice. Not everybody gets that time with their kids in the car. And I always think about that, how real estate has allowed me to be able to get to drive my kids to the millions of places they need to be. And that’s just something I’ve learned to appreciate over time is like, that’s an opportunity. That’s something I should be so grateful and thankful for that real estate has provided for me is the things I get to do with my kids as much as I’d rather do other things, that is time that I won’t get back.
So I think real estate really, as much as you said, everyone says it’s a dream and it doesn’t seem real, it really can do these powerful things for you with money and with time and just with your family in general too. Well, Jane, thank you so much for coming on to share your story, to tell us all about your real estate investing journey and congratulations on your success as an investor.

Jane:
Thank you so much.

Ashley:
Where can people reach out to you and find out more information about your investing journey?

Jane:
So I’m primarily on Instagram. You can find me @theinvestingmom and just send me a note. We can connect.

Ashley:
Great handle to have.

Jane:
Oh, thank you.

Ashley:
I’m Ashley. He’s Tony, and thanks so much for listening to this episode of Real Estate Rookie. If you like this episode and you like others, make sure you subscribe to our YouTube channel at Real EstateRookie. Thank you guys so much for listening. We’ll see you next time.

Money is often the biggest barrier standing between a rookie investor and their first deal, but there’s a creative way to buy a rental property that doesn’t require draining your savings or putting much down at all. We’re talking about seller financing. In today’s market, you may have even more leverage to negotiate these kinds of deals. Tune in as we break one of them down!

Welcome to another Rookie Reply! We’re back with more questions from the BiggerPockets Forums, including one from an investor who’s struggling to find great real estate deals due to higher mortgage rates. While it’s true that today’s rates could eat away at some of your cash flow, you can still find properties that meet your long-term goals. Waiting for rates to drop could cost you!

Don’t have the cash for your next investment property? There’s a creative financing strategy that could allow you to put very little (or no) money down. We share how to negotiate and structure one of these deals so that it’s a win-win for both sides. Finally, should you move to invest in real estate? How do you pick the right market? It’s not as tricky as you probably think!

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

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Fannie Mae just supersized a landlord’s potential income by expanding financing for accessory dwelling units (ADUs).

In doing so, the government-sponsored mortgage underwriter has made it easier for everyday investors to add rentable units, boost cash flow, and tap into the land around properties they already own, thereby driving appreciation.

By expanding the ways ADUs can be financed and loosening rehab lending guidelines through its HomeStyle, HomeReady, and Construction-to-Permanent renovation programs, Fannie Mae has opened the door for homeowners to become landlords and for small investors to turbo-boost revenue from their existing single-family and small multifamily buildings.

What’s Changed?

In its Selling Guide Announcement SEL-2025-10, Fannie Mae announced an expansion of ADU eligibility to increase housing supply and make it easier to update housing stock, stating the update was intended to “meet the growing demand for flexible and affordable housing solutions.”

Specifically, Fannie Mae will purchase loans for two-to-three unit homes that include an ADU. In total, each property is now allowed to contain four units, so a single-family unit can contain three additional ADUs, as long as it adheres to zoning laws.

Additionally, ADUs are permitted on single-wide manufactured homes, removing a previous restriction requiring multisection units. This addresses rural and lower-density areas where manufactured homes are more prevalent.

Possible configurations for investors looking to add ADUs to their portfolios are:

• A duplex + one ADU
• A duplex + two ADUs
• A triplex + one ADU
• A single-family + three ADUs

Energy and Resiliency Improvements Can Be Financed Too

With the rise in extreme weather-related incidents, financing energy and climate-related resiliency improvements, such as storm and fire-resistant measures, could be a big deal for investors in vulnerable states looking to safeguard their ADUs without incurring the cost of a full energy report.

When used as rentals, these improvements could be a big draw for potential guests and tenants. The addition of ARM loans means that owners can update and adapt existing homes without being saddled with pricier 30-year mortgages.

Appraisals and Income

In the near future, appraisals could present a problem, as these configurations are so new to the market that appraisers might have a tough time pulling comps to meet Fannie Mae guidelines for HELOC financing or sales.

With regard to income, a portion of ADU rent can also be used to qualify, as the rent from a small multifamily helps an owner-occupant looking to house hack qualify for a loan. With one unit as the primary residence—when purchasing or doing a cash-out refi—only one ADU’s rent can be used (even if more exist), and its revenue is capped at 30% of your total qualifying income.

So, for argument’s sake, say you were using your ADU as a short-term rental, and Leonardo DiCaprio decided to stay there, paying you $10,000 a night. 

First, great for you! Second, you couldn’t use all his rental income for your refi. However, the money it contributes to your total qualifying income could raise your purchasing power. This is not necessarily a bad thing, as it protects against over-leveraging and the temptation to inflate rental income.

Here’s an example, according to Innovative Mortgage Brokers:

• Your base qualifying income is $6,000 a month.
• Market rent for the ADU is $1,200; lenders usually count 75% ($900) for qualifying purposes.
• While $900 is 30% of $3,000, we’re adding it to $6,000. The cap says ADU income used can’t exceed 30% of your total. With $900, your total becomes $6,900, and the $900 used is within that 30% cap.

Throwing an FHA Loan Into the Mix

FHA lending guidelines are baked into the new Fannie Mae ADU rules, allowing for lower down payments and credit scores than with conventional loans. “We’re going to allow both existing rental income for ADUs and prospective rental income to be included in the underwriting process,” said Julia Gordon, HUD’s Assistant Secretary for housing and federal housing commissioner, noting that the change is designed to help borrowers finance properties with ADUs or add them during renovations, according to The Mortgage Reports.

Renovation Lending Becomes More Investor-Friendly

The ADU update includes major improvements to HomeStyle Renovation loans. Here are the main changes:

• Up to 50% of renovation costs can be disbursed at closing (no outside borrowing or leaning on a contractor to front the starting costs)
• Larger renovation budgets are allowed for manufactured housing.

Putting New ADU Lending Guidelines to Use in the Real World: An Investor Playbook

“Hidden density” is the new value-add: Look for units with convertible space. This can include:

• Oversized lots
• Alley access
• Detached garages
• Basements or underused structures
• Existing duplexes or triplexes with extra yard space

Zoning is the grim reaper: The new Fannie Mae ADU rules are good, but they’re not good enough to overcome prohibitive zoning. Before imagining your overflowing bank account, double-check that your dream property complies with applicable zoning guidelines. Confirm:

• How many ADUs are allowed?
• What are the size and height requirements?
• What are the parking requirements?
• Are detached ADUs permitted?

The latter taps into the YIMBY versus NIMBY movement, where wealthier single-family neighborhoods oppose ADUs for the same reasons they do not allow multifamily dwellings: fears of parking issues, turning communities into rental-heavy, transient areas, and lowering the quality of schools.

“If you have the 16-foot poison pill in your regs, it’s not good enough,” says Kol Peterson, a nationally recognized ADU expert and founder of AccessoryDwellings.org, in a recent podcast. “It needs to be much better … that doesn’t mean that everywhere in the country has good codes except for Portland, Seattle, and a few jurisdictions in California.”

The Cost of Building an ADU

As welcome as the new ADU-friendly guidelines from Fannie Mae are, they don’t translate to “free new rental units for everyone!” ADUs cost money. Just how much, however, varies greatly. Converting a glorified garden shed, attic, or basement is likely to cost way less than replicating an Ibiza-style lounge in your back garden.

According to home renovation site Angi, the average ADU costs $180,000, but an ADU generally costs between $60,000 to $285,000, depending on size, scope, and location. It’s possible to scrape by with a sub-$80K ADU in less-expensive markets—bearing in mind that ADU requirements mandate a kitchen, bathroom, and a separate entrance. When converting a part of your existing home, the exterior costs of weatherproofing a roof, walls, and sometimes even installing insulation can be taken out of the equation.  

Final Thoughts

Adding doors without buying new properties almost seems too good to be true for an investor, but it’s a practical way to bring in additional income for homeowners and increase an investor’s portfolio, while helping with the housing crisis. With financing on board, this could be a game changer in a high-interest rate, low-inventory environment.

Dave:
Happy New Year, everyone. Welcome to the BiggerPockets Podcast. I’m Dave Meyer, head of real estate investing at BiggerPockets. I hope you all had a great holiday and are excited as I am to grow your portfolios this year. Today, we’re kicking off the year with New Year’s resolutions. And for that, I’m joined by my on- the-market co-host, Kathy Fettke and Henry Washington. We’re going to share our goals for the year, the strategies we’re planning to achieve those goals and the risks we’re avoiding in a changing market. A heads up that this show will also be published on the On the Market podcast feed over this New Year’s break, and make sure to tune in next week for my annual state of real estate investing show and a huge announcement for the BiggerPockets podcast you’re not going to want to miss. With that, let’s jump in. Kathy, Henry, how are you?
Happy New Year. Happy New Year to you.

Henry:
Happy New Year.

Dave:
I am not going to lie and pretend that we’re recording this in the new year. It’s not really the New Year, but proactively to everyone. We’re recording this in December, but happy New Year to all of you. Kathy, you have some great holiday plans. Tell everyone what you’re up to. You’re always somewhere fun.

Kathy:
Well, yes, I’m in Paris recording this from a cave.

Dave:
You literally look like you’re in a medieval wide seller right

Kathy:
Now. I’m pretty sure I am. I’m in the oldest part of Paris, but I am here for the Christmas markets and mainly because my daughter is getting married in France. So I had to come see the venue with her. Had

Dave:
To.

Kathy:
And then it’s also-

Dave:
You had to.

Kathy:
I had to, and it’s the last year of the northern lights being really intense. So we’re going to take a little trip up to the North Pole, to the North of Norway.

Dave:
Oh, that’s so great. Wow. What a fun trip. Henry, what were you up to in the holidays?

Henry:
Food.

Dave:
Enough set,

Henry:
Really. Absolutely. I mean, I have little kids, so I do get to enjoy the joy of Christmas still, so that’s fun, but mostly I’m eating my way through the holidays.

Dave:
Yeah. Good for you. All right. Well, let’s jump into today’s episode because I really want to just start looking forward. Last year was a interesting … I wouldn’t call it a great year. I was going to say it’s a great year. I would not have called 2025 a great year. That would’ve been a straight up lie. I am feeling optimistic going into 2026 and just about real estate in general. So let’s talk about this in terms of what our New Year’s resolutions are. We’ll start with real estate, but if you want to throw a non-real estate one in, I would love to hear them. But Kathy, what’s your real estate New Year’s resolution?

Kathy:
Well, I have a few, but one is to really dive into AI because
Rich actually bought a really expensive program and he’s finished it and I have not. I’m not even close. But I know it’s so powerful. I mean, one of the things that Rich did is he uploaded everything. Our bank statements, the cash flow, our system knows everything about us. And when we upload it, we could know which properties are performing well, which are not. I mean, we should be knowing that anyway, but I feel like sometimes it’s easy to get lazy or you’ve just owned properties for a while and haven’t really taken a look. Is this still a good performer? So using AI to optimize our portfolio is my goal for real estate.

Dave:
I like that a lot. I like this as a goal. It’s not like, oh, I have to buy this property by this date. This is more like a growth mindset kind of goal. How do you just evolve as an investor generally so that you can make better decisions going forward? Is that program, is that real estate specific?

Kathy:
No, no, it was just a bunch of business owners. But I mean, it’s like he’s got a business consultant now. All of our business financials are in there and we had every employee detail what they do, not in a dog kind of way, but I guess kind of like what do you do all day? And so AI knows each employee and knows how to optimize for them. It’s really been phenomenal.

Speaker 4:
Wow.

Kathy:
And we had one of the best months ever for our company last month. I don’t know if it has to do with that or not, but that’s strange, right? At a time when real estate has been so slow, sales have been slow, we had a really good

Dave:
Month. That’s awesome. So it sounds like you’re using AI not just to identify properties or deals, but work on and in your business as well.

Kathy:
Yeah. I mean, how many times do you really know what your insurance covers?

Dave:
Literally never.

Kathy:
So with, I’ll say Claude, for example, we can upload our entire insurance thing. There’s a word for it.

Henry:
Your insurance binder? Yeah.

Kathy:
Yeah, that thing, the binder. To just really know the details of your insurance policy and even ask it, “Hey, is this covering me for everything I need for this investment property in this particular state?” It’s really phenomenal with what’s available to us and it’s only going to get better, so why not be on the cutting edge of it?

Dave:
I love it. Henry, are you using AI regularly?

Henry:
The short answer is yes, but I’d be lying to you if I told you I was using it on a much deeper level than just the surface level asking for help with certain items. Now, I did try to build something similar to what Kathy was talking about about two months ago where I was uploading transaction data and information from my property manager because I wanted to see if AI could give me a sense of how well certain properties are performing. And I thought if I could upload the actual bank statements and marry that against the data from your property manager who’s actually going out to the properties, doing the actual repairs. And then I wanted to marry that against what I’m spending with contractors on certain properties to get just a bird’s eye view of my portfolio. And it was very challenging in ChatGPT. And so I’m wondering if I should try Claude or Gemini or one of those.

Kathy:
Claude is so good for business.

Dave:
Oh, really? I got to check that out because Henry and I were just in Seattle and people were raving about Gemini.

Kathy:
Yeah.

Dave:
I feel like it’s a horse race right now. One releases a new one and it gets a little bit better and then the other one gets a little bit better, but there’s not a clear winner. I just have to tell you guys, I got a little bit of a behind the scenes look at a big real estate company’s new AI tool. It’s not BiggerPockets, but there’s another one that’s going to release one soon. I got to do the beta. It is so freaking cool. It’s unbelievable how good the analysis and information about properties and markets. For a data analyst, this thing is so cool. I am super excited to start using these kinds of tools in my own analysis. But I have to ask you guys, maybe I’m just a complete control freak, but I use this for research, but I double check everything

Kathy:
That

Dave:
I do still, right? Okay,

Kathy:
Good. Because it still makes lots of errors. It’s not there yet, but it will be. It will be. So learning the things that we’re learning. And bottom line, the goal for me for doing all this is I want to see if I can … Wait, let me say that in a more powerful way. I’m going to increase cashflow by 10% by optimizing our portfolio, whether that means taking some older properties that aren’t really performing and 1031 exchanging them into better ones or just looking at things like we bought a lot 10 years ago because we were living at a house where someone was going to build this mega box property that block our view. And so we bought the lot and they wouldn’t do it and now we don’t live there anymore and we just kind of haven’t done anything with it. We tried to sell it.
Nobody wanted just a lot. So that’s one thing. It’s like, how do I optimize this piece of land that’s just been sitting there and we’re paying taxes on? And so I’ve been working with a manufactured housing company and we’re going to put manufactured housing on that lot. And so when I’m doing a whole new thing and it’s actually going to cash flow in CaliforniaCalifornia.
Yeah. And if my daughter ever decides she wants to move down the street from us, there’ll be a house there for her. Intent. But yeah, it’s kind of just stuff like that. Just kind of looking at what we have, the theme is more isn’t always better. Look at what you have and make it better.

Dave:
That’s great. Well, I think this is an awesome New Year’s resolution. I really like this idea of getting better at AI because I will admit, I am simultaneously excited by AI and very, very scared of it and terribly tired of it. And so sometimes I just choose to ignore it because I’ll see these deep fake videos online and I’m like, “AI is evil.” But then you talk about all these things that AI is amazing for. I just need to figure out the right way to use it for my business that makes sense and not be overwhelmed by the societal implications that might be coming with AI at the same time.

Kathy:
For sure. I mean, an example is just, I’ve been working a lot with Claude, that’s what I use and asking for LA County, what do I need to know about manufactured housing? Tell me this step-by-step process. And it’s not 100%, it’s not easy, but it helps it feel not as daunting.

Dave:
All right. Well, I love this. This is a great New Year’s resolution. Thanks for bringing this one, Kathy. We got to take a quick break, but we’ll be back with Henry’s New Year’s resolution right after this. Welcome back. I’m here with Kathy and Henry sharing our goals, New Year’s resolutions for 2026. We heard Kathy’s, which I love about getting better at using AI. Henry, what is your New Year’s resolution even though you don’t like them?

Henry:
No, I don’t like them. And I always feel awkward when people ask questions like this because of the kind of investor I am. I just do old, boring real estate, Dave. I buy distressed properties, I fix them up and then I rent them out or I sell them. And I think when people ask about resolutions, they expect to hear some super ambitious, creative thing that you’re doing. Like a big pivot,

Dave:
Like you’re making some change. Yeah. Yeah.

Henry:
And my goals are very similar each year because I just want to continue to do what works and what’s worked for generations, which is another iteration of the same thing. But now that I’ve placed that caveat, essentially I think of investing in three buckets where you’re either growing, you’re stabilizing or you’re protecting.
And we as investors operate in typically two of those buckets at a time, heavily weighted more so on one than the other. And so as I started in 2017, I’ve been a lot more focused on growth. So my goals each year were always around how many more assets do I need to acquire? How many more projects do I need to flip to give me the funding to acquire those assets? But now I’m in a place where I’m more focused on stabilization and protection. And to me, protection is paying off. And so my goals for 2026 or my resolution, if you want to call it that, is more focused around stabilization, optimization similar to Kathy, and paying off debt. So I have a stretch goal of paying off two properties in 2026. And I know two doesn’t sound like a lot, but we’re talking about completely clearing the debt on two assets, which I think is a big deal.
So I want to pay off two of my assets and there’s about four assets that I need to stabilize because I’m bleeding money in them right now.
Some of them my own fault, some of them, no fault of my own. One in particular, I bought a duplex, not in a flood zone, and we had a crazy flash flood and it tore through both units of the duplex. And then on top of that, a big mistake happened with one of the remediation companies where they did some work unauthorized to the tune of $40,000. So I have about a $40,000 bill that we’re fighting because they weren’t supposed to do the work. And I have about a $50,000 renovation I’m going to have to fund out of pocket. So these are big ticket items. They don’t just come very easy. So that property right now is a duplex that I pay monthly all the expenses on, but has no income. So stabilization is a big deal for me in 2026. I also have some multifamily assets I bought in 2023.
Again, no fault of my own. The city has come in and is requiring me to do some work that we didn’t plan on doing that where you can’t really fight. So there’s a lot that happens in a real estate portfolio that I think requires you to take a step back and evaluate. So 2026, stabilizing the assets that are bleeding money and paying off two properties. And so those lead me to my other goals, which is I need money to do those things. So that guides me to how many projects I need to take on throughout the year to generate the income I need to solve those problems, live my life. Make sense?

Dave:
It does make sense. I love the way of thinking backwards. A lot of people would be like, how many flips can I do, maximize, and then take that money and be like, what am I going to do with it? But I really like thinking about it like, what do I need to do? And then sort of backing into the minimum amount of work that you can do. That doesn’t mean you might not take on more deals if you find opportunity, but just having a good sense like, okay, I need to do two a quarter or one a year. I need to do that, make sure I’m hustling on that and then I’ll take everything else that comes from there.

Henry:
Yep. I average probably around like $45,000 net profit on a flip and I would estimate that I need to do about 15 projects to be able to pay off the properties that I’m looking to pay off and to be able to have the income necessary to continue to live and be able to stabilize the four assets I need to stabilize. So that’s my goals.

Dave:
I love it. I guess I understand maybe why you don’t love a New Year’s resolution because this sounds like it’s a multi-year project too. It’s not like this is something you do in 2026. This is a piece of a larger goal that you have been working for and will probably need to keep working towards beyond 2026.

Henry:
Yeah. My larger goal, ideally, this is … Now they say your goals are supposed to be big and scary, right? And in corporate world, they called them stretch goals. The big, scary stretch goal is to have a third of my portfolio paid off 10 years from now. I

Dave:
Like that.

Henry:
That’s a lot. It’s a lot of money. Yeah. Yeah. But I feel like if you don’t set a big scare … Shoot for the moon land on the stars, right? If I end up with half of that paid off, that’s still going to put me in an extremely strong financial position in 10 years. So the larger goal is that. And then what I do each year is tying into that. And then I have to adjust each year because yeah, I have a goal of two this year, but what if I only get one? So then I need to take what happens in 2026 in terms of the economic outlook and make new goals. Maybe 10 might be too far out. Maybe I need to change it. So I think I’m not afraid to reevaluate my goals based on what’s happening, but I try to make it all tie together.

Kathy:
I love that. It sounds like you’re also looking at the protection side of it because as you start paying off properties, oh, there’s such relief knowing that if anything goes wrong and you just can’t predict, you can’t predict things like 2020 coming along that turned out not to be bad for real estate at all. Ended up being a pretty good time for real estate bought, could have gone the other direction. And when you’ve got paid off properties, boy, all you have to do is sell a couple and it’ll help pay for the other ones that you’ve maybe over leveraged. And I know that you have way over leverage to get to where you are now and that has worked. But at some point you’re like, okay, it’s time to turn the ship and pay some of this off. That’s great.

Dave:
It’s interesting to hear both of you are focusing on optimization instead of growth. Is that a reflection of the market or just where you are in your personal investing journey?

Kathy:
That’s a good question. It was just the first thing that came to mind because it’s what I’ve been doing and excited about. Just taking a look at some of these properties that bought 10 or 15 years ago, I really haven’t paid any attention to them. For example, one, it just vacated and I talked to the property manager and she goes, “If you update this by about $20,000, you’ll get about 100,000 extra in equity.” I hadn’t even thought

Speaker 4:
About it. Easy.

Kathy:
So that’s exciting. And if I do that, then we can sell that or keep it, take the money out. And so it’s almost like an after the fact bur,

Speaker 4:
10

Kathy:
Years later down the road, bur.

Dave:
It’s a slow burn. A slow bur. It just doesn’t matter. Just keep optimizing things over the long run. This is the way to do it. It’s absolutely right. I love that.

Henry:
For me, Dave, it is more a function of where I am as an investor because I’m a deal junkie and I love the process of finding deals. I love buying a great deal and I love operating assets in great parts of the community. It all is so fun for me, but at some point I have to get to a place where I am protecting the assets I have so that I have paid off assets to pass on to my children. The overarching goal for my real estate business is for my children to be able to be the people they’re called to be and not the people they have to be for money. So if they need or want to do something that isn’t going to pay them a ton of money, at least I have these assets that will be paid off that can provide income for them.
And so to get there, I have to pay off properties. And so I have to draw a line in the sand somewhere and start paying down these assets. And so that’s why I have the 10-year goal trying to get some of these paid off so that I have those to pass. Now, when I get to that point, Dave, I may just start doing more deals again, but I will always have- You will. You will.
And I’ll probably still do deals that are like home run deals along the way. I’m not saying I’ll never buy another rental property between now and 10 years from now. I’m just saying I’m not in aggressive growth mode. So optimization is more important to me right now than growth was. And growth was more important to me when I first got started. It’s just a shift in where I am as an investor.

Dave:
All right. Well, these are great resolutions. Thank you. I really think these are, obviously they’re not just resolutions, but just goals and good perspective on where you both are in your investing journey. We are going to take a quick break, but we’ll come back with my New Year’s resolution right after this. 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. I am here with Henry and Kathy talking about our New Year’s resolution. Kathy shared that she’s looking to optimize her portfolio and learn more about AI. Henry is going to be trying to pay down some of his debt and stabilize some of his assets. My New Year’s resolution for 2026, and I’m with you on this, Henry, this is something I’ve been thinking about for at least six months and is going to take me 10 years. But my plan right now and the thing that I’m focusing on is enacting what I’m calling my end game.
Hopefully not going anywhere, but I’ve been investing for 15 years now and I feel like I’ve had these two different eras of my own investing. My first 10 years, I bought rental properties, I self-managed them, all of them locally in Denver. Those were the first 10 years. The last five years, then I moved abroad. I was living in Europe. I sold some rentals. I got pretty into passive investing. I got into lending. I do syndications. I still own rental properties, but I’ve kind of had this second era. And now I want to move. I’m back in the United States. I want to move into my third act as a real estate investor. And I call it my end game because I want to spend the next 10 to 15 years putting myself into retirement. I am in a fortunate position where I do feel like I have enough capital to do it, but I need to rearrange my portfolio into an optimized way so that 10, 15 years from now, I’m going to have a portfolio that is just rock solid.
It’s only assets that I really like. Ideally, they’re paid off or have very low debt on my overall portfolio. And I actually think it’s a good time to start acquiring rental properties right now. And so I’m seeing opportunities trade out of some of my more passive options or lending and start acquiring the assets that I want to own ideally for the rest of my life.That’s kind of what I’m starting to think about. And I’m even considering, Henry and I were just together in Seattle. We were talking about this, thinking about putting things on 15-year notes, for example, instead of going to the 30-year fix that I’ve always really used and just start thinking, I’m 38 years old. At 53, I probably still won’t retire, but I want the portfolio that I can retire off of and that I wouldn’t need to touch if I didn’t want to for the rest of my life to be in place.
That’s not going to happen in 2026. This is going to take me probably at least five years to reposition things, do some different projects, learn a little bit, but that’s my goal. That’s the thing I’m really working on.

Speaker 4:
Love it.

Henry:
Yeah, no, I think that that’s just smart financial planning. It’s similar to what I’m thinking about because I enjoy what I do now. I like chasing deals. I like flipping houses. It’s still fun and exciting. And is there annoying parts of it? Sure, but I enjoy it. But will I still enjoy it in 10 years? Will I just be tired of the chase? I’ve talked to a lot of seasoned investors in their 50s, 60s, and 70s, and the one theme across all of them is at some point they got tired of chasing deals. They got tired of churning houses and flipping houses. And so if I can get myself to a point where I don’t ever have to flip another house if I don’t want to, but I can still choose to, that’s ideal. And it sounds like that’s what you’re trying to get to.
How do I get to the point where if I just want to sit down and do nothing, I can. I’m taken care of, my family’s taken care of, my legacy’s taken care of, but if I want to go do some cockamamie crazy deal, I can also go do that. Definitely.
Getting yourself to retirement doesn’t mean you have to retire.

Dave:
First of all, I got tired of flipping houses before I even got started. So good for you. I did one. That’s all I needed. I’m at two right now and I’m tired. And I didn’t even do the GC. You

Henry:
Didn’t do the

Dave:
Hard part. I didn’t even do the hard part. I’m tired of it. No, I signed last night though and getting this thing done. So that’s great. No, that’s exactly right. For me, it’s not even the flipping. I’m always tinkering. I’m just like an optimizer. I’m always moving money from here to there. And I got to stop doing that too. I will do some of it. I will keep some of my money for fun because for me, that’s fun. Like you were talking about, Henry, you like looking at deals. For me, I like investing in passive deals. I like underwriting deals and figuring them out and looking for different opportunities, but I need to put the rock solid thing back in place because I had a lot of great rentals. I don’t regret selling any of them, but I have not rebuilt my active portfolio in the way I want to yet.
And so that’s really what I’m going to be focusing on. And like I said, there’s better and better deals. It’s not even that prices have gone down that much. It’s just the asset quality is so much better, in my opinion. And you’re seeing high quality properties come on the market. I think multifamily is looking more and more attractive right now. And so that’s the plan for 2026. My other resolution, just so you know, as always, is to go on as many vacations as humanly possible.
How do I travel all the time?

Henry:
Can we go on record, Dave, and set a stretch resolution? You and I?

Dave:
Uh-oh.

Henry:
Can we set a resolution that within five years we land an Anthony Bourdain style TV show where we travel around, eat food

Dave:
And

Henry:
Talk about real estate?

Dave:
This is our dream in life. Yes. We need a new vision board, you and I. All right. Well, this was a lot of fun. Thank you guys. I would love to hear your New Year’s resolutions, right? We want to hear them. Share them with us in the comments. We want to hear what your New Year’s resolutions are real estate-wise, fun-wise, lifestyle-wise, because at the end of the day in real estate, we’re doing this usually not because we just want to own or acquire assets for something, because it frees up something else in our lives, spending more times with our friends, family, traveling, eating disgusting amounts of food. This is why we’re actually here. So tell us what your resolutions are. Kathy, happy New Year. Thanks for being here.

Kathy:
Thank you. You too.

Dave:
Henry, happy new year. Excited for another year doing on the market with you both. And James, of course, when he decides to grace us with his present.

Kathy:
Yes. Absolutely. Thank

Dave:
You. Thanks everyone. We’ll see you next time.

Dave:
Will home prices go up or down in 2026? We have seen a historic run of home price appreciation with values rising year after year, even as mortgage rates have remained high. But will that continue next year or will we see prices flatten or even decrease in the year to come? Today, I’m giving you my 2026 home price forecast. Hey everyone. I’m Dave Meyer. Excited to have you here for what is simultaneously both my favorite and least favorite show of the year, predictions about the next year. I genuinely enjoy and love the data analysis and research that goes into making these predictions. And since I started doing this back in 2022, I’ve been pretty accurately in calling the direction of the housing market. But at the same time, it’s a little nerve-wracking and difficult to put these predictions out in public, especially this year when there’s less data available due to the recent government shutdown.
But despite those limitations, I choose to make these predictions for you every year because having an idea of where the market is heading, even if it’s not 100% accurate as no forecast is, this is still crucial as an investor because you invest differently in a rapidly appreciating market than you do in a flat or a correcting market. And don’t get me wrong, you can invest in any kind of market, but you do need to plan accordingly. And that’s what I’ll help you do today. By the end of this episode, you’ll know where the market is likely to go, what things to watch for in case things start to change and how to build your portfolio accordingly in 2026. Let’s do it. So making predictions about the housing market is difficult because the housing market is driven by so many different variables. On one side, you have all these things that impact demand.
How many people want to buy homes? These are things like demographics, immigration, cultural shifts, domestic migration, investor activity and so on. Then you have this whole other set of variables that impact the supply side, like the lock-in effect, construction trends, a longstanding shortage in homes in the United States and so on. But to me, and I’ve been on this trend for a while now, affordability is the number one variable driving the market these days. Now, why this variable among all the other ones out there? Well, we have hit an absolute wall in terms of affordability. We are near 40 year lows. And by the way, if you haven’t heard this term before, in context of the housing market, it just means how easily the average American can buy the average priced home. And that’s at 40 year lows. It hasn’t been since the early 1980s that has been this difficult for the average American to buy homes.
Now this is really crucial because what has not changed is that people do want to buy homes. There is still desire to buy homes. But when you look at demand, this economic term, demand, it’s not just desire, it’s desire and the ability to pay for it. We still have the desire side. The issue is that most Americans just cannot afford it. And in my view, if that doesn’t change, if affordability doesn’t move, not much is going to change in the housing market. But if affordability improves, so will the market. So affordability, this key thing is actually made up of three individual variables. We have home prices. How much do homes actually cost? That should make sense. We have mortgage rates because the majority of homes are purchased with a mortgage, and so this matters a lot. And we also have wages. How much are people earning?
So those are the three things, and we’re going to break each of them down one by one. So the first factor in affordability is mortgage rates. I did a whole episode about that, but the TLDR was that although I think they could come down a little on average, next year I don’t think they’re going to move that much. So I think it could modestly help affordability, but it’s probably not going to be the thing that really changes the housing market. The second one is wages and real wage growth can improve affordability. Real wages, if you haven’t heard this term, it’s basically just a question of are incomes rising faster than inflation? If the answer to that is yes, you have positive real wage growth. The answer to that is no, you have negative real wage growth. But luckily right now, one of the bright spots for the economy in recent years since 2022 or so is that we have had real wage growth.
Wages in America, incomes are growing faster than inflation, which means your purchasing power is going up. I hope that will stay up, but I think it’s going to slow in the next year. We’ve seen inflation up to about 3%. The job market is definitely weakening. That reduces leverage and salary negotiations. And I think wage growth will slow. But the thing about the housing market and how this relates to our strategy as investors is that even in the best times, wage growth takes time to really impact affordability. So although wage growth does really matter, it’s probably not a big factor in 26. So if rates aren’t going to change that much in my mind in our base case, and real wages are not going to impact affordability that much, does that mean that the housing market is doomed to have another year like we had this year where things are pretty slow and stuck?
Maybe, but we still have one more variable, which is housing prices, which is why my base case for next year is for home prices to be flat or maybe down just modestly. If you want some actual numbers, I like to predict a range and a direction because I think as real estate investors, it actually hurts us to obsess about is it up 1% or 2%? I think we actually should just say, “Hey, it’s up modestly. It’s down modestly. It’s flat this year. It’s going to go up a lot. There’s going to be a crash.” Those kinds of directional indicators I think are what’s really important. And what I see is that home prices in 2026 are going to be between negative 4% and positive 2%. You could call this flat if you want. I am personally leaning more towards the negative side right now. Again, we don’t have data from the last couple of months, but the way the trends are going, I think if I had to pick where we’ll be a year from now, I’d say negative one, negative 2% year over year growth.
So you might be surprised hearing me say this because all previous years I’ve said we’ve been flat or up because I genuinely believe that and that was what actually came to be. But this year I see that changing. And I just want to say having these kinds of declines, this isn’t crazy. Seeing modest declines in prices isn’t a crash. It’s not even unusual. It is a normal correction, and I should probably mention a buying opportunity. And that said, I am a little more pessimistic I think than other forecasters. I see Zillow at plus 1%, some others are near flat, but most of them are modestly positive. But we’re all still generally in the same range. Honestly, being plus 1%, minus 1%, it’s kind of flat. So that’s what most people are saying. And I think the takeaway here, whether you think it’s plus 1% or minus 2% is the same.
Appreciation is going to be slow at best. It might be negative. We can’t know right now with the little data that we have, but we have to not count on appreciation. I think that’s the main takeaway for us as real estate investors. Maybe we’ll get 1%. That would be great. Maybe it’ll be negative 1%. Honestly, whatever. If you’re counting for flat or you are not counting on appreciation when you’re underwriting your deals, you can still invest in this market, but that’s the main takeaway I want you all to have right now is that you should not assume you are going to get appreciation in 2026. So that’s my belief about what’s going on in terms of nominal prices. This is going to get a little wonky, but stay with me. Nominal prices means not inflation adjusted. This is the price that you see on paper.
This is the price that you see on Zillow. People are split on whether that’s going to be up a little bit, down a little bit, but what almost every forecast that I believe in that I think is reputable, all of them agree that real prices are going to be negative. And again, real in economic terms just means inflation adjusted. So every forecast I see believes that compared to inflation, home prices are going to go down. So even if prices on paper go up 1%, but inflation stays at 3%, then real home prices have declined 2%. Real prices are down. And even though I’m saying, I think the most likely scenarios that nominal prices are down next year, I feel much more confident that real prices will be down in 2026. That much seems pretty clear to me. So that’s my base case. It’s what I’ve called the great stall in recent months as you’ve listened to the podcast, and it’s still what I think is the highest probability of happening next year because affordability is too low.
Rates will come down a little bit, I think, but not that much. Wages aren’t really going to help us one way or another. And prices, if they flatten or modestly decline, that’s how we get into the stall period where affordability gradually gets restored to the housing market. That is the base case. But I should say that when I make these forecasts, I like to be honest about my confidence level. And I just want to say that this year it is lower than previous years. Last year, I felt really confident about what I said was going to happen. I was pretty accurate. This year, I think the great stall is probably a 50-ish, maybe 60% probability, which means that we have a 40 or 50% chance that something else could happen. And I’ll give you some alternative forecasts and predictions right after this break.
Before the break, I shared with you my base case. It’s what I think is the most likely scenario to happen next year, and that’s having pretty flat or maybe modestly declining nominal home prices next year. And I think pretty confident that real home prices are going to go down unless one of these other X factors happen, which is what we’re about to talk about. So what else could happen in the housing market? To me, it still all comes down to affordability. As you’ll remember, my base case is saying affordability not going to change that much. It’s just going to gradually improve. But what happens if it goes up a ton? What if affordability gets way better? What if it goes down and actually gets worse? Are there scenarios where affordability really does move more than my base case? Yes, absolutely. That is possible. I don’t think it’s the most likely thing to happen, but I want you to understand all of the different scenarios that could play out next year.
And to me, there is one really big X factor that I am going to be keeping a very close eye on next year because it could cause what is known as a meltup, basically a huge surge in home pricing. So when I’m asking, could affordability get much better and send prices up? Yes, there are a few routes to that, but to me, the most compelling one, the thing I’m going to watch most closely is something called quantitative easing. I went into this a lot in the episode predicting mortgage rates. So you can listen to that again, but if you missed it, it’s basically the Fed using one of its emergency tools to get mortgage rates down into the mid or low fives, maybe even lower. We don’t know. Quantitative easing, it’s basically they go out and frankly print money to create demand for mortgage-backed securities and bonds.
This pushes down yields, that pushes down mortgage rates, and that could increase the demand in the housing market a lot, which could potentially push up prices. Hopefully that makes sense, right? Because I don’t believe regardless of what happens, the Fed cuts rates a bunch of times. I still don’t think without quantitative easing, we are getting to the magic mortgage rate that we need in the United States to unlock the housing market. Research by Zillow, John Burns Real Estate, a couple different economics firms have all gone into this, and they say that the magic number you need to get to to get people off the sidelines to free up inventory, to restore transaction volume to the market is like somewhere between five and five and a half percent. I just don’t see that happening next year without quantitative easing. So the big question for 2026 in the housing market to me is, will there be quantitative easing?
And frankly, I think the chances of it happening are going up like every single week right now. The Trump administration has continued to prioritize affordability, particularly in the housing market. And as we’ve seen other parts of the economy start to falter and weaken like the labor market, I think the chance that the Fed dips into its toolbox to stimulate the economy continues to go up. Now, I don’t think this will happen right away in 2026. I think the earliest it will probably happen is in May because President Trump, he actually the other day said he already knows who he wants to name Fed chair, but he can’t do that until Jerome Powell’s term is up in May of 2026. So that’s when we would probably seriously start looking for this to happen. I don’t know if it’ll happen on day one, but it might happen sometime after May.
So if that does happen, and I call this the upside case, I know you have your base case, which is what you think is most likely. Is there a more positive case? That’s usually called an upside case. So my upside case for is we get quantitative easing, affordability improves, and then what? In that case, I think we see prices go up somewhere maybe between two and 6%, maybe up to seven if they really get rates down into the fives, maybe up to 7% if they get mortgage rates down in the fours, but that seems unlikely. And that’s what I see happening. Now, I know a lot of people are saying if there’s quantitative easing, if the Fed cuts rates, we’re going to see explosion in appreciation. They’re going to go up 10% again during COVID. I don’t buy that personally because we know that when rates went up, not only did it drive down demand, but it drove down supply as well, right?
That’s the lock in effect. That’s why prices haven’t fallen because low affordability doesn’t just impact demand, it impacts supply at the same time. Both of them are low right now. So in my opinion, if rates come down, yeah, it’s going to bring back demand, but it is also going to bring back supply, right? This will break the lock in effect. So more people will be listing their properties for sale, more people will be looking to move. And so in this quantitative easing scenario that we’re talking about, I think the real winner is going to be transaction volume. We are going to see more homes bought and sold. That will help. And there will likely be upward pressure on prices, but not like COVID. That is unusual. Seeing 10% appreciation might be a once in a lifetime thing that we don’t see again for generations. Of course, if they drop rates down to 2% or 3%, maybe that will happen, but I think that is not the case even if there’s quantitative easing.
So I would expect positive appreciation in this scenario, good appreciation, really good for investors, but nothing crazy like COVID. The other thing I should mention is that if this happens, it will probably happen amongst a backdrop of a slower economy. So people may not want to make huge economic decisions like buying a house when they’re fearful about their jobs. So we have to temper our expectations for what might happen if there is quantitative easing. Now, I told you my base case, I think that’s about a 50, 60% chance of happening. When we talk about the upside case is quantitative easing, I think it’s getting more likely. I actually think it’s about a 30% chance that this happens, and we’ll talk about how to account for that in your own investing in just a minute, but I also want to talk about downside because yes, there is a chance that affordability gets better.
There is also a chance that affordability gets worse, right? How does that happen? Well, it probably happens if inflation stays high. If inflation goes up, it’s been going up four months in a row. It is nowhere near where we were in 2021, 2022. So people overuse the word hyperinflation a lot in this country. 3% is not hyperinflation. Four months in a row of growth is not hyperinflation. We are nowhere near that. But if inflation continues to creep up and mortgage rates go back up, I think there is more downside. I’m not saying that’s going to be a full on crash, but I think there’s more downside below one to 2%, right? Could a crash happen and it really get bad? Sure. But on top of rates staying high, what we need to see is to force selling. We’ve talked about this on the show, but the thing that takes a correction to a crash is when homeowners are no longer able to afford their mortgages and they are forced to put their homes on the market to avoid foreclosure or as part of a foreclosure.
Now, right now, delinquencies, they’re up a little bit, but they’re still very low by historic standards. They’re below pre-pandemic levels. But what I am saying is that there is no evidence that a crash is likely at this point. If people’s predictions about AI just destroying the labor market come true and we see unemployment go up to 10%, yeah, there is a chance that there is a real estate crash, but that still remains unlikely. I think even in this scenario, maybe prices drop five to 10%. I have a really hard time, even in a downside case imagining more than a 10% drop in 2026. It seems just extremely unlikely to me, but the chance that we see 5% declines, 7% declines, low, but I’d say it’s maybe a 10% chance because we just don’t know. There could be some Black Swan event that we don’t see coming that negatively impacts the housing market.
We always have to remember, even though we can’t predict them, we have to remember that these things exist. That is part of being an investor. And we can’t just ignore them and pretend that they don’t happen, they are out there. So the question then is, what do you do? How do you use this information where I’ve just said, yeah, I have a base case, but it’s maybe 50, 60% likelihood. There’s a 40% chance that something totally different happens. How do you invest in that kind of market? I’ll tell you how right after this break.
So far, I’ve told you about my base case, which is the great stall, the potential for quantitative easing to bring us into an upside case and a scenario where the labor market really breaks and inflation stays high where maybe we have more downside. These are obviously three pretty different scenarios. So the question is, how do you invest in an era of uncertainty and low confidence? How do we invest when there are multiple likely outcomes? There’s no right answer to this, but I will tell you how I am doing it. I am first and foremost preparing for the great stall. I think that is the most likely scenario. And the whole idea of making forecast is to not get paralyzed by all the different outcomes, but to have a plan, but to remain somewhat flexible. So I’m going to plan for the great stall because I know this might seem counterintuitive, but I actually think it could be a great time to buy, right?
If we are in a scenario where prices are flat or going down on average, that means you can get great assets at a discount. Now, of course, in these kind of scenarios, there’s also the risk that you might buy a property and the value of that property goes down more once you buy it, but in the great stall, the downside risk of that is not so great. And if you use tactics like buying deep or value add investing, you can mitigate that risk. Now, seeing this opportunity and wanting to pursue that, at the same time, I’m protecting myself against those possible declines in values. Like I said, I am going to underwrite super conservatively. I am being very, very picky right now. I am being patient. I will only buy sure things, only buy excellent assets, things I would want to own even if prices went down for a year or two after I bought them.
Those things absolutely exist 100% and they will become easier to find and buy during the great stall. That is one of the benefits of this market is that more opportunity will exist. And by doing this, by pursuing great assets that I can get at a discount, but while simultaneously protecting myself against downside risk, I am also positioning myself to take advantage if that melt up happens, right? This is the way that you are actually planning for all three scenarios, right? You plan for flat, you protect against downside, but at the same time, you need to make sure that you are in the market in case the upside case happens to take advantage of the growth that could come from that. This, to me, covers all the bases and it’s entirely possible. So let’s talk a little bit more just specifics about what this looks like.
I am going to focus only on assets that I want to hold for a long time. I want to take a long-term mindset. When I look at a property right now, I’m thinking, do I want to own this five years from now? Do I want to own it 10 years from now? And if the answer to that is no, I’m not really interested in it. Even if I think it’s going to go up in the next couple years, maybe there’s something great happening in the neighborhood or you’re buying it below comps. For me, I only want to buy things that I’m going to hold onto for a long time. That’s like the number one thing. Number two, I want cashflow within a year to make sure I can hold onto it for five or 10 years. Now, we’ve done a bunch of episodes about this recently.
I really recommend you listen to them, but you need cashflow positive within the first year. One year is really not some magical number, but I basically mean at stabilization. A lot of times now when you go out and buy a property with current rents, the current condition of the property, it’s not going to cashflow. Well, if you’re going to do value add, if you’re going to upgrade them, if you’re going to big rents up to market rate, that’s when you need positive cashflow. If you can’t get to positive cash flow after stabililization, do not buy it. I know some people say appreciation’s more important. I don’t think so in this market. I just told you, I don’t think appreciation’s coming next year. So make sure you get cashflow so you can hold onto that property so that when appreciation does come, because it will come back.
When it comes back that you’re in the market, you’re already making cash flow, you’re getting those tax benefits, you’re getting that amortization, you’re in the market and you’re comfortably holding onto them. That’s what cashflow does for you. Next, I am adjusting my mindset to care less about short-term returns. Some people might disagree with this, that’s fine, but I am saying I still need cashflow. I still need the tax benefits. I still need amortization. So I’m not saying I’m getting no short-term returns. Those three things alone should probably beat the average of the S&P 500 by themselves without appreciation. So you can still get seven, 10, 12% without appreciation, not to mention value add. You should still be able to do that. But by expectation for appreciation, market appreciation where macroeconomic forces push up the price of housing, I have very low expectations for that for the next few years.
I have low expectations for rent growth over the next few years. I could be wrong about that, but I don’t want to account on that. I don’t want to assume that because no one knows. It’s super uncertain. I’m sorry. I know some people are going to say it’s going to go up. It’s coming back next year. We don’t know, and that’s okay. If you buy according to the way, I’m telling you, by being patient, by being picky, by having conservative estimates when you underwrite your deals, you can still find great deals, but you have to follow an approach similar to this. I’m not saying you have to do everything exactly the same as me, but having this kind of mindset will help you in this era of investing. This is the approach that I am going to pursue. Now, I understand that some people are thinking now, why not wait?
If there is this flat period that we’re going to be in, why not wait? I mean, you could, but what if that upside case happens and you miss out on it? That wouldn’t be good, right? The value of real estate is being in the market for a long time. So if there are good deals that produce cashflow that are going to produce a seven, eight, 10, 12% return as good as the average in the stock market in a bad year. If you’re going to get that in a bad year and you can buy properties that you want to own for 10 plus years, why would you not buy it now? You’ll still get cashflow. You’ll get amortization and tax benefits. You’ll be able to do value add and all of that, even if appreciation is slow. You’ll also start paying down your mortgage, which means that your benefits of amortization get better year after year after year and you’ll be learning and growing.
So to me, this approach gives you a little bit of everything. That’s how personally I am going to approach a year where there is frankly a lot of uncertainty. As I’ve shared with you, I think the most probable outcome is the great stall. That’s what I’m planning for, but I just want to be honest with you. I don’t want to pretend I know everything. I want to be honest that there’s probably a 40% chance that something else happens, that there is a melt up or 30% chance is my rough estimate of that or a more significant client. I think that’s really only about a 10% chance, but it is still absolutely there. Even with all of that uncertainty, there are very proven ways to invest in real estate and to continue moving yourself along the path towards financial freedom if you are willing to set your expectations appropriately, to be patient, to be conservative in your investing that will benefit you over the long run and even in the next year.
So that’s my approach, and hopefully this helps you as you start formulating your own strategy and tactics heading into 2026. That’s what we got for you guys today. I would love to hear your forecast. What do you think is most likely to happen in 2026? Please let me know in the comments. Thank you all so much for listening. We’ll see you next time.

Dave:
Hey everyone. This is it, the last BiggerPockets podcast episode of 2025. We released 153 episodes this year and I hope you found them inspiring, educational and entertaining. I know I had a great time making each and every one of them. We will have a new episode Friday to kick off 2026. And then the following week, we’re going to do my state of real estate investing, which you’re going to want to listen to. And we have a very fun, very exciting announcement coming next week as well. To close out the year, we are republishing one of your favorite episodes of 2025. This is a conversation I had with Henry Washington, Kathy Fettke, and James Dainard back in April about properties that we had each recently purchased. It was a lot of fun, and I think it showed that you can make real estate investing work for you in almost any market at almost any price point.
So enjoy it. Have a happy new year, and thank you all for listening. Here’s my conversation with Henry, Kathy, and James.
Hey, everyone. I’m Dave Meyer, head of real estate investing at BiggerPockets, where we teach you how to achieve financial freedom through real estate. And today on the podcast, I am joined by three expert investors who are my co-hosts on the On The Market Podcast, James Daynerd, Kathy Fecke, and Henry Washington. James, Kathy and Henry are each going to tell us about an investment property that they’ve bought within the last few months with purchase prices ranging from 55 grand, so sort of at the low end of the spectrum, all the way up to 600 grand at the high end of the spectrum. Well, thank you guys for being here. Kathy, great to see you.

Kathy:
Great to see you. Can’t wait to hear what these guys are up to now.

Dave:
Are you nervous? I mean, not that this is a competition, but we always make it one.

Kathy:
It’s going to be a competition. It always is, even if it’s unsaid.

Dave:
Okay. Well, you usually hang pretty well in these competitions, so we’ll see. James, how are you doing? I’m good.

James:
And it doesn’t need to be said. It’s always a competition.

Dave:
Henry, good to see you, man.

Henry:
Hey, glad to be here. This is always a competition and I want to win this time.

Dave:
All right. Well, I’ll give you guys a little bit of a spoiler because I’ve read a little bit about the deals. We know that so far that Henry’s house that he’s bringing to trying to win apparently with a house full of spiders when he closed, but it will be a part-time vacation home for his family. Kathy found an incredible upside opportunity in one of the US largest and fastest growing cities, and James is getting super creative with a multi-part strategy to create profit other investors may have overlooked. So whether you’re a new investor, you’ve been in real estate for a long time, today’s show will have some great ideas to get the wheels turning on your own next property. Let’s get into it. All right, Henry, I’m going to pick on you. You have to go first and share the deal that you’re doing.

Henry:
Yeah, we’ve got a single family home that we purchased. It is coincidentally across the street from a lake and it’s arguably the second nastiest house I’ve ever bought. It was so riddled with brown recluse spiders and webs. You got me there. So first of all, when you walked in, you walk into a sunroom. The sunroom, literally three inches thick on the ground of just cigarette butts. Like this guy would just smoke his cigarettes and then throw his butts out in the sunroom. And then when you get into the house, I took one step in and I was like, nah, I’m good. So you had to get a stick of some kind and then you just had to wave it around in front of you from all the cobwebs.

Dave:
Oh, it’s like when they make cotton candy, they take that little thing and roll it around.

Henry:
Yeah. It was literally just like a thick stick of cotton candy except spiderwebs. And then the subfloors were so rotted away that we just had to put two by fours down so that we have something sturdy to walk on because I thought I was just going to fall through the floor.

James:
You know what though? I like that Henry said that this is the most realistic deal. Who wants to buy a house where you’re going to fall down and get killed by spiders within the first 30 seconds? It’s realistic though, Henry.

Henry:
It is realistic because our listeners can afford it. We haven’t talked to yours yet.

Dave:
What did you like about it? I’ve heard some things that would turn me off, but what was attractive about this

Henry:
Deal? I liked that it was across the street from the lake. I liked that I could buy it for $55,000, I think we paid for it.

Dave:
Oh yeah, that’s something to like.

Henry:
I mean, it needed more put into it than I paid for it. So we’re putting 90 grand into it, but the ARV on the house is 265 conservatively, probably closer to 275, 285. And if we want to long-term rent it, we could easily get $1,800 a month, mostly because as we bought it, it was a three bed, one and a half bath, but we were able to steal some room from a couple of closets and we made it a full three bed, two bath. So $1,800 a month long-term rent, but we’re going to actually short-term rent it because it’s across the street from the lake and I just want to be able to take my family there and do lake stuff. I don’t really know what lake stuff means because I’m not an outdoorsy person, but we’re going to figure it out.

Dave:
You will find out soon.

Henry:
Yeah.

Kathy:
I got to ask you about this lake though, because there’s different, there’s bougie lakes, there’s redneck lakes, and there’s lakes you don’t want to go near. What are we talking?

Henry:
I’m going to say one word and then you tell me what kind of lake it is. Arkansas. No, no. It is a pretty lake. There’s actually a deck and pier that you can walk up to and fish off of. They even have a fishing house. So when it’s cold outside, you can go inside the little house and fish down into the lake from the little house and there’s a boat dock and all kinds of stuff. So it’s actually, there’s really nice

Kathy:
Amazing

Henry:
Lakes in this community.

Kathy:
Oh, nice.

Henry:
And so I like the price point. I like that I have multiple exit strategies. I can sell this one if I wanted to and make a pretty decent profit because like I said, ARV is pretty high. I could long-term rent it for $1,800 a month and cashflow the property, or I can short-term rent it, which is what we’re going to do. And we’re estimating to make about $3,000 a month on the short-term rent. But the real reason I want to short-term rent it is because I haven’t been able to get my wife to agree to let me put a golf simulator in my personal home, but if it’s for a short-term rental and it’s going to bring us more income, I have gotten her agree to let me put it in the short-term rental, which is only like a 20-minute drive from my house. It’s basically like my own personal talk.
Is

Kathy:
Henry

Henry:
Working

Kathy:
On that house again?

Dave:
What could possibly be wrong

Kathy:
With it now?

Dave:
Wait, I have to ask you about this because I was going to put one in my short-term rental because I have this detached garage that I don’t use for anything right now, but I was worried that people are going to break it because it’s like you need a computer and a software. Are you worried about that at all?

Henry:
There’s cases that you can get for your launch monitor that can secure your launch monitor to the ground so that no one can take it. And then you can also lock your computer up in a case so that no one can take that, just a key to entry case. So yeah.

Dave:
Oh, maybe I have to come visit you in person and see how you created this just so I can replicate it.

Henry:
If you want to come and do some market research, or I can come out there and consult and tell you exactly how to set all this up. It’s a writeup. Yeah, easy

James:
Piece. But Henry, so you bought this house, it’s got no floors, it’s got lots of spiders.What does the permitting take? Because for us, if we have to wait nine months for a permit, it can be all the profit in the deal.

Henry:
Yeah, no, that’s a great question. Actually, the permitting process was really easy, actually. I just went to the permit office and told them what I was going to do and then they made me draw it out for them and I did. And then you pay for the permit and they issue it to you pretty much on the spot. As long as you’re not asking to do something that doesn’t conform to their normal standards. So I’m wanting to build a deck over the driveway of this property because the elevation is so steep that I don’t want anybody to park at the top of the driveway. And so I actually want to build a deck over the steepest part, but the rules in this community say that every house has to have either a carport or a garage. And so when I asked them to do that, they said I’d have to come to the meeting and present and get approval, and then they’d give me a permit.
So as long as what you’re asking for is within their normal standards, you can get a permit pretty quick. If it’s not, then you’ve got to go present.

Dave:
And how did you finance this, Henry? Because I imagine this deal you could not get a conventional loan on. So how’d you make this one work? No,

Henry:
This was similar to a hard money loan. I financed almost 100%. I think I had to put about $5,000 down at a mile money, but they financed the majority of the purchase and all of the renovation. And then once we finished the renovation, we will refinance it out into a 30-year fixed on a

Dave:
DSCR. So you financed your own golf simulator, just to be clear.

Henry:
Yeah. For business purposes, yes. Yes, of

Dave:
Course.

Henry:
Purely

Dave:
Business.

Henry:
I will get no personal joy out of this.

Dave:
And how long are you expecting this renovation to take? Sounds pretty serious.

Henry:
By the time we’re done, it’ll be about five months. Yeah,

Dave:
It seems pretty reasonable. So as you said, this is the most relatable deal. Is this a deal you think an average real estate investor could find and pull off?

Henry:
Absolutely. I think there are markets like this all over the country where you can buy houses for a reasonable price point and you can figure out a way to monetize them. I’m not saying it’s easy. I am saying it’s repeatable.

Dave:
Well, what’s hard about it? Tell me. It looks easy

Henry:
Because I just get to get on here and talk about the deal that I have. But what we don’t hear me talking about is how long or how much marketing I had to do in order to find an opportunity like this. There’s a level of consistently looking for opportunities and then when we find one, we’re able to capitalize on it. So it’s not like I just found this one property sitting out there, nobody wanted and bought it. It took a lot of legwork on the front end to find this opportunity. I mean,

James:
I love this deal. When the rehab’s bigger than the purchase price, it typically means- You’re making money. Yeah, you’re making some money on this thing. You

Kathy:
Better be making some money.

James:
But you still have to control those costs, right? And I think you have to be careful about buying the cheapest thing because the cost can’t explode. I mean, what do you think for somebody that was brand new, what’s their rehab number going to be?

Henry:
You could easily run this about 1125 to 150. It’s not just controlling your costs. It’s also not over renovating. But I have this contractor doing four jobs for me right now, and so he’s able to source materials all at the same time, and I’m able to get a discounted rate because we’re doing so many jobs with this one contractor.

Dave:
But even you said 125, right? So Henry, just as a reminder, he said his renovation cost him 90. So even if you went up to 125, which is like a 30, 35% increase over what Henry’s paying, you’re still into this deal for 180 and the ARV is 265. It’s still a good deal.

Henry:
It’s a stupid deal.

Dave:
Yeah, right.

Kathy:
You could mess it up left and right.

Dave:
Exactly. So yes, there are inevitably efficiencies that come with doing the volume of deals, Henry Doe, having a business for several years, being great at building these relationships, that definitely helps. But even if you’re starting, there’s so much cushion in a deal like this that it gives you a lot of flexibility and allows for some of those inefficiencies that just exist for anyone when they’re first getting started.

Henry:
Absolutely.

Dave:
All right. Well, that is Henry’s deal. We are going to take a quick break, but when we come back, we’re going to hear about Kathy’s new property and we’ll see if it’s as relatable as Henry’s deal that’s filled with spiders and has no floors. We’ll be right back. Running your real estate business doesn’t have to feel like juggling five different tools. With Reese Simply, you could pull motivated seller lists. You can skip trace them instantly for free and reach out with calls or texts all from one streamlined platform. And the real magic AI agents that answer inbound calls, they follow up with prospects and even grade your conversations so you know where you stand. That means less time on busy work and more time closing deals. Start your free trial and lock in 50% off your first month at resimply.com/biggerpockets. That’s R-E-S-I-M-P-L-I.com/biggerpockets. 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 the BiggerPockets Podcast. I’m here with Kathy Becky, James Dadard, and Henry Washington talking about deals that we are all working on right now. We heard about Henry’s frightening deal with a lot of upside. Kathy, tell us about something you’re working on.

Kathy:
Well, this is a classic Kathy deal, and it is quite opposite from Henry’s and probably James as well. Shouldn’t be any spiders in this one, but actually it is me helping my daughter get her first investment property because first of all, I don’t know about my youngest yet, but my oldest, Karina, listens to me and she bought a house instead of a car right out of college. Because she didn’t get a car, her debt to income ratios were better. She was driving an old car. She didn’t need a new one, and that house helped her buy a house in Southern California. And just recently, the bank contacted her and said, “We can give you an equity line. All you have to do is just sign.” And she called me, she’s like, “Mom, what do I do? ” And I said, “Honey, you buy an investment property.
That’s what you do. ” And it’s a pretty substantial equity line that they’re giving her. So it’s scary. She’s very busy, busy professional. She’s got her own business and she lives in Southern California. So to find what Henry just described in her neighborhood would be about a million dollars for that. So I wanted to show her how I’ve been investing and how we’ve been teaching people invest who don’t live in areas where it makes more sense to do the types of things that Henry’s doing and James is doing. So how do you have a full-time job, two young kids, try to take care of your life, your home, all the things, and try to buy an old house and fix it up. It’s really hard. So an alternative is to buy a new house that doesn’t need any work and that still cash flows and is in a growth area where you today can negotiate to have the rate bought down.
So Dallas has been hitting the news a lot as an area where prices are going down or there’s just a lot of inventory, but they’re not really talking about the outskirts. And if you go to North Dallas, it’s a very different story, very low inventory versus higher inventory. Places like the McKinney area and even further north where you can still get tremendous deals and they still cash flow and it’s still in the path of progress. And it’s all the things I love for buy and hold investing for busy professionals who just aren’t in a situation to buy a spider house. It’s just not going to work for them. So this deal is in an area in North Dallas, kind of near McKinney. There’s so much development coming in in this area. The purchase price is $214,000 for brand new.

Henry:
That’s really good. Wow.

Kathy:
Crazy. The median price in that area is almost double that, 395,000. So getting it well under median price, I love that. It’s a three bedroom, two and a half bath. We’re negotiating the interest rate down. We’re trying to get it under 6% by negotiating with the builder. And the rent looks to be around $1,825. So again, not the numbers you’re going to see with Henry, but also that’s really hard to do when you live in Southern California. You’re not going to find
A $50,000 house and be able to put 100,000 into it, make it work. So again, this particular area has, days on market is 65, months of inventory, 3.9. So kind of normalizing, not what you hear in the news, which is a flood of inventory in Dallas. You have to know that with the Case Schiller Index and a lot of these areas where they mentioned cities, they’re not always talking about the metro area. And the metro area is very different than the city itself. Cities operate very differently than suburbs. So you’ve just got to know your suburb really well and know where the growth is headed because if we want something that cash flows, if we want something more affordable, so do businesses. Businesses want to get out of expensive areas and into more affordable areas where they can get the land for cheaper, where they can pay their employees a little bit less than they might have to in a city.
So you’ve got to always be looking at where our business is moving and where is housing needed as a result of that. So I’m super proud of her. She’s going to be able to pull this deal off. It’s her first investment, and I like it so much I’m going to get one too.

James:
Oh, wow.

Dave:
Just double dipping.

James:
I love that.

Kathy:
Yeah, you know

James:
It. You know what I love about this deal right now though? You’re catching the builders in the middle.
Right now, it’s a little bit harder to sell inventory, so they’re now selling to you at a discount. You’re able to negotiate the rate buy down, which is a benefit to you. I mean, essentially you’re getting the property for cheaper by getting that rate buy down. And also we have tariffs coming that supposedly is going to raise construction costs 10 to 15%, and you’re locking in on today’s bill cost where the builder is also working with you to get the inventory off. And that’s what we’re always chasing as investors is what’s in the middle no man’s land. And that’s how you can kind of crush that deal. When you can get that rate negotiated down and you’re buying below replacement costs, because if construction cost is up 10, 15% in 12 months, you’re buying below replacement cost. And that’s what I really do love about that deal.
It’s the right price, it’s the right affordability, and it should naturally go up in value just by the bill cost alone.

Henry:
There’s a couple of things I love about this deal. First of all, brand new construction home in an area of the country that is going to continue to grow. There’s a lot of landmass in Texas. They’re not just going to stop growing. So 214,000 for a purchase price for a brand new home-

Speaker 5:
Yeah,

Henry:
It’s crazy. The home’s not going to go down in value. Even in the short term, if it does, over the long term, this property’s going to appreciate. And I know there’s people listening to this and looking at the numbers and going, oh, 214,000, only 1,825 in rent. But you have to consider that this property is brand new construction, which means you are not going to have the maintenance expenses and the capital expenses maybe that I am going to have with my property that’s a much older property. And so that is going to help you with the cashflow in the short term. And in the long term, you’re going to have equity and appreciation plus the tax benefits on a property like this. This is almost a no-brainer if 214,018.25 rent in a market that’s going to appreciate. Sometimes where you find new construction at these price points, you’re probably not going to get the growth or the appreciation over time.
So I think being able to buy something like this at that price point near a metro area like Dallas is pretty amazing.

Kathy:
And then like you said, just not to get nickel and dimed. It’s like buying a new car versus an old car. You’re going to get a better deal on the old car, but you might have to … More fix it costs than a new car, hopefully.

Dave:
Yeah. And lower vacancy, right? I think when you go into these communities where it’s more family oriented, you might have longer term tenants too. I mean, this makes a lot of sense to me. Kathy, this might be a more relatable deal. It was. I think for an average investor who, especially who lives in a high price market, this is a good option. Henry, your deal has a lot of juice in it to borrow James’s term, but it’s a little bit more work and it’s going to be a little bit harder to do. So I think you might be competing here on relatability, Kathy.

Kathy:
All right.

Dave:
All right. Well, thank you for sharing with us, Kathy. Sounds like a really good deal. Good example of something that you can buy anywhere in the country if you have the capital to afford something like that. All right, we’re going to take a quick break, but we’ll be right back. Welcome back to the BiggerPockets Podcast. I’m here with James Danard, Kathy Fecke, Henry Washington, talking about deals everyone is working on right now. We’ve heard about Henry’s Spiderhost, Kathy’s new construction deal outside of Dallas. James, I’m guessing yours is probably worth more than both of theirs combined. What are we talking about here?

James:
Yeah, my earnest money was double Henry’s purchase price on this one.

Dave:
He’s like, “That’s pretty cute. 55 grand,

James:
214.” That’s great. No, and it doesn’t matter the size of the deal. You got to play with the cards you get dealt, right? And we’re in Seattle. It’s expensive. I would love to buy myself a $55,000 lake house. And Henry, I did just get a wakeboard boat, so maybe we head out that way. My deal though, for the market we’re in, we have to get pretty creative to come up with cashflow and build out your rental portfolio. Things are expensive. And the reason I love my deal is because they only make so much land and I’m getting the land for almost free-

Henry:
I love

James:
It. … on this one and how we’re setting up.

Henry:
Love that.

James:
What we have is I found a property, which is the equivalent to 55,000 in Arkansas. I found a two bedroom, one bath property in the Central District of Seattle. So this is an expensive neighborhood. It’s constantly growing on a 4,000 square foot lot, and we paid 600 grand for this property. And 600 grand in Seattle is cheap. So the reason I love this deal is there’s potential in the backyard. It sits on a two-sided street. There’s access on the back and the front house is on the front of the lot. We can renovate that house and put in about 1120,000, 125,000, and that house will be able to be sold for about 900,000. In addition to, this property is zoned LR3, low rise residential, to where we can build a row house in the back.
And I can build a 2100 to 2200 square foot house in the backyard and subdivide it off and sell that property for about $1.2 million. Wow. So the plan on this is we’re going to renovate the house, put 12,535,000 in. We’re going to sell it for 899,000, which is then going to give us the back lot on that property. There’s going to be about $35,000 in profit after we flip the house. So we’re going to get our backyard for $35,000 cash to us, and we’re able to build that house out at a cost of about 700 to 720,000 to build a house that’s worth 1.2 million. That property then has now created over 350 to $400,000 in equity, but it’s not going to pay for itself. I’m going to have to write a check to either pay for it or leave some money in. And so that’s why I love this deal.
It takes a long time to build these things out so I can start collecting rent, start putting renters in, and I can 1031 exchange this in one year. And so I’m going to flip off the front house, get the lot for essentially free in the back, build a house for 720,000, sell it for 1.2, create $300,000 in equity and profit, and then I’m going to take that 300,000 and I’m going to go buy a fourplex with no money out of my own pocket. And so the reason I do love this deal is you have to look at creative ways and expensive markets, whether you’re in LA, Chicago, Miami, New York. The numbers don’t pencil if you want to buy a rental.
And so for us, it’s a lot of work. This is going to take us about 12 to 15 months, but in two years, I’m going to be able to get into a fourplex with no money out of my own pocket. And that’s how you start creating the wealth. And that’s how we built out our whole portfolio. Again, I would much rather buy a deal like Henry. If I had those in my backyard, I would buy them. But in my neighborhood, I got to cut off my backyard to make any kind of money on the three.

Kathy:
This is how you do it in a high priced market. In California, you can do things like that with ADUs. There’s such a push. The California legislation is all about building these ADUs in the back and increasing value. And I love what you said. You can have income coming in while you’re working through the permitting process and so forth. You still can rent the main house and then be able to build and improve the back part. Love it. We’re always looking for deals like this.

Henry:
So you’re still able to sell these properties, one for 950 and another one for what, 1.2, even though they don’t have the yards anymore?

James:
Yeah. And so we’ve deducted that value down. So 899, if I build it in the back, if I actually don’t build anything in the back, the property could be worth up to 999. But that comes down to the plan. So as I was permitting and start working on permitting that back unit, you want to make sure that you’re not putting too many negative factors on that house. So things that we planned out is as we did our design, we made sure that this house still had a little bit of a backyard as a front yard, but we also got parking on it. And that was key to make the numbers work. If we couldn’t have got parking, that house could go down to about $799,000 in value. And so these deals, they get a little complex and you have to look at all the comps and what the impacts are.
And they take a little bit of time to work through. And that’s why it’s really important to work with the right professionals that can give you the right values because if we don’t have that parking stall, instead of making money on it, I’m actually going to be paying 100,000 to 150,000 for the deal. And so it’s all about that plan and how you lay it out. And just because you can build it in the back doesn’t mean you should either. And so you want to work with an architect, an engineer, a surveyor, and to figure out exactly what you can do. This is not guessing. This is all done in our feasibility when we bought the property. And the reason I love this deal is for some reason, if bill costs shoot up 30% because of tariffs in the next six to nine months and my numbers change, I can still pivot my deal and sell the house for in the 900s, high 900s, and still make a profit and just cancel it.
And the only risk I’m taking is the waste of plans.

Dave:
James, I’m curious, how many different ways did you look at making this deal work before you settled on this particular strategy?

James:
I looked at this deal five or six times. I said no the first three times. And then I just kept coming back to it because it was affordable. And I’m going, okay, I love a no man’s land deal when everyone doesn’t want it. It’s like, well, how can we make this work? And so I probably looked at this six different times over a 45-day period. And even when I locked it up, I was like, man, this might not work. And then finally after talking to my surveyor and architect, we came up with the right plan.

Dave:
Yeah. I mean, I think that shows getting creative in not just expensive markets, but just in the kind of housing market where we’re in where there’s not that much inventory. This is something that a lot of people probably had a chance to buy, but because you were disciplined about it and got creative with it, you were the one who figured out through that hard work that you did, how to make this what other people couldn’t make pencil into a really profitable deal for yourself.

James:
Yeah, it’s all about the plan that you’re putting on things. And if you look at a straight over tackle a lot of times, it won’t pencil because everybody’s looking at it straight over tackle, so they’re rushing in on that deal. I like the ones where it doesn’t make sense, straight over tackle, and you got to get a little creative, and that’s how you can create big pops. Even on this deal, I might keep it as a rental, but I still might tweak it at the end because I can 1031 that front house, and for some reason if bill costs go up, I know I can sell that lot in the back for 15 to 20% of value. So that tells me that lot’s worth 150 to 200 grand, and I can combine it and then 1030 want it out that way too. And so there’s multiple different options in where I’m not going to get stuck having to build the house if I don’t want to.

Dave:
Awesome. Well, this sounds like another great deal, James. Thank you so much. And I know the prices may seem out there, but a lot of the lessons that James is talking about on how to approach this kind of challenge, I think is applicable to really any market. So thanks so much for bringing it to us. All right. Well, thank you all so much for bringing these deals. Since we tend to always just make these things competitive for absolutely no reason, I think we often vote for one deal that we would do, you can’t vote for yourself. So James, what’s your vote?

James:
Well, even if I could vote for myself, I’d pick Henry’s deal all day long. I love a massive fixer, cheap, high equity growth, straight over tackle rental. I’m jealous. That is my kind of deal.

Dave:
I like it. All right, Kathy, what’s yours?

Kathy:
So I would pick James because I love opportunities like that where you have multiple exits. 600,000 might sound high to some people, but I know that is a good deal and then all the options that you could do with it. And then I would just want to borrow James and his team for just a year or so, and I’ll take that deal.

Dave:
Yes. Okay. So you’re not buying just the property, you’re buying the whole

Kathy:
Opportunity.

Dave:
Okay. I like that. All right. Henry, what’s yours?

Henry:
Well, even though Kathy’s hating on my deal, I would buy hers.

Dave:
Oh, okay. Oh, I have to be the tie breaker now, but tell us why, Henry.

Henry:
I just think those numbers are pretty amazing for a new construction. And we have to remember that real estate is a long-term wealth game. And the more that I am into this space and the more that I’m looking at my rental portfolio, I’m most excited when I look at the newer properties that I’ve bought in the past couple of years. I’ve bought a few new construction rental properties. Those are the legacy properties. Those are the ones that you’re going to be able to hand off to your kids and they’ll still be in pretty decent shape versus if I bought a 50-year-old property and then I’m handing that one off to my kids. There’s a lot of problems that could come with those. Here

Dave:
You deal with this.

Henry:
So the idea of being able to Buy something brand new at that low of a price point and knowing that appreciation’s going to go up, rents are going to go up over time. We didn’t talk about that with Kathy’s deal, but that’s another upside to hers. It’s 18.50 a month now. But if you’re going to get appreciation over time and rent growth over time, that gap of wealth just continues to get bigger. I think that’s a great option for people who probably have 15 to 20% sitting on the sidelines that they’d be willing to throw in a deal.

Dave:
Well, I get to be the tiebreaker now.This is fun. You all voted for each other. Oh boy. And normally, I think I would actually pick your deal, Kathy, because those are the type of more passive long-term deals I like. But Henry got me a golf simulator. You thrown a golf signature on Andy deal. I’m taking it, so I’m picking Henry. All right. Well, thank you guys so much. This was a lot of fun, Henry, James, Kathy. We appreciate you being here and hopefully we’ll have you guys back on again soon. And thank you all so much for listening to this episode of the BiggerPocketsPodcast. We’ll see you next time.

Ashley:
Hey rookies, are you tired of watching your money sit stagnant and low yield savings accounts or giving your money away in rent every month? In 2025, real estate investing could be your path to financial freedom.

Tony:
And in today’s episode, we’ll break down the current market landscape and give you a step-by-step roadmap to help you start your real estate investing journey.

Ashley:
We will give you the knowledge and confidence to get started in real estate. I’m Ashley Kehr.

Tony:
And I’m Tony J. Robinson, and welcome to the Real Estate Rookie Podcast.

Ashley:
Okay, Tony, before we actually jump into the action steps you need to take to get your first deal or even your next deal, let’s talk about why you should invest in real estate right now. Tony, are you seeing any market indicators or economic indicators as to why someone should invest right now in real estate?

Tony:
Yeah, I mean, I think the biggest thing that we’re seeing is that even with all of the kind of fluctuations in real estate, we’re still seeing that over the long term, property values are continuing to go up and people are still building wealth. And as we continue to see, I think the supply of housing be constrained. That’s been a big talk for quite some time now is that there just isn’t enough housing to absorb all the demand. For the people that hold that limited supply, it typically is going to put you in a really good position, especially if you look out over a longer time horizon of five years, 10 years, 20 years, because you’re going to get a lot of appreciation on top of the cash flow that you’re continuing to generate. So I think just the fact that there’s this big imbalance between supply and demand is going to play in our favor.
And then irrespective of your kind of political beliefs, I think having a president in office who’s a real estate investor, there’ll probably be some good things that come our way as well. I saw a clip, I don’t know where he was speaking at, but he said that, hey, bringing back 100% bonus depreciation, very much something that he wants to do and all of us as real estate investors benefit from that. So I think there’s a lot of things kind of working in the favor of real estate investors today. What about you, Ash? What are you seeing?

Ashley:
Yeah, I think right now that if you’re going to start investing in real estate, it should be a long-term play. This isn’t going to be a get rich, quick scheme. You’re not in most cases going to see amazing cash flow because you’re getting a property at such a low interest rate, your mortgage payment is lower, rents are super high, so you have that cashflow buffer that maybe you got a couple years ago. That’s definitely going to be harder to find now. But I think if you are putting in long-term goals for real estate to actually build wealth, then I think definitely now is still a great time to invest in real estate.

Tony:
I think the other thing too, Ashley, to add to that is that we’re in this kind of weird spot and we’ve been here for a little while now and we’ll probably be here at least through a good portion of this year. But I think we’re in this weird spot where the demand, the number of people who are looking to purchase properties is nowhere near what it was in 2021 and 2022. So there’s fewer people looking for properties. Now, supply is also lighter than it was because there are a lot of people locked into these lower interest rates, 4% and below that don’t necessarily want to sell. But for the properties that are listed, I think we’re in a really unique opportunity right now because since there is less competition, it means that you as a buyer have slightly more leverage. And it means that if a property’s on the market and it’s been sitting for 30, 60, 90 days, you’ve got the ability to go there and go in there and start negotiating on things like price, negotiating on things like credits, negotiating on things like whatever other terms are important to you.
So if you are a rookie who’s sitting on the sideline and you don’t want to have to get in when rates are back to 5% and maybe you’re … It was crazy buying real estate at one point. It was so hard. And if you want to avoid that kind of bloodbath of so many people fighting over the same deal, this might be a great time where you as a buyer have a little bit more leverage.

Ashley:
Now, if you’re considering your first deal or maybe even moving on to your next deal, another consideration besides just the timing right now is also your own personal financial foundation. Are you actually ready and prepared financially to invest in real estate? So we did a YouTube video. You can head over to Real Estate Rookie on YouTube, unless you’re already here watching right now. And it was released on March 4th, and it’s a video about how to financially prepare yourself to invest in real estate. So go ahead and go check out that video. Let’s get into step one. So besides getting your personal finances in order, there’s some other things you need to do to kind of lay the foundation for your first investment. One of those things is figuring out what your goal is and what your priority is. So why do you even want to invest?
What do you want to get out of it?

Tony:
Yeahs, I think a lot of people get into … They get so excited about investing in real estate that they don’t really take a moment to pause and understand why they’re doing this and what their actual priorities are. There’s different reasons people invest. You have cash flow, you have the appreciation, you have tax benefits. If you’re doing something like short-term rental, you have maybe owning cool vacation properties in places you like to go. But with those motivations, oftentimes you won’t be able to equally satisfy all of them with one property. You probably won’t get a property that’s going to give you amazing cashflow, amazing appreciation, and amazing tax benefits, and oh, it’s a place that I love to go vacation. So more often than not, you’ll have to choose which one is most important. And I think that’s where most rookies kind of make a mistake is that they don’t make that decision, and then they’ve just got this kind of shotgun approach on strategy and market.

Ashley:
So the next thing you should be figuring out when you’ve set your financials is going to get pre-approved or figure out how you’re going to fund this deal. How are you going to pay for it? Is it going to be cash that you have? Is it going to be a mix of cash and bank financing? Will it be a line of credit on your primary residence? But you need to figure out what your purchasing power is. If you don’t know how much you are able to spend, you are going to be wasting so much time analyzing all these deals, looking in all these markets, looking at all these properties without even knowing what you can actually buy. How annoying is it? Have you guys ever gone to one of those wholesale stores where they dump everything off the truck that was overstocked from Target and all these different places and you go and there’s just stuff piled everywhere and you walk through and there’s no prices on anything.
You have to find someone, you have to barter with them. How do you walk through there and know what you can actually buy without knowing the prices? It’s so frustrating. So same with knowing your purchasing power for your property as to what can you afford? What can you be looking for?

Tony:
I think the last thing that Ricky’s want to do is start investing a ton of energy and time into a city, into a market or into a property, only to realize that it’s not even within their budget. Because who cares if you found the perfect city that checks all the boxes, if you can’t actually afford to buy there because you either don’t have A, the cash for down payment and closing costs, or B, the ability to get approved for the debt to buy in that market, then you just wasted a bunch of time. So that’s why Ash and I are saying, starting with understanding your purchasing power, your cash on hand and your loan approval amount is one of those most important first steps.

Ashley:
And then you’ll also need to know what exact strategy you’re going after because your buy box is going to be tailored based upon what strategy you’re going after. So say Tony and I are both looking to invest in the same market, but he’s going for a short-term rental and I’m going for a long-term rental. He may be looking for a property with a pool because it will increase his daily rate where myself, I don’t want a pool because it’s going to drive up my costs of insurance having long-term rentals in there and a pool. So making sure you know your strategy, you’ve defined your buy box and what you’re actually going to be looking to buy.

Tony:
And just one additional point on top of that is, I guess there is a bit of a distinction between strategy and asset class and having some understanding about those things I think is important as well. For example, with quote unquote short-term rentals, you can have a single family short-term rental, which is the asset class. Short-term rentals are the strategy, single family is the asset class. You could have a “short-term rental with a small motel.” You could have short-term rentals with a large hotel. Same thing for long-term. I can buy a single family property, so long-term is a strategy, single family is the asset class, or I could do long-term as a strategy and focus on small multifamily. Four to 10 units, 20 units. I could do large multifamily, 100 units and up, still long-term rentals, but it’s different assets. So understanding not only the strategy that you want to go after, but also the asset class is important to make sure that you’re putting all of the other pieces in place correctly.

Ashley:
We are going to take a quick break, but we’ll be right back after this with more on how to get your first property.

Tony:
All right guys, we’re back. So we talked about the foundational stuff. Now let’s get into the good stuff here.What’s the actual roadmap? So one of the most important questions you’re going to have to ask yourself is, how am I actually going to fund this purchase? So our second step is to get you to talk to a lender. Your lender’s going to be one of your best friends as you look to scale up your real estate portfolio. And I think Ashley and I both would encourage you to do a couple of things when it comes to lending. Number one is talking to multiple people. I think we’ve seen enough folks who come on and they only go to one lender. That lender gives them an answer and they take that as the gospel. But I think there’s challenges in doing that or you kind of make it more difficult for yourself because every lender has something that’s slightly different that they can offer to

Ashley:
You. Yeah. And I think too, we’re going to get into market selection, but even if you don’t have your market selected, there are nationwide lenders where you could at least get an idea of what you would be approved for. So if you need help finding a lender to get your preapproval, you can head over to biggerpockets.com/lenderfinder. And this is where you can find a lender that works with investors and can help you get that first investment.

Tony:
One other thing too that I just want to call it on the lending side, and we’ve talked about this a lot on the Rookie Podcast also is that there is a tremendous amount of value in going and working with small, local, regional banks. If you’ve got a good relationship with your local Chase, your local B of A, sure, go talk to them as well. But as you start to build your real estate portfolio, the small local banks are the ones that are going to have the most flexibility. And Ashley and I both, as we built our portfolio, have built relationships with these small local banks that have given us loan products that we no way, in no way, shape, or form would’ve gotten if we would’ve walked into Bank of America. My very first deal, my bank funded 100% of my purchase and my rehab.
I could not walk into Bank of America and say, “Hey guys, I got a killer deal for you. Check this out. ” There’s no way they would’ve said yes to that, but small local banks have the flexibility to do so. So whatever market you’re in, look up credit unions, look up regional banks and just go start talking to folks, see what they can offer you.

Ashley:
The next question kind of ties into this. You need to know what market you’re going to invest in, because if you are going to use a small local bank, you’re going to want to use the small local bank that’s in the market that you’re buying the property. So one of the banks that I use now, it is such a small area that they will actually lend in. If I was going to get a property in the city of Buffalo, which is 25 to 30 minutes from where these bank locations are, they would not lend there. They want to stay nice in their little rural surrounding towns and only lend on those properties, but they have great flexibility and they know their market, they know their area and they stick to it because they can tell when they’re looking at a property, what is actually going to be a good investment for the bank to lend onto.
So when you’re looking for your market, the best place to go to actually find it is to go to the BiggerPockets Forums, go to the Real Estate Ricky Facebook group, read, read the forums, read through the post, or ask the question, “Where should I invest? Where are you investing and why are you investing there?” Make a comment or make a post that shows your buy box, what strategy you’re looking for and that you need a market that fits that strategy. This is such an easy lift to do. Even if you get no one that responds, which is very unlikely in these two groups, it took what, five minutes for you to type up that post and to post it. You will get so much information. Then go to the BiggerPockets forums and create a keyword. So you can create keywords. So I have it set.
If anyone mentions Buffalo, even if they’re talking about the Animal Buffalo instead of Buffalo, New York, I will get, and I have gotten, there was a post about that where I got an alert and you have the alert set up right to your email and it says, “This person’s talking about Buffalo.” So if there is markets you’re interested in, start making keyword tags for them so that you’re getting updated information about them. Then you can go to the biggerpockets.com/resources and there’s a whole bunch of market analysis tools there. So the first things you need to know is your budget. So what markets can you actually afford to invest in? If you know you can only buy your purchasing powers only 200,000, you’re not going to waste your time looking in San Francisco for a property. Your strategy. If your strategy is long-term buy and hold, you most likely are not going to go and purchase in a destination area like Joshua Tree or maybe even the Smoky Mountains.
Sure, there probably are deals out there, but those aren’t probably going to be your highest cash flow. You would make more money turning those into short-term rentals probably. So knowing your strategy and your purchasing power can help you narrow down what market you actually want to invest in.

Tony:
Yeah. We actually did an episode recently, Ashley and I, and Dave Meyer from the real estate podcast on the market. It was episode 452 where we broke down market research for Ricky’s and each one of us picked a different market. We explained why. So if you want some more support on choosing your market as a Ricky investor, episode 452 is a great place to go. Once you’ve chosen your market, our next step is in building out your investment team. And David Green, who wrote several books of BiggerPockets, he’s oftentimes referenced this as your core four, but it’s the people that you’ll need around you as you look to build out your real estate investing empire. And I think for most rookies, the kind of core folks that you’ll need, your lender, which we already talked about, you’ll need a real estate agent, you’ll need an insurance broker, you’ll need potentially a property manager if you choose to self-manage or not, and usually you’ll need some sort of handyman contractor, someone that’s going to do that kind of work for you.
And as you put those pieces together, that’s how you start building the confidence that you can actually do this thing, whether it is in your backyard or whether it’s long distance.

Ashley:
Yeah. And I think it starts with finding one of those people and then using referrals, word of mouth, recommendations to actually build the rest of the team. So if you’re looking for deals, I would say an agent is a great place to start. Or if you know somebody that lives in the area that can be your boots on the ground, that can tell you like, no, I would not invest on that street. Turn the corner, then I would buy a property there that’s a way better area. So having somebody who has knowledge of the property, I think is super valuable too. Even if they’re not an agent, they’re not a lender, anything like that, but they can be your eyes and your ears for the property, I think is very valuable too.

Tony:
My very first deal, it was my agent that was kind of like, actually it was my lender. My lender and my agent kind of concurrently, they were like the lunch pin for me, but my lender introduced me to my agent, and then they both introduced me to my contractor, to my property manager, and a good agent who’s well connected and who does a lot of volume in a certain city typically has a lot of people in their Rolodex. So for all of our Ricky’s that are listening, if you want to find some of the best investor-friendly agents on the planet, head over to biggerpoxes.com/agentfinder, biggerpockets.com/agentfinder, super quick, super easy, fill out a quick form and you’ll get all the top rated agents in whatever market it is that you’re searching in.

Ashley:
Yeah. To give it a real life example of this, I’ve used the same real estate agent. I’ve used a couple others, but she’s been the consistent one for a while now. And I bought a pocket listing from her last year and I was flipping the property and an issue came up with the sump pump and it was delaying our closing. So she knew somebody that knew the building inspector, that knew who did the plumbing inspections and just because of how well connected she was just from doing deals in this area, this property was the farthest away from my house that I’ve ever done. I didn’t know anybody in the area. I have a great contractor who worked out there and hired his subs and took care of everything. I barely ever had to go there, but during this issue, it wasn’t a contractor connection. It was like working with the town and she was so well connected because she had done so many deals in that area that it wasn’t … It was one of her clients that used to work with somebody in there, but just having those connections can be so valuable to make your deal go through.
And I think that is a huge benefit to working with an agent who is investor friendly and has experienced doing a lot of deals because of those connections they have.

Tony:
Yeah. Ash, great example of the power of avenue good agent. So again, if you guys, Ricky’s biggerpockets.com/agentfinder best place to go. Once you’ve got your team built out, the next step, I think we’re on step number five now, so set number five is building out your buy box and then actually analyzing your numbers. So I guess before we even get into the nitty gritty here, just to quickly define what your buy box is, your buy box is the specific type of property and location of property that you’re searching for to help you achieve the goals that you’ve set out to become a real estate investor. So I’ll give you guys a quick example. When we made the decision to buy our first hotel, we made the buy box of we want a property that’s between the purchase price of one million to $3 million, value add opportunity, meaning we needed an opportunity to go in there, rehab and increase the value.
We only wanted to focus on either vacation markets or urban markets. We didn’t want suburban or rule, and we wanted something that offered seller financing. That was our tight buy box. And then it became so much easier to filter through all the different opportunities we were seeing to say, does it match or does it not match? Because then we didn’t waste our time with the stuff that wasn’t within our buybox. And we got really, really good at underwriting things that were within our buybox. And then taking it even back to the beginning of my journey, my buy box, when I very, very first started, I wanted a single family home and the 71105 or 71104 zip codes in Shreveport, Louisiana, single story. And I think I wanted it built like 1950s or later, nothing before 1950s with a value add opportunity. And my very first deal was at the three bedroom, single story home, value add 1954 build and the 71105 zip code.
So the better you get it defined on your buybox, the easier it becomes to really scale up the property identification and the property analysis. So I don’t know, what are your buy boxes looking like or how have they maybe evolved? What would it look like for you?

Ashley:
Well, actually I created a buy box worksheet. You can go to biggerpockets.com/Rickyresource and it’s a template and it basically asks you questions as to everything you should be looking at when building out your buybox. Do you want a pool? Do you want a garage? Do you want an HOA? Do you want how many bedrooms? How many bath? What type of building material do you want the property to be constructed of? Things like that. And I know you guys are probably so sick of us mentioning different links you can go to on BiggerPockets, but all of this stuff is free. All of this is free that you’re mentioning. We’re not trying to sell anything, but that’s another link is biggerpockets.com/rookieresource. And it’s a buy box template and you can go ahead and just click on it, download it, and then fill out that information to help guide you.
So for me, my BobBox right now is the next property I’m going to do is I’m going to do another flip and it’s going to be a starter home is basically my buy box. So I have three little towns that I’m searching in and it has to have a minimum of three bedrooms and a max of five bedrooms. So not super big wiggle room there, at least two bathrooms, two full bathrooms. And it has to be on an acre, at least an acre for these towns that I’m investing in, that’s where true value add is having that little bit of acreage. So those are a couple different things that you should be looking at. I don’t want anything with a pool. I don’t want to have to make sure the pool’s working. I don’t want to have to do updates and repairs to a pool.
So different things like that. The more detailed you get, the slimmer your funnel will get to be. And yes, you’ll have less deals to analyze, but at least you’ll only be analyzing the deals that you really, really want.

Tony:
And for all the Rickies that are listening, you might be asking, “Well, how do I know what my buy box should be? ” And a lot of it is you asking the questions or maybe answering the questions that we’ve kind of been talking about. Like as you said, what scope of project are you willing to take on? How comfortable are you going out of your own backyard? How much capital do you have to actually buy something? And as you start to answer these questions, your BuyPod kind of naturally starts to fill itself in. But that’s like the first piece of this equation or at least the first piece of this fifth step. But once you have your buy box, the second piece is to then start finding properties that fit within your buy box and running the numbers on those deals. I think the analysis piece is one step where a lot of rookies make mistakes, both on they don’t analyze enough and they just see a property that looks nice and a nice area and they assume, “Okay, well, if it looks nice and it’s a great area, it must be a great deal.” That is not how you analyze a property.
You want to make sure that you have as much cold, hard facts about the potential revenue on that property, the potential expenses on that property, and the potential profits on that property to see, does this actually align with whatever return expectations I have for my real estate business? So making sure that you’re going through the process of correctly analyzing the deal. Now, the flip side of that is true as well, where we’ve seen some rookies who maybe go too far to the extreme and they overanalyze and they get suck in analysis paralysis and they never buy anything because they feel like they don’t have enough data. So you got to find your sweet spot on that spectrum of not analyzing at all and being frozen in analysis paralysis to be able to find the deals that you’re confident enough in to actually move forward. And I just think the last thing I’ll add on the analysis part is that, because there’s always risk in real estate investing.
There is no real estate deal that it’s going to give you a guaranteed return. If you want a guaranteed return, you have to go buy a government bond, which I don’t know what bonds you’re paying these days, but a couple of percentages, percentage points. So just know there’s always risk. The goal isn’t to eliminate the risk in real estate investing. The goal is to build your confidence as high as you can. And once you feel confident in the deal, that’s when you know it’s time to pull the trigger.

Ashley:
Okay, you guys, welcome back. If you haven’t already, make sure you are subscribed to the Real Estate Rookie YouTube channel. Okay. So next we’re going to be going over making an offer and what to do once you’re under contract. So there’s so many different ways to make an offer. If you’re using a real estate agent, they will definitely help you guide you through this process. But once you get under contract, there’s different things that you need to do as soon as they’re under contract. But Tony, let’s go over making an offer. What are some of the things as an investor that we need to consider when making an offer? We’ve done our deal analysis, we know what we can make the deal work for at what purchase price. What are the next steps from there to actually submit your offer?

Tony:
Yeah, I think first, and this is just mindset, is that the asking price, the listed price of a property is simply a suggestion. And we have no idea what is going on in the mind of the seller, and maybe they’re much more willing to accept a number that’s lower than what they’ve initially listed for. I feel like most people, when they go to sell a property, understand there’s some form of negotiation in that. So typically they’re not just going to list it at their rock bottom price, right? They usually have a little bit of wiggle room there. So I see a lot of rookies who kind of get caught up because they’re like, “Oh, well, they’re asking this and the deal just kind of doesn’t make sense there.” But the question isn’t what did they list it at? It’s like, “Hey, what number makes the most sense for you?
”

Ashley:
Yeah, I’m honestly one of those people right now. I’m trying to sell this property that I had bought, kind of held onto it and now just want to unload it, not doing anything with it anymore. And I would take a lower offer than what it’s sitting at right now too. So you never know.

Tony:
You find the right seller at the right time. When we bought our hotel in Utah, I don’t recall how long the property had been listed, but enlisted for a while well over, I think they had an initial list for like close to two million and we bought it for just under a million bucks. Same property, but it just sat long enough. The pain was strong enough for the sellers. They said, “Okay, cool. Hey, we just want to get this off our hands.” So just from a mindset perspective, actually, I think there’s a lot of value in treating the listing price as a suggestion and always basing your numbers off of, how does this deal make sense for me?

Ashley:
And then too, when you’re making your offer, you don’t have to make just one offer. I like to submit multiple offers so the seller is getting the decision, which when people get to make a decision, they feel happy. That makes them, instead of getting something and like, “Oh, well, you’re offering this, I’m going to counter this so that I’m getting what I want. ” That weird mindset thing of somebody wanting to have control of the situation, you give them two, you give them three offers, let them select it in their hands. They’re getting to choose. So one could be conventional financing, one could be seller financing, and one could be an all cash offer. So my all cash is going to be the lowest offer. I’m going to give you $80,000. Do loan financing, I’m going to give you $100,000. You do seller financing, I’ll give you $115,000 as the purchase price, okay?
And you can tailor up these different contracts, these different offers as to what your terms are going to be for each, but you could still have the same purchase price, but maybe change the contingency. I’m willing to pay this amount and on this one, I’m willing to close on the property in this state, but I want seller credits. So I’ll close sooner, but I want $10,000 in seller credits. Then your other one could just be, well, close whenever or whatever it may be and you don’t have to pay me any seller credits. So there’s different things that you can negotiate rather than just the purchase price of the property too, to make it more appealing.

Tony:
We did an episode recently with J. Scott, episode 525, where we talked about negotiating tips and tactics for real estate. So again, if you guys want a full deep dive on real estate negotiating, episode 525 with Jay Scott, but I guess just one more thing to add to what you said, Ashley. I think when we think about negotiating real estate, there’s a few things and you touched on a few of them, but just to kind of clearly articulate it for the listeners, you have the purchase price, which is what I think most people think about when it comes to negotiating real estate, but that’s just one lever you can pull. In addition to your listing price, there are things like if you’re doing a traditional real estate transaction, it’s like, “Hey, what contingencies am I going to add?” And maybe you can make your offer more competitive by reducing the number of contingencies.
Some of the common ones are you have a due diligence period, like an inspection contingency, you have a financing can Contingency, those are true of the most common ones. Sometimes if you’re in certain markets, you might have a sword type plumbing type thing, whatever it may be. But what contingencies are you including and which ones can you maybe not include to make your offer more competitive? We’ve heard some interesting stories from folks in the Rookie Podcast as well, like people who are like, “Hey, all I need is help moving. If you can help me move, I’ll give you a really good deal.” And that’s something that’s so out of the box that you would never think would impact the ability to get the deal done, but the more you know about the seller’s motivations, the easier it becomes for you to solve that problem. So just the point here is that there are more things to negotiate than just a listing price.
And the more questions you ask, the better job you can do at providing the best offer to the seller.

Ashley:
So now that you’re under contract of the property, say you did your inspection, you went past through all the contingencies. And just a little side note is that I highly recommend if you don’t know anything about construction or rehabbing a property and this is a property that needs work, or maybe it doesn’t, maybe it is being sold as turnkey and in perfect condition, but you don’t know things to look for, I would highly, highly suggest getting the inspection done. Don’t skip that because there could be issues that you don’t even know. And when you’re vetting an inspector, make sure there’s certain things that they are going to do for you. I used an inspector for a long time and I didn’t even realize that there was way more capabilities until I went to a different market and used a different inspector. And I was like, oh my gosh, taking a tool to the wall to make sure every wall was insulated.
My other inspector had never done that before. So little different things like that is to make sure when you’re interviewing inspectors, what is their full scope? What are they actually going to give you? So once you’re under contract on the property, there’s other things that you need to do. You need to get your insurance in place. You need to switch the utilities into your name for your closing date. If this is a rental property for especially short-term rental or long-term rental, and I guess even midterm rental is setting up your systems of processes for the day that you close. So are there already tenants in place? If it’s a short-term rental, are there already bookings in place? Do you need to set up your bookings? Do you need to order furnishings? Do you need to hire a property manager? So start thinking about, it gets so exciting when your offer is accepted and you’re under contract, but the work doesn’t stop there.
That’s where the real work begins. And then you close on the property and it’s like, yay, I closed. But now you have to put all those processes in place that you worked on while you were under contract. And that’s when starts to take off for you and is exciting when you have that first deal in place. But you need to really focus on building out what is your business for this property and how are you going to asset manage it? How are you going to operate this property?

Tony:
You hit on so many good things, Ashley, that I think a lot of rookies don’t realize go into being a successful real estate investor. But I think that the main takeaway from what you said is that we have to approach even our first real estate investment as a business. And I think if we can kind of just take off the hat of over just real estate investors to putting on the hat of we are entrepreneurs and business owners who just happen to be in the business of real estate, it gives you a slightly different perspective on how to approach even that very first deal because Ash and I have both gone through the growing pains of scaling a portfolio ineffectively to then having to go back and kind of rebuild it from the ground up. And it’s so much easier if you just take the time to do it the right way.
So everything you actually said about having the systems, the processes, everything from making sure you turn on the utilities and turning them off, those are the things that’ll save your headache as your portfolio continues to scale. I think the only other thing that I’d add to this is the goal is to get the first deal done, and hopefully you’ve done that, but also think about how you can leverage that first deal to get to your next deal. And I’ll give a really quick example, but let’s say that you’re able to save 500 bucks a month from your day job. That’s 6,000 bucks a year. And so you’ve got a starting pile of cash of about 50,000 bucks. So you’ve got 50,000 to start with, $6,000 per year that you’re able to save. You take that 50,000, go out and buy a property and say you’re able to get, you’re doing rent by the room and you get a 30% return.
What is that? 15,000 bucks a year that you’ll get back on top of the $6,000 per month or $6,000 per year that you’re saving, like two and a half years, you got another 50 grand. Now you’ve got two properties kicking off 15,000 bucks per month. So you can see how it starts to snowball. So one property gets you a lot further when you recycle those profits back into the business, you can go from one property to two properties to five in a relatively short period of time.

Ashley:
Well, thank you guys so much for joining us for this episode of The Ultimate Guide to Investing in 2025. I’m Ashley and he’s Tony. And if you guys aren’t already following our new Instagram account, make sure to go check it out at BiggerPocketsRookie. You’re watching on YouTube, make sure you let us know in the comments what you want to learn for investing in 2025. Thanks so much for joining us. We’ll see you guys next time.

Dave:
How will AI impact the economy? And what does it mean for investors in 2026? It’s a massive question that may define the next few years and beyond, and today we’re diving deep. Hey everyone. I’m Dave Meyer, housing market analyst and head of real estate investing at BiggerPockets. My guest today is Ben Miller, the CEO of Fundrise. Ben is a thought leader in the real estate and finance space, and he has a long track record of finding value and making deals work in many different investing markets. We had him on last December when he came onto the show and presented a case for real estate investing in 2025 that mostly proved correct. But since the market is always changing and we face a lot of uncertainty heading into next year, I had to bring Ben back on to share his expectations for the economy next year and how he recommends real estate investors take advantage.
We talk a lot about AI and its potential impact on different parts of the economy and the housing market, including how you can leverage new tools in your own analysis and investing. Ben, welcome back to the show.

Ben:
Yeah, thanks for having me.

Dave:
I am always looking forward to these conversations. You are exposed to a lot. You see a lot of different stuff in real estate and in the economy, and you always have a very unique perspective on where things are going. So maybe we can start there and have you tell us just what’s your read on real estate and the housing market right now?

Ben:
Yeah. I mean, I think real estate’s bottomed, but I’ve been humbled by the last half decade. We had COVID, we had interest rates, so I’m much more humbled than I was before. There are three or four really big things happening in the world today. Obviously AI, interest rates. The political environment affects the business environment a lot these days. And then, I mean, the good news is that supply is going away. New supply of construction has really fallen off a cliff. So those are part of the big four things driving real estate these days.

Dave:
All right, great. Well, let’s dig into each one of them one at a time. But before we do, when you say real estate has bottom, do you mean that for multifamily specifically?

Ben:
Well, I guess all real estate is interest rate sensitive. And I think interest rates are approximately, this is my point of view, obviously it’s impossible to know. But yeah, I think interest rates are going to keep falling. The market doesn’t believe that. The market doesn’t know. There’s a lot of debate about that. And I think so that would affect all real estate, including single family housing.

Dave:
So you think the federal funds rate will keep falling, is that right? But you also think mortgage rates will fall as well?

Ben:
Yeah, I think everything will fall. I could walk you through my argument. So let’s just set the stage. So the stage is they cut rates 375 to four. The Federal Reserve doesn’t want to cut anymore because they really don’t know. Inflation has been stuck at about 3% for the last 18 to 24 months. And the long end of the curve, the 10 year treasury has also pretty much been stuck at the low force. And so what you’re seeing is essentially a lot of uncertainty about the future interest rates. Some people arguing that we’re going to see a reacceleration in the economy, and then some people are arguing it’s going to soften. And so the reacceleration in the economy would happen for two main reasons. One is that the great beautiful bill, that big bill is going to start hitting the economy around April. And so a lot of those tax incentives will hit in 26.
And there’s an argument that companies will start spending and hiring as they get all these tax incentives from the bill. That’s one acceleration argument. The other one is obviously AI and data center build. Those are the two main arguments for why the economy reaccelerate. I’m skeptical on both. I think that the economy is not doing great outside of AI, outside data centers,
And that most companies, most people, if you get a big windfall from your taxes, are you going to spend it on hiring people or are you going to basically sock it away a little worried about the state of the economy?

Speaker 3:
Yeah.

Ben:
I personally think most people aren’t in a risk appetite mood.

Dave:
It’s risk off. Most people are risk off right now and wait and see. And although a tax boon might help some people start hiring, I don’t think it fundamentally changes the outlook in a way where people are going to feel confident about making large investments. I think that on a business level and actually on an individual level as well, just like average consumers.

Ben:
Totally. So that’s my view as well. And I say a year ago when I passed that bill, they didn’t realize that sentiment would be so much more negative. And so maybe it would’ve worked a year ago, but I think it’s not going to reaccelerate the economy in any material sense. April’s a while away, things could change. So it’s possible, but that’s not my expectation. It doesn’t seem to be yours either. The other one is AI. AI data center, really AI data center spend is the biggest CapEx or biggest dollars moving the economy. It’s absolutely insane.

Dave:
It’s wild.

Ben:
I think it’s real. I think that it’s not a bubble

Dave:
Right now

Ben:
And that the amount of money, I mean, it’s definitely going to keep the economy propped up, but it’s such a narrow part of the economy that I don’t think it’s enough to reaccelerate inflation outside of transformers, electrical equipment. Things that you need for data centers are going to be really inflated. But there’s like limited spillover effects the way that you have spillover effects on housing, huge spillover effects in housing construction.
If we were spending a trillion dollars more on housing construction, we’d see massive spillover effects, but I just don’t think that’s true for AI. So what would cause things to get slower? I think that you have sort of two main things. One is that generally things outside of AI are not that strong, not that hot. I mean, it’s like high interest rates really did slow down the economy. Home builders are as strained as they’ve been in more than a decade. Inventories are high. Multifamily construction’s off a cliff. All real estate’s pretty depressed outside of AI. Wage growth is not really strong. Hiring is not very strong. So generally the economy is pretty soft. And then on top of that, I mean, everybody knows this, but it’s one of those things that people forget. So the tariffs were put in place in April. Companies did raise prices.
They raised prices April, May, June, July, August. And so we saw inflation stay high for longer because of tariffs. But I think we’ll start to see, hey, actually, there really isn’t any more inflation in the economy. I think the inflation is gone. I think it’s just not a driver of the economy anymore. And then people will realize, oh my God, interest rates are too high.
Inflation is not 3%. It’s actually 2% or low twos. And then I think everybody’s going to wake up to that and that’s just going to cause interest rate sensitive things to get really, really, really valuable.

Dave:
I see. So my opinion is that mortgage rates wouldn’t change very much in 2026 because I think until we get a line of sight of what’s the bigger risk inflation or recession, bond yields are kind of locked up and people are kind of locked up. And so it sounds like you think we’ll get that line of sight sometime in 2026 and your feeling is that inflation will be, maybe we don’t get back down to 2%, but people will see the path down to 2% and that we’ll feel more confident that the risks, whether it’s tariffs or some other risk that could create inflation, will be mitigated. And then for reasons, bond yields start to come down, spreads start to come down, we start to see better buying conditions and a lot more activity in real estate.

Ben:
Yes, completely. That’s exactly what I think. And then I think if you were to play that out, I think there’s like two main questions. One, the market’s forward-looking. So it’s possible we start seeing that sooner than October or November or something. It’s probably really, really like 100% by November or December, but the market probably starts to get anticipatory signals earlier than that. And then everybody, at this point, you always end up conditioned by recent events. So everybody got conditioned by inflation, high inflation. And it’s like usually what happens is because everybody’s conditioned for it, it’s the least likely thing to happen.

Dave:
That’s interesting.

Ben:
The thing we’re defending against, that’s my view. And then I think the question’s going to be, what happens after that?

Speaker 3:
Well,

Ben:
What then? Now I’m going to take a really big leap. I think it goes through 2%. Really? Why? I’m curious. Because AI is deflationary.

Dave:
Yeah. Yeah. So please expand.

Ben:
Yeah. Okay. So let me do Fundrise. So Fundrise, we’re 200 people. We have a lot of different departments. Customer service, we get 6,000 tickets a month, half of them are handled by AI.

Dave:
Wow.

Ben:
Maybe more. We used to have twice as many investor relations people handling tickets as we do now. We have cybersecurity, IT, we used to have eight people, now we have five. We used to have three people doing copywriting. Now we have none. I mean, just go down the list. Everywhere that AI touches, it either suppresses the number of jobs hiring or it gets rid of jobs, and then that will suppress wage growth.

Dave:
Yes, I agree with that. I was actually just debating this with someone on the market, our other podcast earlier that I thought real wage growth was going to go negative next year. I just think that trend is going to continue. So basically people are going to lose their negotiating leverage in labor negotiations, and so wages are going to go down.

Ben:
Yeah. We can debate, and I think it’s really hard to know exactly if it goes negative or exactly what happens, because certain people benefit and certain people will get punished. But overall, you’re replacing people with software and that’s deflationary on wages. So you have this thing where people became more expensive and goods became cheaper.

Dave:
Yeah. Or services basically. If you think about it. Service. Yeah. So services are more expensive.

Ben:
Exactly. And so AI is the first technology that really makes services cheaper. Interesting. It’s going to make people cheaper.

Dave:
So that’s the argument for lower wage growth in general.

Ben:
You basically have majority of people with lower wages and then a minority of people with higher wages. Because if Dave had 10 employees in LES five, is Dave making more money? Maybe because he has a lot more profit. So the average may not be lower, but the median will be lower.

Dave:
Okay. All right, everyone, we got to take a quick break, but we’ll be back with Ben Miller right after this. That’s a scary proposition, to be honest. When I think about it, just like society-wise. To me, the idea that we’ll have fewer people employed and at lower wages is a big break in the economic system, is it not?

Ben:
I think that there’s a transitionary period that could be quite ugly. And I’ve actually sat down and done a lot of work on this. You can go on ChatGPT, go on Claude and ask these questions of like, okay, what percentage of their work can be replaced by GPT-5, GPT-6, go through the tasks they do. And you can really quickly get to a pretty confident conclusion that it’s not less than 10% of most people’s work. And in some places where you’ve built a customized application like for customer service or customized accounting software for AI, it can do more than 50%, I think. Let’s say 50%, maybe 90% in scheme cases. And so you say, okay, let’s just say it’s 20%. Well, 20%, 100 million is 20 million people. It’s a lot. It’s a lot. It’s huge. It’s

Dave:
Too many. Yeah.

Ben:
And it doesn’t actually cause unemployment to go through the roof. Maybe unemployment goes to 5.5% or 6%. Is it mostly it suppresses hiring? Well,

Dave:
That’s kind of what’s going on right now, right? Yes. We’re not seeing layoffs. We’re just seeing no one hiring.

Ben:
Yeah. I think that a generation of people who are in their early 20s are going to really get impacted.

Dave:
Yeah. I mean, you look at unemployment for 16 to 24 year olds right now, it’s already 10%. That’s really high. And it’s hard to imagine that picking up anytime soon. That’s what I mean about the societal challenges here. There’s obviously benefits to it, but there’s a lot of stuff that just feels uncertain. Another reason why, going back to your previous point about people not wanting to make a lot of investments, it just feels like so uncertain about these things, how these things are going to play out. We’ve had ChatGPT for what, two or three years now, but it’s still so brand new. There’s going to be so many different forms of AI that start to come in, not just in large language models that could do totally different things. So I buy the idea that this could be deflationary, at least in the short to medium term.
And I can’t really think in my head of precedent for that in the economy where it’s been a sustained deflationary period. We’ve had lagging wage growth for 40 years in this country, but this seems more serious than that.

Ben:
Yeah. I guess I’d argue the opposite of that. You’ve probably seen this graph, but corporate profits have been going up for 25 years. And if you look at the number of people it takes to produce something, it’s been falling. It used to take eight people per corporate dollar and now it takes two and it’s falling to one. So technology has been making the economy more productive, need less workers, and it’s been mostly gains to capital,

Dave:
Not

Ben:
Gains to labor. That’s

Dave:
Right.

Ben:
So I think this is very consistent with that. That’s

Dave:
A good point. So there is precedent. Yeah. Yeah.

Ben:
I think it’s more similar, but more extreme.

Dave:
It’s just more dramatic. Yeah. It’s just basically the acceleration of a pattern we’ve seen.

Ben:
Right. And it’s a pattern that is both very productive and very counterproductive, counterproductive politically, productively from a capital point of view. I’m not as bearish. I think that an optimistic view would be that AI is really designed for the young people. They’re much more adaptive. So it could be that at some point, all these young peoples are getting hired to really be the person in the office who understands how to use AI.

Dave:
I’m following you. I mean, obviously no one really knows, but I think this is very plausible. This is a very plausible line of thinking here. To continue your thesis here about real estate in general, how do you think this impacts, like you’re saying deflationary that could lead to lower mortgage rates. I totally buy that if it is deflationary. So then is this kind of where the thesis about real estate bottoming comes from is like, we’re going to get cheaper cost of borrowing and asset prices are going to go back up?

Ben:
That’s my expectation, my belief that basically we end up in a new era. And this era is different. We go through these paradigms. You and I have been through, I don’t know how many now, three or four. So we’re going into a new one and that new one is not like the old one. COVID almost accelerated it or something. We went through usually about a decade and this one ended up being five years or something instead of being 10. And so the old one was money printing, inflation, high rates, and now we’re going to go into something that’s like high productivity growth, high returns to capital, lower inflation, but higher real interest rates because what happens is we have really high GDP growth and high growth that drives the real interest rate up, but it drives the inflation rate down. So it’s a little bit of a, you get some and you lose some, but generally that’s good for growth in which real estate is a levered investment in growth.
And so the leverage part gets cheaper and you get more growth. And so I think you’re just going to see a lot of benefits and then it’s going to be more asymmetric. I think that high end does better than low end real estate. So San Francisco, New York, places that selling to a multimillionaire, the high end is absolutely crazy how much money is going to be created for top 0.1% of the country.
So high end real estate, I think is where you want to be. Interesting. I’ve spent 20 years focusing on workforce real estate, real estate for middle class because usually middle class real estate is more resilient. This is where I don’t have my thinking as refined, but I think that could be impacted by this hollowing out dynamic.

Dave:
I haven’t thought about it that way. I buy the idea, if you’re right, that we’ll have a lot of wealth creation at the top. That’s certainly a continuation of a trend that’s existed in the US for a while now. I guess I’ve made my own investing thesis more about affordability and trying to find places similar to what you’re saying about workforce housing. Trying to find places where the average person can afford the average price home is your move away from that thinking that affordability for the average American could get even worse than it is right now?

Ben:
That’s the political dynamic that’s really quite ugly. There’s affordability in terms of goods and services and there’s affordability in terms of assets.

Dave:
Sure. Yes.

Ben:
I think assets get more expensive, but goods and services get cheaper. So it’s harder to buy a house, but you can afford the healthcare, maybe it gets cheaper for the first time, not in the short term, but really like healthcare is, I think, very impacted by AI. And so that’s why I was saying if you’re going to buy assets, which is real estate, you want to be in assets that benefit from the wealth effect. And we haven’t shifted our real estate strategy yet around this. It’s still early, early days on this, but high end San Francisco for sure, no question. High end New York, you probably want to be in the suburbs. I think it’s like a challenge for where you want to invest. You really have to think about that. So you’d want to be near these big economic centers, but not actually probably in them.

Dave:
I’m curious, this is kind of another tangent, but how does the average person afford rent in this scenario? Asset prices are going up. People are making less and less money. I see a lot of people talking about universal basic income. Is that kind of the avenue you go down?

Ben:
I don’t think so. Have you heard this thing? It’s a new concept to me. I heard it recently. It’s as opposed to redistribution, you have pre-distribution.

Dave:
No, I have not heard of that.

Ben:
It’s actually comes from the right, but it’s an argument from, we’re in cash from New Compass. The argument is people don’t want handouts. They want a job and they want a purpose. And so we’d rather do it as effect. So like unions are pre-distribution, minimum wage pre-distribution, things that are before you get to the government. So you’ve affect the workplace. So rent control is kind of a pre-distribution thing.
Anyways, I think it’s going to be really popular. And so I think that there’ll be this new movement around how you address this inequality. Rent control is obviously an example of that. And I mean, it’s pretty crazy in some places where you can’t evict people and you can’t raise rents. And probably a million units in New York will go bankrupt because essentially their costs went up, their mortgage went up, their insurance went up, everything went up, but their rents didn’t go up. So all these affordable housing projects in San Francisco and DC and New York are going bankrupt. So it’s like that’s a taking, right? That’s a way of kind of redistributing wealth from the owner to the renter. So that’s a version that’s already happening. So what’s the next version of that? I think it’s hard. I think maybe Europe, you can’t fire people.
Maybe they start making it so you can’t fire. Maybe unemployment insurance becomes 10 times more expensive, so you have to support people. So there’s all sorts of possibilities, but I think it’s like in a world where you have an extreme effect on AI, I think you see extreme government intervention into the private economy.

Dave:
Yeah. I mean, something would have to happen if this scenario … I just don’t think you can have a functioning society where people continue to make less and less and unemployment goes up and up and all the money’s going to a very small percentage of people. That’s just the recipe for civil unrest if you look at history. So something would have to happen. Yeah.

Ben:
And what you’d hope is that somebody has a good idea.

Dave:
Yes, I would definitely hope that.

Ben:
Well, mostly I’m giving you bad ideas.

Dave:
But this is not your job. You’re not a policymaker. So I understand. I’m just curious if you had any, if you had seen any good ideas.

Ben:
No, have I seen any good ideas? I have to think about that. But anyways, but you understand where I’m coming from. I

Dave:
Do understand what you mean, yes.

Ben:
But I mean, the point is when people say AI is a bubble, what I hear is deflation

Dave:
Because

Ben:
I say, “Oh, so you’re going to put two, three, four trillion dollars into AI.” It’s either deflationary or very deflationary. So the two versions of it is they put trillions dollars into building artificial people. It’s software that can do the work of 20 to 50% of people’s work. That’s like my base case or worse, it is a bubble, it blows up and then we have super deflation because you have built trillions of dollars of AI data centers that are pumping out all these tokens that are replacing people’s tasks and the AI economy blew up and deflated. So I’m like, oh, it’s just a question of how deflationary it is.

Dave:
Stay with us everyone. We got to take a quick break, but we’ll be right back. Welcome back to the show. Let’s jump back in with Fundrise CEO, Ben Miller. All right. Well, you’ve given me a lot to think about a lot. Before we get out of here though, just curious, you’ve given us a couple of hints that you think about investing near these big economic hubs, being careful about where around those hubs you choose to invest. What about different asset classes? Do you think residential versus multifamily or commercial will perform differently in the coming years?

Ben:
Well, I definitely don’t touch office.

Dave:
Yes. Me neither, thankfully.

Ben:
Yeah. I mean, it’s obvious because I’m talking about eliminating jobs, which eliminates office and office was already bad. No, I mean, I’m a big believer in industrial and in multifamily. I think you’re high-end for sale housing and then also rental housing in places that are not going to be overregulated. And then we don’t do high-end, super high-end residential, maybe super even high-end retail where it sort of caters to that upper class. It’s not something I think I want to do, but I think that the asset classes around Greenwich and Susalito and places that are extreme wealth would just get even crazier. And then I mean, I’d be remiss not to talk about our AI product that we’ve been building.

Dave:
Yeah, let’s do it because I mean, we talked a lot about AI. So tell me how you and Fundrise are using AI in your own investing.

Ben:
Yeah. So we, for the last couple years, been building a real estate AI product called RealAI. It’s not realai.com. It’s still kind of in beta, but you can go in there and it’s pretty amazing.

Dave:
I’ve got to use it. It’s really cool.

Ben:
It’s amazing to me because it makes me understand the potential of AI in a different way.

Dave:
Yeah. It makes me glad that I’m a podcaster now and no longer a data analyst. Yeah. I

Ben:
Mean, it turns ordinary people into advanced data scientists.

Dave:
Yeah, it does. It’s crazy.

Ben:
We built real estate, one called real estate AI, and that’s basically to help you do analysis. We’re building more things so you can … If you take like a, “Oh, I have an OM from a broker, maybe I have a T12, I have some information, I upload the deal and I start using it to interrogate the deal. Do you think these rents are realistic? What if tariffs get removed? Or what if you can do all this thinking, all this analysis with this tools and then have it produce draft for you that you can then edit?” It both saves you a lot of time, but it makes you so much smarter. I mean, so smarter. It really

Dave:
Does. Yeah. I find myself doing the same amount of thinking that I used to. I don’t feel like I’m necessarily spending less time working, but it’s like I just get better information to consider so much faster and ideas are introduced that I would’ve taken me a longer time to come to. Or just like I’m an analyst. So sometimes AI will suggest a data set I didn’t even know existed and that means that I can now start thinking about something else or there’s just framing it somewhere away. I wouldn’t think of it. I still find myself working, of course, but it’s just a much more robust and rich set of information that I can work with. At least that’s how I’m using it right now.

Ben:
That’s a funny way to think about it because I was on a podcast three years ago and I was on again this week and they said, “Three years ago you recommended a bunch of podcasts. What do you recommend now?” And I was like, “I think I spent all my time now in AI where I used to spend it on listening to podcasts.”

Dave:
Yeah, listen to podcasts, right? Yeah.

Ben:
Because I just spend so much time essentially, it’s a form of content where I’m like, “What about this? What about that? ” And I’m thinking about things and it’s producing things for me. And so I want to ask you, because you’ve played around with real

Dave:
AI,

Ben:
What do you have to say about it?

Dave:
I love it. I’m being sincere that someone like me who analyzed housing markets, don’t go into that career right now. Aggregating real estate data is a huge pain in the butt. We don’t need to get into why, but it’s really disparate. There’s MLSs, there’s data source, there’s private sources, there’s public sources, there are county and national. It’s a lot of stuff. And what Ben and his team has done and allowed us to access all this information about a city, dig into comps, dig into migration patterns, dig into ARVs, all of it in one place, it’s incredible. This is a true time saver. I felt like I could do this analysis before, but I was probably one of few people who could do it confidently. But now not only can anyone do it, but you could do it in a fraction of the time. It even took me to do it.
And so I think it’s going to be an interesting thing, but I can even feel myself feeling a little overwhelmed by it almost, where if you’re not an analyst digesting just tons of data might be a little bit intimidating. But for people like me who are analytical, it’s a playground. It’s super, super fun. And I’m sure what you and everyone else is working on is just like, how do you make this different levels? How do you create a level for a beginner investor to understand things and then a little bit more sophisticated, more sophisticated and have different levels of communication. But the fact that it’s all there is just fascinating. I am guessing, because I get messages from our audience all the time, people saying, “Where do I get data about the housing market?” And they’re not even talking about anything like what you’re doing, but it’s frustrating for regular investors even to go to Redfin, then to go to the BLS, then to go to the Fred website and just even get four or five data points, even if you’re not trying to aggregate them, it’s frustrating to do just that.
And so I think the merging of all this information into one digestible place is going to make the job of an investor, I think just more fun. You get to do more of the enjoyable part
And less of the admin kind of backend stuff that someone like me does at least. I think it’s going to become more fun.

Ben:
My friend, I have a friend who’s a very inappropriate person, but he says, “Wake up in the morning, I should have an omelet. There’s the insight. He go to the store, he’s got to get these eggs, he’s got to get the butter, you got to cook it. ” And finally at the end, you get to eat it. But how much of the time was not the insight, not the eating?

Dave:
Oh my God. I’ll spend an hour cooking in four minutes eating. I just inhale food. It’s embarrassing.

Ben:
That’s how I think a lot of work is a lot. I don’t think AI is going to get rid of the four minutes. I think that we’re nowhere close to AI replacing people. There’s so much of your work is just not valuable. It’s just grindy, administrative, sucky work. That’s the stuff AI is so good at.

Dave:
All right. Let’s end there because to me that is an optimistic out. I love that idea. That’s a great positive view of how AI might impact all of us on our work. Well, Ben, thank you so much for joining us. It’s always a pleasure.

Ben:
Yeah, thanks for having me.

Dave:
And thank you all so much for listening to this episode of BiggerPockets Podcast. We’ll see you all next time.