Ashley:
If we were starting over in 2026, we wouldn’t be looking for the perfect market, the perfect strategy or the perfect deal.

Tony:
We’d be focused on one thing, making the decisions that actually get a rookie to close on their first deal instead of staying stuck in analysis paralysis.

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

Tony:
And I am Tony j Robinson. And in today’s episode, we’re going to focus on five key things that we would do if Ash and I were starting over in our portfolio today. And the goal is that for all of the rookies listening, you can take these five things, implement them into your strategy to make sure that you are, by the end of this year, hopefully one of the folks we can bring on as a guest to the podcast say, Hey, I listened to this episode and now I’m the proud owner of my first real estate deal. So five key things. The first thing that we do is we’d start by asking the right questions. And what I mean by this is that oftentimes we see rookie investors who just are kind of focused on the wrong thing when they’re starting off their journey of real estate investing.
And sometimes it could be focused on steps that are maybe too far ahead, like, Hey, well, how am I going to buy my second deal? Or how do I scale? And then, okay, well, you haven’t done your first deal. Why are you worrying about scaling today? Or what does the legal structure look like? And I need this holding company based out of the Cayman Islands and all these crazy things, and they’re just asking the wrong questions. So the core questions that I would focus on first are what is my time availability? How much time can I allocate toward my goal of investing in real estate? What is my risk tolerance? How much purchasing power do I have, which is my cash on hand and my ability to get approved for mortgage? And then what’s my motivation? So time, availability, risk tolerance, purchasing power and motivation for time availability.
The reason that I start with this is because this is a limiting factor for the type of deals that you should be focused on. Now, I will put a big caveat to this is that I hear oftentimes people say that the reason they want to invest in real estate is because they want to at some point in the future, have the ability to have more control over their time. Because right now they feel like they don’t have a ton of time, but they want real estate investing to be the thing that gives them more time. But then in the same breath, they say, well, I don’t have time to actually do all the work that’s required to be real estate investor. And if you hear that being said out loud, you can see how that’s just like this closed loop where you’re going to be stuck in this space of not having time, right?
Because in order to do the thing that will give you the time you need to be able to allocate some time, but you don’t have time. So you can’t start that thing, so you, you’ll never be able to get out of that loop. So I think first you got to be able to make some sacrifices in your life to free up a little bit of time if you felt like you’re truly maxed out. But that’s the first one is the time availability. The risk tolerance is everyone sleeps differently at night depending on the kind of risk that they take on. There are some people who are totally fine with the super risky deals because they’re like, Hey, I’m going to swing for the fences. And there are other folks who are like, man, I just want to get on base. So I think understanding what your risk tolerance is and how easily are you going to be able to sleep at night as you take these first steps, the cash in your purchasing power is important because how much cash you have on hand and your loan approval amount will also dictate the kind of properties and locations that you can focus on.
If you’ve got a million dollars cash and you can get approved for a $5 million loan, you’ve got a lot of options. But if you’ve got $10,000 cash and you can get approved for a hundred thousand dollars, that limits more so what kind of opportunities you should be pursuing. So having clarity on that piece first I think is really important. And then the motivation, we talk about this a lot, but understanding why you’re doing this is super important because it makes sure that as you take steps on finding properties, finding markets that it actually supports whatever goals you have in place. Because if you’re doing this for appreciation, well then you better make sure that the properties in the markets you’re focused on do really well when it comes to appreciation. If you’re doing this for cashflow, well then you better make sure that whatever opportunities you’re looking at are really focused on maximizing cashflow. So understanding your motivations I think are first. So those are the big questions I’d ask.

Ashley:
Yeah, the only thing I would add to that is don’t get too caught up on pursuing your passion. And I don’t want to sound like a buzzkill, like, oh, you want to get away from your W2 job. It’s not your passion. You want to feel fulfilled, you want to manifest your dreams. If your why is because you want to make money or you want to build wealth, yes, at some point in time that can probably be correlated to your passion. But if you want to expedite that, you really want to pick the strategy that goes in line with what Tony already talked about, but also where you have resources, opportunity and advantages where you have resources, opportunities and advantages. So for me, I worked as a property manager. The only person I knew that invested in real estate did long-term rentals, and those were my opportunities and my resource to get started.
If I would’ve started in flipping or short-term rental, I didn’t have anybody around me that was doing that to ask for help, to guide for me to follow them. It would’ve taken me a lot longer to be successful if I didn’t have these advantages and opportunities already in place. And I was able to build a really solid foundation by sticking as to what was actually the path that would give me the most progress towards this wealth building. So that’s something you should be thinking about too. If you’re thinking about buying a deal in 2026, don’t get too focused on what your dream job is or your dream investment. Think about what is going to build you wealth the fastest. And I don’t want this to get confused by, oh, they’re posting about self storage and how you can make so much money, that’s the way to make the most money.
I’m going to do that. Don’t get caught up on the get rich quick, and I am not going to say they’re schemes, but I’m going to say that it may work for somebody to get rich to build wealth, but that may not work for you and it may not really be as quick as you think it is. They could have made a hundred thousand dollars on that flip because for some reason they ended up buying every single material they put into that house from a wholesale clearance place, and they did all the DIY themselves. They didn’t hire any contractors, and you might not have the time to actually spend six months rehabbing a property and just shopping wholesale outlets to find the cheapest materials. So don’t look at Instagram, don’t want to think about what is actually going to move the needle for you when you’re picking a strategy.

Tony:
Yeah, I couldn’t agree more ash about not focusing too much on what you see on Instagram. Obviously the purpose of social media a lot of times is to encourage you, inspire you, even this podcast to an extent, but you don’t always see the hard work behind the scenes that goes into that. And you shouldn’t make super big life decisions and you shouldn’t make super big life decisions based on a snapshot you see of someone’s life on social media. So you really got to make sure that, again, you’re asking the right questions, which is what we just walked through to help you make a more informed decision around what strategy, what asset class, what type of real estate investing makes the most sense for you.

Ashley:
I mean, even right now for you guys watching on YouTube, here I am looking all glamorous and beautiful, but in reality, I got sweatpants on a heated blanket on my lap level four heating right now and slippers on. So you never know what’s actually going on behind the camera on YouTube, Instagram, things like that. So once you stop asking the wrong questions, the next mistake rookies make and feels productive, but it’s the reason most first deals never actually close. Next, we’re going to talk about why chasing the best deal keeps you from buying any deal. Welcome back. Once rookies get clear on their situation, the next trap shows up immediately. They start hunting for the perfect deal instead of one they can actually execute. So number two is we pick the boring deal that still moves the needle. Yeah, I am too tired, I’m too exhausted to be tracing the perfect deal.
And the longer you wait to actually get started, the less time you’re actually building equity in a property. And that is really the opportunity that I have seen over the last 10 years of buying properties and holding them and waiting and seeing all that equity build up. And if I’m spending the full year chasing the perfect deal, I’m wasting out on all that time of already getting baked in appreciation and mortgage paid down by my tenant. I’m wanting to take action on a deal that works. It doesn’t have to be the best use of my money. And I see this posted in the BiggerPockets forum all the time, and it’s a great question to ask. I mean, I ask myself questions like this every day, but it’s like I have $50,000 I don’t know how to invest. What is the best thing I can do with it?
And everybody wants to know where are you going to get the best value of your money or the best value of your time? And sometimes that first deal, it doesn’t need to be the best, and you don’t need to overanalyze and get stuck in that analysis paralysis of like, I’m not spending this $50,000 unless I know that I’m getting the max return and I’ve looked at every possible deal in every possible option, and that really is just going to stall you and delay you. I’m not going that route. I’m going to look for a deal that works even if it’s not a home run deal and not super amazing. If someone interviewed me, my YouTube thumbnails and going to be cash flow is $5,000 on our first deal, it’s going to be the slow and boring investment with Ashley Care.

Tony:
My very first real estate deal, I think I was cashflowing like 150 bucks a month, something to that effect. That’s not life-changing money.

Ashley:
That’s what I thought mine was going to be, but then I forgot to account for snowplowing. So it was even less

Tony:
Snowplowing. And now then you break even, right? So I couldn’t agree more. I think oftentimes if we just focus on that first deal being as boring and simple as possible, that simple decision, we’ll unlock your ability to actually get the first deal done. So I think boring and simple is often the approach that most rookies should take because there’s a difference between a deal that looks good and a deal that you can actually close because yeah, I can take you to the hoarder house that’s got a bunch of deferred maintenance that probably needs to be renovated down to the studs, but it’s a really, really good deal. Versus a house that’s mostly turnkey has a tenant in place already that’s slightly above breakeven on cash, left your account for all of your expenses and vacancy and opex and all those things. And the first deal definitely seems a lot better, but which one will you actually pull?
The trick wrong, which one will you actually be able to execute on the hoarder house is down to the studs or the turnkey property that you’ll cashflow a little bit, which you’ll cashflow on day one. So I think the goal is not necessarily just to look for the deal that looks the best, but it’s which one can actually move forward on today. So to Ashley’s point, instead of prioritizing a big home run, we want to try and prioritize for this first deal, something that’s clean and easy to finance, right? Because oftentimes these big heavy rehab jobs are super complex things. They get a little bit more tricky on the financing piece. Simple to no rehab removes the big obstacle of having to manage a rehab for the first time and something that’s just like a very clear path systematically for you to move through to actually get the deal done.
There’s so much talk out there right now about different sexy strategies and subject to and settler financing and renting by the room and conversions to ADUs. And we’ve interviewed a lot of these folks with these different strategies in the podcast as well. So I’m not knocking those, but I am saying that those are slightly more involved than just the strategy of buying a house that’s basically ready to go on day one that’s got a tenant in it, right? Or if even if we want to talk about flipping, what’s an easy way to flip a home or short-term rental, what’s an easy way to do it that way, right? Buying something that’s turn key and closer to it to being ready. But I think just trying to move away from some of the super complex and overly sexy strategies to one that’s a little bit more black and white, cut and dry on that first deal.

Ashley:
I think a great starter property is looking for a single family home or a duplex, a small multifamily that has a tenant in place and it’s somebody the tenant wants to stay there long term and maybe the property isn’t updated, but it’s in good condition. If you could find a property that it’s not completely renovated or up to date, but it’s very well taken care of by the tenant and maybe the tenant’s already lived there for 10 years and wants to keep living there, that could be the easiest first deal that you ever have already having a tenant in place. It’s already cash flowing from day one, even if it’s only $150 a month depending on how much money you’re putting into the deal, but you already have somebody in there that you know is going to take care of the place, your chances of having a long-term renter in there are great.
You don’t have the cost of vacancy and turnover, and then you can just know that you’re going to save. And at some point, if the person does move out, then you’re going to go ahead and renovate the property or over time, which I’ve done with tenants that say a long time is like, I’m going to do an increase this year, but we’re also replacing the carpets, or we’re going to repaint, or we’re doing this upgrade to the property too, to justify why we’re increasing your rent a little bit more than what we usually would. So I think that is also a great opportunity. I have a friend that did that. She invested out of state, and anytime I ask her, how’s that rental doing? She’s like, I think good. I mean, she pays her rent and it was a tenant that lived there forever, just a little single family house. And if there’s a maintenance issue, she will just message about it and then my friend calls someone to go out and take care of it, and that’s it, and it’s said and done.

Tony:
Number three, the third big thing is we’d focus on financing early on. I think that one of the first questions, and we kind of touched on this on the first point, but one of the first things that we need to understand is what kind of financing do we have access to? There are, I’ve used this metaphor, this analogy before, but the lending industry is a lot like the ice cream industry where I can go into different ice cream shops, I can go to Dairy Queen, I can go to Baskin Robbins, I can go to Coldstone, and they all sell ice cream, but they all sell slightly different flavors. And it’s the same thing in the mortgage industry where I can go to lender A, lender B, lender C, and they all sell loan products, but the flavor and how they deliver those loan products is slightly different.
So I think making it a point early on to try and talk with as many lenders as possible to understand all the different flavors of loan products that are available to you. That way you can identify, okay, what is the actual best product for the type of deal that I’m going after? Because the lender who really understands traditional single family long-term rentals is different than the lender who understands small multifamily. And that lender might be different than the lender who understands flipping. And that lender might be different than the lender who understands short-term rentals. And that lender might be different than the lender who understands large commercial properties and RV parks and motels and whatever it may be, self storage. So understanding the loan products that are best for the deals that are in front of you, I think is one of the big things that I would focus on as well, because I’ve seen plenty of deals get to the 11th hour with the lender who says, yeah, sure, I write loans like this all day. And then when it comes time to actually close, you’re like, oh man, this is actually underwriting pushed back on this because of X, Y, and Z, or actually don’t think I’m going to be able to get this loan closed. So having those conversations early on I think is a big thing that Ricky should be focused on as well.

Ashley:
And even if you’re not going with bank financing, lining up your private money lender or where you’re pulling cash out from, or if you’re borrowing from your 401k, make sure you talk to your employer and you understand what the process is to actually get that money out. So one thing that I actually just learned with retirement funds is I didn’t know this is with a Roth IRA, you can actually pull out, I think it was up to like $10,000 without a penalty. And since it’s a Roth, you’ve already paid taxes on it, so no taxes but without penalty for a first time home purchase. So if you’re looking to purchase your first home, you can actually tap into your Roth IRA and pull out $10,000 to put into a property. I thought that was cool, but anyways, have that plan in place of how are you going to actually access the money that you’re going to need and use. There’s been a lot of times where I’ve found a deal and then I’ve went and got the money, and yes, you can absolutely do that, but it is so much easier to have the financing, have the money lined up first, then to do it the opposite way and it makes the deal goes faster and a lot smoother and a less headaches and things like that along the way to actually get the deal done.

Tony:
One last thing I’d add to that, Ash, we’ve answered this question on different rookie replies and folks have asked me this question in person as well is like, is it too soon or when should I go talk to a lender? And my answer is today, because there’s no harm in going to get a soft pre-approval today, so at least you have an idea of where you stand and what loan products are available to you. So if it’s been more than, I dunno, 90 days since you’ve gotten a pre-approval, I might do that process again today just to keep it fresh. You understand what your options actually look like

Ashley:
Because a lot of times with the pre-approval, they’re not actually doing a hard credit pull. So make sure you ask that first. You’re not getting a hard pull every 90 days, but you should be able to do that without having a hard pull on your report to get the pre-approval. And if you are going to get a heart pull, make sure you know what the window is. I can never remember. I feel like sometimes it varies. I don’t know from state to state or what, but I always get it can range from 45 to 60 days or something like that. But you could literally go and have a lender pull your credit every single day within that period of time and it’ll only count as one hard pull. So Tony, what’s the answer?

Tony:
In 2026, you can shop for a mortgage for up to 45 days before multiple applications are treated as separate hard hits on your credit score. Now it also goes on to say that because you cannot control which scoring model a lender uses, financial experts typically recommend a more conservative 14 day window to ensure you are protected under all different systems.

Ashley:
So that might be where there’s a range sometime depending on the so spices, some they must mean like Experian or

Tony:
FICO Vantage score, it themes are the two different ones you’re talking about. So FICO looks like an older version, it was 14 days. The newer version of FICO is 45 days vantage score, usually a 14 day rolling window. So again, hey big disclaimer, Ash and I are, this is chat GPT, Jim and I giving us this information. So go validate this, but 14 days seems like a reasonable timeframe to make sure you can shop with them, but still validate that with your lender as well.

Ashley:
Yeah, literally just go to the websites of the banks and usually most of ’em have a form that you fill out and just take a night and just fill them all out for each of them. The lender will most likely reach out to you, ask for some more information, let them know what you’re doing and things like that. And then they usually tell them that you’re looking to get a pre-approval and that you don’t have a deal in place or anything like that. I have seen sometimes they do even have a checkbox as to, do you have a deal now? Well, they don’t call it a deal, but do you have a property now? Do you plan to get a property within the next month? Are you this for so far out or whatever that you can actually put in there too.

Tony:
Alright, even if you’ve solidified your financing, you know your motivation, you still have to find the right property. And after the break we’re breakdown how simplifying your buy box and redefining what a win looks like finally gets you across the finish line. Alright guys, at this point we’ve gone through all of the big things you need to do, but now we’re talking about the actual deal and the faster you simplify the kind of deal that you’re looking for, the faster your first deal will actually happen. So with that, and the fourth thing that we focus on is that we would ruthlessly simplify the buy box. Now just to define this, your buy box is basically the type of property that you’re looking to purchase. So I always go back to the very first deal that I bought and my buy box was super simple. I wanted a three bedroom, ideally two bathroom property in the 7 11, 0 5 zip code of Shreveport, Louisiana.
There was a 1950s build or newer, that was my buy box and that’s pretty much exactly what I bought. It was a three bedroom, two bath, built in like 56 or something like that, in that exact zip code. So a very, very simple buy box makes it so much easier to A, build your confidence. And then B, it gives you the ability to say yes or say no quickly. The reason that it builds your confidence is because if I’m only underwriting a very tight specific type of property, every time I do that, I get better and better and better at understanding what a good deal looks like versus what a bad deal looks like. Because think about it, if I analyze 100 different three bedrooms in the same zip code, I start to get a really, really good sense of how much revenue that property will generate if it’s a rental, rental, short-term or long-term, or B, what the after repair value is from looking to do a flip. So that way as I find a deal that seems significantly lower price immediately I can say, well man, this is actually a really, really good price because I just analyzed 99 different deals that were $50,000 more than this one, a hundred thousand dollars more than this. And so I know this is a good deal. So as you have a tighter buy box, your ability to more quickly and confidently underwrite deals exponentially increases as well.

Ashley:
We actually have a few resources for you guys too to help with this. You can go to biggerpockets.com/resource and we have a buy box resource which is basically just like a worksheet for you to actually define your buy box and kind of just gives you things to think about, do you care about what the age of the property is? Or one friend that invests in Seattle, he only buys within a certain timeframe from 1940 to 1960 houses because those were built during the great construction and he knows everything about them. So really down to the specifics of the property and things you may not have thought of and you can always add and expand to it too, but it’s a great template that you can [email protected]. And then also too, really defining your neighborhood is I think really important that maybe miss sometimes as to you think, okay, I’ll give you Buffalo for example, as to my picked my market, it’s going to be Buffalo, New York.
Okay, well there’s lots of areas of Buffalo. Are you going to invest in the west side? Are you going to invest in BlackRock? Are you going to invest in the east side? Are you going to invest South Buffalo? Are you going to be by a park? All these different things, but it really goes street by street. So in the rural towns I invest in, it’s not so much, it pretty much is like the town metrics are the metrics, but when you get into bigger cities, there is a triangle and this triangle is the area that I would invest in south of Buffalo. Anything outside of this triangle is literally within walking distance of the two houses I have in South Buffalo, but yet I would not buy them because it is such a distinct difference crossing over this one street or not even a different street, but driving too far west on the one street I would not buy over there.
And I think you need to take a map or get out your drawing tool on your laptop and mark out the actual lines of the neighborhood that you want to be in and really define and narrow down. Then you can use websites like Bright Investor or Neighborhood Watch and those where you can actually really, really get down into the niche of the neighborhood that you’re actually looking in and get the metrics for that exact specific streets and neighborhoods where you can see what I think it’s like Crime Watch, I haven’t looked at it in a long time, but I know Neighborhood Watch and Bright Investor has this integrated now, but there’d be a little pin where crime had happened and what the crime was and what data happened. And so you can see where there’s significantly more crime than there is in other areas too.

Tony:
Yeah, that’s a great breakdown Ash on how to build out your buy box. And I think the other piece that I would layer on top of that is that your strategy, your chosen strategy should also go into your buy box as well because a market that maybe is really good for flipping is not a great market for short-term rentals or a market that’s really good for maybe room rentals, like renting by the room. Maybe that market doesn’t work as well for a traditional long-term rental where you’re renting out the entire house. So understanding your strategy I think leads itself to building out your buy box as well. And we just interviewed on a recent episode, Rashad George, and he broke down how he built out his buy box and he was focused on section eight housing. That was the strategy that he was going after.
So he started his search by identifying the zip codes in his town or in his county that gave the highest rents for section eight. And then once he had those zip codes, he layered in things like crime and schools and all those other things to really drill down on what part of town he wanted to focus on. And then you layer in your ability to actually get approved and your purchasing power and you start to end up with a pretty tight buy box like, okay, here’s the max price, here’s the location, it’s probably going to be this type of property that I’m focused on. So starting with your buy box, super important point.

Ashley:
Okay, let’s move on to number five. We’d redefine a win for the first deal. So a win may be different for everybody depending on why is what you’re trying to achieve with real estate. So there’s no set thing, but a lot of times a win is considered you made money or you’re cash flowing, but this is also an emotional payoff. The first deal, it really builds your confidence, your proof of concept and your skill building, and that holds a lot of value in calculating your RO. I think about going to college and how much people pay to go to college to learn how to do something. So Tony and I both have deals that have cost us and been examples, and that’s the cost of education and the lessons that we have learned on them. And I think that when you are looking at your first deal, you need to understand that this is so much experience that you’re getting by being an active investor and owning property.
Then you are just from reading, listening to podcasts, watching YouTube videos, all of that. You can absorb so much knowledge and it’s just like think of a doctor, think of a teacher, think of a lot of professions where before you can actually get licensed, you have to go through some kind of hands-on training. Obviously a doctor a very long time, a teacher. I think it’s like your last year of college, you have to go and shadow and teach in a classroom for two different semesters. So I think that this is something that is often left out when you’re considering your deal as a win, is not thinking about what you learned and how much better and how much you’re going to improve on the next deal because of that.

Tony:
Yeah, you hit on the emotional side of it and I couldn’t agree more. And we talk about this all the time. The purpose of your deal is not to retire. You we’re almost 700 episodes into this podcast and we have yet to interview someone who retired off of their very first deal. So that’s not the purpose of it. The purpose is to give you that confidence to move on to your second deal and your fifth deal and your 10th deal and like clockwork. We oftentimes see that the complexity of deal number five is significantly higher than deal number one. And the confidence that someone has going into that third, fourth, fifth deal is significantly higher than what they had going into that first deal. So there is a massive, massive emotional transformation between deal number zero and deal number one. So much so that the actual monetary value of that first deal is just icing on top, but it’s that internal transformation where all of the value really lies in that first deal.
And transforming yourself from someone who wants to be a real estate investor into someone who actually is a real estate investor. I think the last thing I’d add to this to you, Ash, is that because so much again of what we see and what we hear on podcasts are people kind of sharing their successes. You’ve got to be careful to not judge your first deal against me or Ashley or some of the guests that we bring on who have been doing this for 5, 10, 20, 30 plus years because we’re at totally different points in our investing journey. So just really say laser focus on the purpose of your first deal, the transformation that it’s supposed to carry, and don’t compare yourself to the person who’s on step 100 when you’re on step number one.

Ashley:
And if you are in the middle of your first deal now, we would love to have you as a guest on the podcast to come and share the experience that you’re going through and what this journey is. And don’t worry about not knowing anything because we just think it is so impactful for when somebody comes on, when it is so fresh in their memory. There are things that Tony and I probably have blacked out from our first deal that we just don’t think about anymore or don’t remember. And so I think if you are listening right now and you’re going through your deal, just telling us the process is going to help so many rookie investors through their process of doing that first deal. So you can go to biggerpockets.com/guest and fill out an application and me and Tony will watch for you and invite you onto the show. I’m Ashley, he’s Tony. Thank you guys so much for listening. If you loved this episode, make sure to give us a little thumbs up and make sure you’re subscribed to us on YouTube. And if you’re listening on your favorite podcast platform, please be sure to leave us a review. We’ll see you guys next time.

 

 

In This Article

New York City has always been known as a tough town for landlords. It’s about to get tougher. The city’s new mayor, Zohran Momdani, is putting “bad landlords” with outstanding violations, or those who owe the city money for stepping in to do emergency repairs, on notice and, in some cases, threatening to take away their buildings and freeze rents, raising fears throughout the real estate community.

“New York has the most tenant protections of any state,” Ann Korchak of the Small Property Owners of New York told the right-leaning American Enterprise Institute.  

While there’s no question that living conditions in some New York apartment buildings are atrocious and slumlords have long been associated with the Big Apple, equally, New York City is a very tough place to be a rental property owner.

In a city where over 70% of residents are tenants, laws skew heavily in tenants’ favor, making evictions—which can take up to a year—time-consuming and expensive. Now, as the housing crisis tightens its grip on renters, other states are following suit with enhanced tenant protection laws. As taxes, insurance, and repair costs rise, landlords, both big and small, are feeling the pressure.

The Effect of Increasing Tenant Protections on Small Landlords

As expenses rise, smaller landlords, who own about 90% of single-family rentals in the U.S., many of whom own only a few rentals, don’t have the deep pockets of corporate landlords to withstand a prolonged eviction. The Urban Institute found that one-size-fits-all landlord-tenant laws are disproportionately tough on smaller landlords who lack the experience and resources to fight increased regulations.

A December 2025 analysis on TurboTenant’s education platform highlighted these states as among the toughest to be a rental property owner:

• Connecticut
• Massachusetts
• Minnesota
• Maryland
• Illinois
• Washington
• Oregon

Factors considered include high carrying costs plus slow, tenant?friendly legal systems, making it especially challenging for mom?and?pop investors.

Here’s a deeper dive into some of these states.

Connecticut

In Connecticut, where the majority of evictions occur in five cities—Hartford, Bridgeport, Waterbury, New Haven, and New Britain—an effective property tax rate of 1.92% (well above the national average of 0.98%) and the expansion of “just cause” evictions make it especially challenging for smaller landlords.

“It takes away the control of my building, and I do protect my building to protect my good tenants more than anything, but occasionally you have to do other things. You have to remodel the units, and I can’t do it when somebody’s in there cause it’s too much, you know, you have too much work, especially half the housing in Connecticut’s over 100 years old,” John Souza, of the Connecticut Coalition of Property Owners, told WVIT/NBC Connecticut.

Illinois

Illinois is another state that is increasingly tough to be a landlord in, due to high property tax rates and increased tenant protection. As of Jan. 1, 2025, under the Landlord Retaliation Act—Public Act 103-0831, landlords “can’t raise rent, cut utilities, refuse to renew a lease, evict, or take other retaliatory actions if a renter does a protected activity or action like reporting unsafe conditions, requesting repairs, joining a tenants’ group, or taking legal action,” Apartments.com wrote about the statute.

 

Complicating issues in the state are the “crime-free housing laws.” The laws were promoted as a way to remove nuisance tenants from buildings, but their implementation has been mishandled, with the wrong people getting punished. As a result, city officials ordered landlords to evict tenants in 500 of 2,000 cases from 2019 to 2024, an investigation by The New York Times and The Illinois Answers Project found, causing a loss of income for property owners.

Infractions cited for evictions included accusations that tenants neglected their pets or eavesdropped on a neighbor, with a single violation enough to trigger an eviction. In families, the misdeeds of one member can result in the entire family being evicted. It has caused multiple complaints from landlords and tenants alike, the Times reported.

Oregon and Washington

On the West Coast, Oregon and Washington are known for their stringent tenant-protection laws. The TurboTenant report notes that Oregon’s statewide rent control, relocation fees tied to certain rent hikes, sealed eviction records, and certain rules that punish long-term ownership all contribute to what it calls “tough sledding”—making it difficult to find or build a home.

In Washington, the same issues occur, along with caps on rent increases in certain areas and the potential for multiyear legal disputes over contested cases. TurboTenant describes the state as a “financial and legal burden” for many rental owners.

Maryland

Maryland is another state named in the TurboTenant list. The Renter’s Rights and Stabilization Act of 2024 was one of two bills recently introduced. It gives tenants residing in a rental property the right of first refusal if the landowner wants to sell the property. It also increases court fees for landlords to file an eviction.

House Minority Leader Jason C. Buckel (R-Allegany) said during the court hearing:

“This bill is disincentivizing. How do I know this? Because they all come here and tell us that. Every group that represents people who invest in these types of property into this sector of the economy—multifamily housing, building associations, all of them. They all come here and say, ‘this doesn’t work. This is a bad compromise.’” 

Final Thoughts: Strategies for Small Landlords in a Tougher Landscape

The housing crisis has seen cities and municipalities across the nation undertake measures to keep tenants in their homes to stave off homelessness, making it tough for landlords, especially those with only a handful of rentals, to run their businesses efficiently. 

The lesson here is less about panic and more about planning. Investors need to assume that tenant protections will continue to increase in many markets. The key is to do your homework before investing. Being a landlord in any state is tough. Don’t make it tougher by not being prepared.

Key issues include:

Consider eviction rules

For landlords involved in government rental assistance programs or with HUD mortgages, the federal 30?day eviction?notice requirement, similar to the CARES Act requirement, is likely to remain in place, and landlords should plan for long eviction lag times.

Increase your slush fund

Landlords need to boost their reserves to cover compliance costs and capital expenditures. City-cited violations must be corrected promptly to avoid additional fines and legal action.

Research rent control laws

Small landlords need to research how local and state policies treat different types of housing within the same region. Are two-to-four-unit properties exempt from rent control? What about higher unit counts?  Can you add an ADU or convert a basement to livable space?

In This Article

This article is presented by Figure.

One of the most asked questions by rookie investors is, “How do I grow my portfolio if my income is low or unstable?” 

Obviously, if your real estate investing is a side gig and you have substantial regular income, this isn’t for you. You already know that you have the option to go down the traditional mortgage route to buy your next investment property.

But if you are self-employed and your income is variable, you likely won’t qualify for a traditional mortgage loan. Assuming that you also, at this point, don’t have access to equity in your own home to take out a loan, your options are beginning to look very limited. 

But that’s because you likely have never explored the DSCR loan route. Its eligibility criteria are fundamentally different from ordinary mortgage products. All you need is one investment property that is generating rental income. If your property can pay for itself, you may qualify for a loan—even if your personal finances say otherwise. 

Here’s what every serious investor should know about DSCR financing.

What Is a DSCR Loan?

A DSCR (debt service coverage ratio) loan is a type of mortgage specifically angled at real estate investors because it allows the applicant to borrow against a rental property’s cash flow as opposed to the borrower’s income.

This can be especially useful for investors whose income documentation may not meet traditional mortgage requirements, such as self-employed individuals or those with variable income.

Rather than relying solely on traditional income documentation, the lender will zoom in on your rental property’s ability to meet its debt obligations. How? By comparing the property’s income to its debt burden. 

Basically, they will want to see if the total net operating income per annum exceeds the total loan repayments. This is the basis for the simple formula lenders will use as a factor in deciding whether to approve the DSCR loan: annual net income, divided by annual debt service payments (principal and interest payments, property taxes, and homeownership association fees). This is the DSCR ratio.

The Importance of a Good DSCR Ratio

A good ratio is crucial for getting approved for a DSCR loan. 

What is considered a good debt service coverage ratio? Most lenders prefer a DSCR of 1.25 or higher, as it indicates stronger cash flow. However, some lenders—including Figure—may accept DSCRs as low as 1.0, depending on other factors like credit score and property type.

Let’s imagine you have a property with an annual debt obligation of $100,000, an annual rental income of $150,000, and annual expenses of $40,000. That leaves you with a net operating income (NOI) of $110,000, which, when divided by the annual debt obligation, gives you a ratio of 1.1—might be too low to qualify for a loan with most lenders. 

Once you understand your DSCR and are considering a loan, remember that the loan is taken out against the property’s rental income. If, for whatever reason, you experience a dip in rental income, you will need those cash reserves to cover the payments, while still meeting all your existing debt obligations.

It is essential to do your calculations right when figuring out if you’ll qualify for a DSCR loan: Always subtract all relevant expenses, including repairs and maintenance/management fees, from your NOI before you get to working out the ratio. 

If you’re getting a low ratio, you may want to look into ways of increasing the rental income or reducing your expenses before applying for a DSCR loan.

Common DSCR Loan Misconceptions 

There is one piece of fundamentally good news for investors who have a property or properties generating a steady rental income. Chances are you can utilize this underused loan strategy to expand your portfolio. And, for investors whose personal finance history works against them on mortgage applications, DSCR loans can be a valuable solution. 

However, there are a few details to be mindful of to maximize your chances of success:

Less paperwork doesn’t mean no paperwork.

It’s true you likely won’t need to fetch tax returns and pay stubs. However, proof of rental income isn’t the only thing you’ll need. Lenders will want to know the current market value of the property, so you’ll need to get an appraisal done. To lessen this burden, consider lenders that use automated valuation models (AVM) and can do this digitally.

Give it time. 

You will typically need at least 12 months of rental income to prove the property can be borrowed against.

Ensure you have a downpayment.

For purchase transactions, DSCR loans typically require a down payment of approximately 20% to 30%, depending on credit profile, property type, and underwriting criteria. Because these loans are designed for investment properties, minimum equity contributions are often higher than for owner-occupied traditional mortgages.

Borrowers should ensure they have sufficient capital to meet down payment and reserve requirements before applying. While some investors explore additional financing options, such as a home equity loan or line of credit (HELOC), to access liquidity, taking on additional debt can increase overall financial risk and reduce cash flow. Any such decision should be carefully evaluated in light of total debt obligations and long-term investment strategy.

Final Thoughts

A DSCR loan is an underused financing strategy every real estate investor should be aware of. If you have even a single property that’s generating healthy, stable rental income, you have a potential lifeline for your portfolio expansion. 

DSCR loans are typically easy to apply for, can take less time to get approved than traditional loans, and take your personal income out of the equation—crucial for the self-employed investor. Do your calculations diligently, and you could get the financing you need to grow your portfolio at your pace.

If you’re ready, Figure has loans to suit many investor needs. With their DSCR loan, you could get approved for up to $1,000,000 (1) in days, not months. Their HELOC is even faster—you can get approved in five minutes, and funding in as few as five days (2).

 

©2026 Figure Lending LLC

Figure Lending LLC dba Figure 650 S. Tryon Street, 8th Floor, Charlotte, NC 28202. (888) 819-6388. NMLS ID 1717824. For licensing information go to www.nmlsconsumeraccess.org. Equal Opportunity Lender.

For general customer support, call (888) 819-6388 Monday – Friday, 6am – 9pm PT, Saturday – Sunday, 6am – 5pm PT (excluding holidays).

Figure DSCR is available in AK, AL, AR, AZ, CA, CO, CT, DE, FL, GA, ID, IN, KS, KY, LA, MA, MD, ME, MO, MS, MT, NC, ND, NE, NH, NJ, NM, NV, OH, OK, PA, SC, SD, TN, TX, VA, WA, WI, WV and WY with more states to come.

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Equal Housing Opportunity

1. Figure’s DSCR loan amounts range from a minimum of $75,000 to a maximum of $1,000,000. Your maximum loan amount may be lower than $1,000,000, and will ultimately depend on home value, lien position, credit profile, verified rental income amount, and equity available at the time of application. We determine home value and resulting equity through a full field appraisal.
2. Figure’s HELOC approval may be granted in five minutes but is ultimately subject to verification of income and employment, as well as verification that your property is in at least average condition with a property condition report. Five business day funding timeline assumes closing the loan with our remote online notary, and where loan amounts are under $400,000 which would not require an appraisal. Funding timelines may be longer for loans secured by properties located in counties that do not permit recording of e-signatures or that otherwise require an in-person closing, or that require a waiting period prior to closing, or where loan amounts exceed $400,000.

Henry:
From a $35,000 a year salary to owning three investment properties in just two years. That’s investor flow, Jacques’s story, and it started with a simple decision at age 22 to buy a home instead of renting. Most people wait for the perfect time flow. Did not wait at all. Fresh out of college, working as a college admissions counselor, Flo had saved $15,000 and instead of letting it sit in the bank, she used it to buy her first home in North Carolina. That purchase wasn’t her end game, it was just the beginning. Over the next few years, Flo educated herself about investing and networked relentlessly. When she finally felt ready, she jumped in with a full gut rehab on a roach infested property in a flood zone. That first deal tested everything. Almost everything that could go wrong did go wrong, but Flo didn’t quit. She didn’t even slow down. She adapted, problem solved, and a month later she bought a duplex, then another property shortly after that. Today Flo is building a portfolio focused on multifamily properties and has her sites set on real estate development. This episode isn’t about waiting for the perfect moment or having a six figure income. It’s about taking action with what you have, learning fast, and refusing to settle for 40 years of a typical nine to five career.
What’s going on everybody? Welcome back to the BiggerPockets podcast. I’m Henry Washington. I’ve been investing in real estate in Arkansas and Missouri since 2017, and my co-host Dave Meyer, is here with me. It’s still weird saying that my co-host Dave Meyer, is here with me. What’s up, Dave? I love it. You have to do all the reading. I just get to see here. This is the best. Today’s guest is Flo Jacques, an investor from North Carolina who went from a $35,000 a year job to managing and growing a rental property portfolio in just a few years. Flo story is all about taking action fast, so let’s jump right in. Flo, welcome to the show.

Flo:
I’m so psyched to be here.

Henry:
That’s awesome. I’m glad you were here. Sounds like you’ve got a pretty interesting story. So why don’t you start and tell us about your background and what you were doing just before you got into real estate?

Flo:
Just before I got into real estate, I was actually a college admissions counselor, so I was blessed and fortunate to purchase my first home at 22 years old.

Henry:
Oh, wow.

Flo:
I remember being in my senior semester, my last semester of college, and I had a good bit of money that I had saved from working multiple jobs and something clicked and it was like I wonder if I could buy instead of rent, and I remember at that period in time, I was also considering renovating homes. I wanted to flip homes, build wealth through real estate.

Henry:
What year was this?

Flo:
This was actually 2021.

Henry:
Okay, so you were curious about investing, curious about doing renovations, so how long was it between when you purchased home to live in to when you actually decided to buy a investment property?

Flo:
It was another three years.

Henry:
Oh wow. Oh

Flo:
Wow. Yeah, and honestly during that time period I was figuring it out,

Henry:
You were 22.

Flo:
Fair enough. You don’t need an excuse

Dave:
To take three years to buy a property.

Flo:
Well, somebody told me you should probably get your real estate license, start there, and so I said, okay, sure. I’ll start with my getting that, learn the ropes of the business and stuff and then build the funds to be able to buy because college admissions education just doesn’t really pay. We know

Henry:
That you weren’t making $700,000 a year in college admission.

Flo:
Actually, I purchased my first home on a $35,000 annual salary. Wow, good for you. Yeah. During that period, after I became licensed, I joined organizations, started building relationships with other professionals in the real estate industry, and through that I also was attending some sessions that were investor focused and I knew I wanted to build a portfolio and not work till the day I die

Speaker 4:
Like that.

Flo:
It was like some spaces I was in was giving me the information, but 2024 was really when I was having some dreams that I was buying investment properties.

Henry:
Oh man. When you start having real estate dreams, that’s how you know you’re in

Dave:
My real estate. Dreams are never happy dreams.

Henry:
No, mine aren’t either. Mine aren’t either.

Dave:
Mine are always scary dreams. I have this recurring dream that I forgot about a property

Henry:
All the time. I have it.

Dave:
Someone calls me and they’re like, oh, there’s a rental that you haven’t been to in three years. I have that recurring dream and I wake up terrified every time.

Flo:
Oh my God.

Dave:
It sounds like yours were more positive flow at least.

Flo:
Yeah, at that time. They were at that time. At that time, it became very clear to me that I was being called to make a move and a month later I purchased my first rehab.

Henry:
That’s super cool. I feel like a lot of people are probably resonating with this story where it’s like education, education. When do I jump off the cliff and what does that look like? So you bought your first deal. How did you find this deal?

Flo:
It was on the MLS. I mean, I’m a realtor, so I’m not opposed to the MLS. I know people here, off market, off market, but the thing is just like off market, you can negotiate

Henry:
Too. You can just make offers.

Flo:
Make offers. Exactly.

Henry:
You can just do stuff. It’s pretty cool.

Flo:
Yeah, I mean, yes, the sellers are off delusional and yes, you are dealing with a realtor in the way of that, but yeah, so the funny thing is I had an investor client at that time who I was helping her purchase some investment properties and she targeted cheap rehabs and the outer skirts of the Raleigh Durham area, like Rocky Mountain, North Carolina, Henderson, those areas. She was interested about this property and another, so I called the listing agent and the listing agent said, yeah, we just listed 19 of them. So he had an investor who was in his seventies letting go of his portfolio, and so I said, oh, where can I find the list of these properties so I can send it to my client? At that time, I wasn’t even thinking for myself. I was just like, yeah, I want to send these to her. She wants to browse through and make a decision on maybe a package deal, and so I sent her the options and I thought flow make an offer on one or two of these too, and I was like, oh, okay. I like

Henry:
How you have a whole conversation with yourself in your head,

Flo:
Literally, and so when I sent her the list, I said, okay, whatever she doesn’t offer on, I will offer on one or two of these. I had already selected. So I submitted her package for three properties and then I submitted on two. That’s how I found that first deal on the MLS package deal. Same thing with another client I jumped into.

Dave:
And what did you like about these deals? What was different about these than everything else out there on the MLS?

Flo:
Well, number one it was 90,000, 60,000, the price, so you can afford it

Henry:
The price. Got it. Yeah,

Flo:
Exactly. So if you’ve ever heard of Rocky Mountain, North Carolina, people call that area murder city. I don’t want to say it’s a dead town, but it’s a very large renter population, but a lot of investors targeted because real estate is cheap there. What really stood out to me was getting a single family home for under a hundred thousand

Dave:
And what was the rehab budget for this?

Flo:
Yeah, so the rehab budget for this, we originally had it for 75,000.

Henry:
So you paid 90, is that what you said or

Flo:
So we went under contract for 90, but we actually ended up closing it at 70,000 because I found out that it was in a flood zone, which the listing agent did not disclose, and I was ballsy enough to still move forward with it. So my first property was in a flood zone. I didn’t do my due diligence, nor was it disclosed, and that’s a material fact that was supposed to be for sure disclosed.

Henry:
So you bought the single family home, you’re working on the renovation. You said you did go a little bit over budget. This was a fix and flip, or were you planning to keep this one as a rental

Flo:
Keep because my whole goal was to build a portfolio, so my mindset was buy and hold burr method.

Henry:
So you’re working on this project and a renovation, and then I’d like to know what happens next, but we’ll talk about that when we come back As a real estate investor, the last thing I want to do or have time for is to play accountant, banker and debt collector, but that’s what I was doing every weekend, flipping between a bunch of banking apps, bank statements and receipts, trying to sort it all out by property and figure who’s late on rent. Then I found baseline and it takes all that off my plate. It’s BiggerPockets official banking platform that automatically sorts my transactions, matches receipts, and collects rent for every property. My tax prep is done, my weekends are mine again, plus I’m saving a ton of money on banking fees and apps that I don’t need anymore. Get a $100 bonus when you sign up [email protected] slash bp BiggerPockets Pro members also get a free upgrade to Baseline Smart that’s packed with advanced automations and features to save even more time. Alright, we’re back on the BiggerPockets podcast with Flo Jacques and we’re talking about her first investment property and transitioning to her second. So what was next?

Flo:
So I closed on that. I knew that the rehab budget was assigned that was being worked on, and then I had another burst of this duplex downtown Durham. I’d love to have it, and so I’m like, I have the funds I can take on another project

Henry:
That couldn’t have been $90,000 that downtown Durham Duplex.

Flo:
No, not at all. I saw it, prayed about it and I took a minute. I took a couple days and then everything started feeling right and so I went and put it offer on it. That one was, I closed it at 287,000.

Dave:
Oh, whoa. That’s way cheaper than I thought you were going to say. Where were you getting the money from at this point? Were you working in admissions or were you making money as an agent?

Flo:
I was doing both. I was a college admissions counselor up until early 2025 as well as I did real estate. I wasn’t the top producer agent killing it with deals really, but my mortgage on my first home was like $700 a month, so I saved, I mean just like at 21 I decided to buy a house. It’s because I had 15 K saved. I’ve just been a saver.

Henry:
I think that that’s just a good habit to have. The fact that you’re a saver, it helps you to be prepared when opportunities arise and it sounds like you have no problem capitalizing on opportunities when they arise, but still you had a job, you had to scrounge up the money in order to save up. So what did the financing look like both on the first one and then on the duplex? Was these conventional loans? Were they

Flo:
Construction loans? What I did was hard money. All of my deals actually so far have been hard money, and so from a lot of communication asking who people know, who do you recommend? I landed with this lender, this hard money lender, and their terms were great, a hundred percent financing of the purchase and rehab

Speaker 4:
Up

Flo:
To 75% of the a rv, and so I was like, oh, so you’ll fund the rehab and the purchase a hundred percent so long as it meets the 75% or 70% formula. Perfect. So once I found that lender, all I had to do was pay origination fees, closing costs, that sort of stuff. So that’s really what empowered me to do that multifamily a month after closing on the first one because so long as you have liquid cash, you’re like, I could do two at the same time. They’re taking care of the purchase and rehab.

Dave:
Well, I love the way that you’re approaching this. I am sure there are people listening to this who want to do the exact same thing, get a hundred percent financing on a duplex or reno. How did you approach lenders with, no offense, you didn’t have any either, so how did you get people to lend to you for these deals?

Flo:
I think this lender is a gem, to be honest, because they don’t have a experience requirement actually. Interesting, but most other lenders did in order to lend to you at a hundred percent they need you to show five deals or something like that. They have a loyalty program though. Your first three deals you pay, it’s like 12.99%, 2.99% origination fee or something like that after your first three deals with them, then it goes down to 10.99% interest rate and 1.99 origination fee.

Dave:
Good for you for finding that. Honestly, just doing that little bit of legwork sounds like enabled you to really start your portfolio quickly.

Flo:
Exactly. Yeah. I just needed the financing and then I was ready to go.

Henry:
Yeah, I have a very similar situation. I found a lender when I first got started that was basically telling me how they could fund all my deals without me having to spend a ton of money, and so the goal became to figure out how to go bring in more deals so that I could get them financed. And so I understand going shopping like, Hey, I got a checkbook. I’m going to go shopping. But with hard money, it’s a short-term loan. And you said these were rental properties, so I’m assuming you had to refinance out of this short-term loan at some point?

Flo:
Correct. The duplex finished first, which was funny, even though I bought it second, it finished first. That was also a six figure rehab too. That was supposed to be 65. I think it came out to like 130,000 or something. Oh wow. I mean, that’s

Dave:
A mess. That one’s a miss. That’s okay. It happens.

Flo:
Yeah, maybe it was slightly under granted. I did account for, I had to furnish it because that one, I made it into an Airbnb midterm

Dave:
Rental. How are you managing this? You were working, you said you didn’t even have that much time necessarily to be an agent. Then you’re managing two construction projects at the same time. How were you going about that?

Flo:
So I actually had contractors doing the work, and so I will be honest, I was not visiting those properties, which was a mistake I made when I look back weeks going by, not paying attention, just trusting ’em, like just send me pictures, that sort of stuff. So whenever I could, I would, but I really wasn’t. So yeah, I mean I went forward with just having them pay for materials and labor and so all I’m doing is wiring or whatever the costs.

Henry:
So this, I assume it was a general contractor, they brought in all their own subs?

Flo:
Correct.

Henry:
They were sending you pictures communicating each week, and you were just wiring money saying, oh yeah, that’s great.

Flo:
Yeah, pretty much.

Henry:
So when, okay, on the first one, went slightly over budget on the second one, but with the overages, were you able to go ahead and pull off the refinance?

Flo:
Yes, I was able to pull off both refinances. I will say that these stories are, this is a little wonky for the first property. I had a contractor, he was licensed and everything, really sweet guy. He didn’t have the crew to handle that scope. We had to rehab the entire foundation. That was literally full gut. We tore down the foundation, rebuilt it, that was rebuilt. Every single thing in that house, like roach infested and everything, he didn’t have the scope to do that level of work. I ended up firing him and having the guy that was doing my duplex to kind of step in. Then things went off with him where he was a greedy and was insane with his prices. So I got rid of him. And then the third contractors who really finished that job, they weren’t licensed, but they worked under licensed people, had their subs and whatnot. So that’s for that first house in the flood zone.

Henry:
Before we move on to talking about what came next for you, given the situation with these contractors and given the situation with how you found these properties and the size of renovations you took on, what advice do you have for people who are maybe considering buying a property in that same price point that have a heavy renovation? I think people often forget that yes, you can buy cheap houses, but a lot of the times they’re tied to large renovations and it’s not necessarily a bad thing, but it sounds like you learned a lot of lessons. So what did you learn or what would you do different if you were brand new? Again, looking at properties like this,

Flo:
I would definitely structure the deal a lot more conservatively than I did because I structured it initially at 75% and in a market where homes are dirt cheap, a highly renter market, which meant there were a lack of sales and comps to justify this new completely renovated home to be 230,000, which is what it appraised to be. But because there were some challenges with comps, when I went to refinance, the underwriter asked, Hey, can you tell me why you use these comps instead of this? Even though the appraiser was like, well, this is pretty much new construction. You didn’t have to replace the roof or the exterior, but you did everything brand new inside new electrical, new everything. And so that question ended up bringing the appraisal price down 26,000. So that’s the lesson that I learned there. Structure deals more conservatively, especially if you’re targeting those cheaper housing markets.

Dave:
Those are great lessons. Thank you. Flow and lessons we unfortunately all sometimes have to figure out. But now that you’re now a year and a half or so into this, where did these two rental properties net you at the end of the day after you refinancing? Are they cash flowing for you? How are they performing?

Flo:
Yes, they’re doing pretty good. So for that first one, we had that one rented out to a group home tenant. There’s a lot of interest for some reason in that market for group homes. I had that rented out for 1595. So yeah, I was cash flowing very, I’m telling you that that flood zone insurance is really eating into it, but I was just happy that the mortgage was being covered and sometimes that’s all you can be happy with. As far as the duplex, both are Airbnb on VRBO, furnish finder, that sort of stuff. So yeah, they’ve been, that one’s cash flowing between 800 to a thousand per month.

Dave:
Wow. On a $200,000 purchase, right?

Flo:
Yeah. 202 80 seven’s. Yes. That one appraised for 4 62 5. Oh, nice. That one turned out pretty well that that’s a lesson I learned for targeting slightly more expensive markets because then they have more crops.

Dave:
When you did the refi, just for that example on the duplex, you built a ton of equity. That’s awesome. When you did the refi, did you pull cash out to use for your next deal like a burr or did you keep cash in to preserve your cashflow?

Flo:
So I actually did pull cash out of that one. I actually pulled cash out of the other one too. Like 2000 was like 2000, to be honest. I was like, I mean, I know this is something very real out there. I was also drowning in the losses of these going over budget, so I needed cash out to recover a little bit. Yeah,

Dave:
There’s no right answer. I’m just curious because I think people say you can’t do a burr, but clearly you created a deal that you could pull substantial amounts of cash out of. It’s up to you whether you want to keep money in that improves your cashflow because you’re borrowing less money, but then you have to save up to buy your next deal. So I think it sounds like you’re only at the beginning of your career here, so pulling money out and focusing on a next acquisition, doing more per kind of deals where you can build equity, makes sense to me that you would prioritize that over cashflow right now.

Flo:
Right, exactly. So yeah, that one turned out well.

Henry:
Flow. It sounds like you became a real life real estate investor. You went through the ropes of buying cheap property, you went through the ropes of a hundred thousand dollars renovation. You went through the ropes of contractors not doing what you wanted them to do, spending too much of your money. I mean, you got put through the wringer, but at the end of the day you have a couple of properties. So I’d love to transition and talk to you about what you did next, but I’d like to do that right after this break. Alright, we are back again with Flo Jacques talking about how she has been through the real estate investment ringer, but has come out clean on the other side. So Flo, after these two deals, so you’ve bought a single family and now a duplex first, do you still own the single family?

Flo:
I still own both, yes.

Henry:
Okay. Okay. So you still own the properties and have you purchased anything else since then?

Flo:
Yes. So right before the year ended, December 1st, 2025, I closed on a single family half acre lot in Raleigh, North Carolina.

Henry:
I love Raleigh. Okay, and is this a home you’re going to live in? Is this a rental? Is it a flip? Tell us about it.

Flo:
So actually I decided I wanted this one to be a flip, although in my mind initially when I started this journey, I thought I would just bur the rest of my life, bur my life literally. But I’m like, you know what? I could use some extra capital right now, especially after those two rehabs, honestly. So this one I actually found off market. That’s my first off market deal.

Henry:
Off market. So tell us about that. How did it come to pass?

Flo:
I attended a private money lending conference back in October after BP Con, so I was at BP Con and I flew back from Vegas on a red eye and literally headed to Atlantic Beach, North Carolina for this private money lending conference. And that kind of reignited this like, okay flow, get back on the saddle. And so I think a month after that conference I landed this deal, I found investor lift that off market platform wholesalers are on there, and so I was just browsing and working out the deals. You still got to do your own calculations because those people are liars. Yes. That one, it seems like a lot of investors were passing on it because the ceiling doesn’t meet code, it’s under seven feet and Raleigh requires a minimum of seven feet. And so to me the strategy is when others are not buying it, that’s your opportunity to negotiate and win it.

Henry:
That’s absolutely true. I think everybody should have a buy box and should have some sort of deal breaker and it’s different for every person and it’s different in every market. I’ve heard people like Laika who’s on this show frequently who said she will never buy a property to flip that’s on a double yellow line road because the houses on busy roads don’t sell. I flip those houses all the time. It’s different in different markets, but I pay a lot less for them because I underwrite them extremely conservatively. So everything that you need to fix on a house, no matter how catastrophic is just a dollar amount,

Speaker 4:
And

Henry:
So it tells you how much you needed to pay in order to fix the problem. So I’m assuming that’s the lens you were looking through. Can I fix this problem if I get it cheap enough?

Flo:
Correct. Exactly.

Henry:
So how’d you do it?

Flo:
Yeah, so this time I was much better. At this point, I’m a full-time real estate professional. I no

Henry:
Longer work You as well get your contractor’s license now.

Flo:
Exactly. Well, I’ve thought about that or I have really thought about that, but yeah, now that I’m a fully full-time real estate professional, I don’t work that job anymore and so I have more time to take my time and do my due diligence. So I invited the contractor, walked it through with him, he gave me a budget and so hopefully he doesn’t listen to this episode, but the budget I tell the contractor is very different than what I actually borrow from the lender.

Henry:
That’s just called being a smart investor dear.

Flo:
Especially after the lessons I learned right, going over budget and stuff. So once I was clear on how much he was going to do it for, I budgeted for contingencies a very good bit, also paying myself. I also started budgeting to pay myself for my time and energy for these projects, and so I worked backwards from there. If this is the rehab budget, I actually structured it at 65% a RV for this one. So I purchased it for one 20 and the R VNA is 3 37 and that is actually a conservative appraisal.

Henry:
That’s a stellar deal. That’s almost a six figure net profit.

Flo:
Yes, that’s correct.

Henry:
That’s a stellar deal. So did you have to pop the top and raise the roof?

Flo:
You’re doing that? We’re literally doing that right now. I’ve been back and forth on the phone with the power company, turn the meter off, install a temporary meter pole. We are actively working on this right now. We are actually a little two months behind the ball thanks to that contractor who I really wanted to fire, but I’m like, you know what? I’ve worked with him.

Henry:
So just to be clear, it had lower than seven foot ceilings, and so for you to be able to sell this property, you’ve got to get to at least seven foot ceilings on your renovation. So you’re raising the ceiling height but all the same level. You’re not adding a second story to the living

Dave:
Space, literally raising the roof.

Henry:
Literally

Dave:
Raising your roof. I love it. Yes. All right. So Flo, we’re 18 months into your investing career flow. Can you just summarize what your portfolio looks like today?

Flo:
Yeah, so currently I do include my primary home because I bought it to be an investment property three months after, but that didn’t work out. I’m still here, but I am very proud of it because it’s hard to find a home in North Carolina. It’s one of the more expensive places to live in North Carolina. So I consider this condo as well as the single family in Rocky Mount, the duplex in Durham and this single family half acre lot in Raleigh. So that is my portfolio, two years from 2024 to date.

Dave:
Nice. Good for you. I mean it’s a really well diversified first couple of deals, right? You’ve done a little bit of everything, but it sounds like the goal is still long-term cashflow. Maybe you do some flips opportunistically, but still want to be a buy and hold kind of investor.

Flo:
Yes. My goal is to continue to build the portfolio. I haven’t exactly figured out my freedom number. I think maybe when I figure that out, I’ll know exactly how many properties I want to have. But I will tell you this though, my life as a licensed real estate broker investor, the goal is to eventually develop.

Dave:
I love that goal. That’s awesome. What about development appeals to you? Because I’m terrified of it,

Flo:
So I want to be a developer because I want to build communities. I spoke to somebody this morning about her son is special needs. She wants to build a community for special needs families, just thinking about providing solutions to communities and things like that. So I don’t have it all figured out, but I do know I want to build.

Henry:
Alright, flow. Well, this is an incredible story. Before we get out of here, is there anything you want to share with us? Maybe something that real estate allows you to be able to do now?

Flo:
Yeah, I think my life is full circle, right? I got my background, my education, social studies, teaching license, my master’s in school counseling. So this kind of education thing that I thought I did just to not ever actually do is now fully present in my real estate investing career where I help other people get the information I was desperately seeking when I wanted this information. So I’ve been teaching real estate investing classes just free, just inviting people and that sort of stuff. So it’s been phenomenal just bringing that to the community.

Henry:
I love that. I love that you’re now able to provide help to your community through your experiences and that’s something that real estate allows us to do because when we have something that we know is going to bring us income, then it allows us to be able to focus on things. Especially like people who want to start businesses first couple of years in business is hard. You may not make money, and so being able to lean on your real estate and start a business or start a passion project or a nonprofit is super cool. So I’m glad you’re able to give back to your community.

Dave:
Totally. And I just love that it’s kind of like an intersection marrying two different parts of your life for you teaching and real estate. You found a way to incorporate both of those. I’ve done that. I know Henry’s done that as well. It’s really cool that you don’t just have to be a real estate investor. There are ways that you can use this industry to pursue things that you really like as well. It’s awesome to hear that you’re doing that flow so early in your real estate investing career. Congratulations.

Flo:
Thank you. Thank you.

Henry:
Alright, well we’ll have to have you back so you can tell us all about the flow estates after you get finished developing those, and then I’m sure you’ll be teaching people how to be a real estate developer.

Flo:
Yeah, well, we’ll see. Never know, right?

Henry:
Alright, I think that was fun. That was a cool story to listen to. I think we often hear the opposite from people where it’s, I just researched for years and then

Dave:
I

Henry:
Finally took some action and flow was like, I’m just going to go buy

Dave:
Something. No, I’m dive it in

Henry:
Right down. I’m just going to buy something.

Dave:
I love it. It’s a great approach and I think it shows that creativity and just determination still net good deals. In 2024, she started in a difficult time, 2024 is maybe the hardest market in the last seven or eight years, and she just went for it, found great deals, educated herself and pulled it off.

Henry:
And think about the confidence she now has because if you were able to successfully invest in 2024 and 2025, whether you got beat up along the way or not, she’s still here now talking about deals that are positive. In a lot of ways, that breeds a lot of confidence as the market shifts to a more favorable real estate market. You got to be feeling good.

Dave:
I hope everyone listening listens to flow story and realize that deals still can be done. This is someone who started with very little experience, very little capital in a super expensive market and pulled off three deals in 18 months. If Flo can do it, everyone out there, if you educate yourself, you can do it as well.

Henry:
I mean, she did several things that people say you can’t do. She went and she got a hundred percent financing on her first deal. That’s true. Yes. And yeah, yeah. She went over budget on her renovation. She had to fire three contractors, but who hasn’t had to go through some of those things. I think we’re all going to go through some of those things. What I think is a good part about this story is single family real estate. Yes, you can have challenges, but no one’s going to die if it doesn’t go perfectly right. You’re not going to go bankrupt if you feel like you have enough of a financial backing to take a couple of lumps along the way. Like taking the action and learning the lessons can be far more valuable than trying to learn all the lessons upfront and then getting into a deal where you’re still going to take some lumps. Alright, folks, we’re going to get out of here, but if you enjoyed Flow Story, I recommend that you check out the BiggerPockets podcast, episode 1105 with Deandre McDonald. It’s another investor story and one of our most popular episodes from the last few years. That’s episode 1105 from last April, and we’ll link it right here on YouTube as well. Thank you so much for watching. We’ll see you on the next episode of the BiggerPockets podcast.

 

In This Article

The combination of foreclosures and falling housing prices is like throwing chum into the water for a group of hungry sharks eager for deals. In some states, as mortgages slip into negative equity and banks seize possession of homes, the fins have started to circle.

Underwater Homes Are Clustered in Specific States

It’s not a feeding frenzy yet, however. According to a fourth-quarter 2025 home equity study by real estate data specialists ATTOM, the percentage of homes that are at least 25% underwater—meaning that mortgage balances are at least 25% above market value—has increased to 3% of all mortgages, up from 2.5% a year earlier. 

That’s not astounding news in itself, but what is interesting is that the underwater homes are clustered in specific states, each with between about 5% and 11% of mortgaged homes in deep negative equity:

• Louisiana
• Mississippi
• Kentucky
• Iowa
• Arkansas

Should these homeowners be forced to sell and cannot find a buyer because their debt exceeds the home’s value, they could find themselves handing the keys back to the bank, which would then list the home for sale as an REO. In a declining market, that’s a golden opportunity for investors.

Analyzing the ATTOM data, Homes.com chief economist Brad Case said:

“When homes get into negative equity, there are three typical reasons. One, they used a very low down payment; two, they used a long amortization schedule, meaning that the period during which most of their mortgage payment was interest rather than principal lasted for a long time; and three, the value of the house went down, either because they bought at the top of the market or because they paid more than it was worth even at the time they bought it.”

Case added, “The bigger problem is that some buyers are likely to have assumed that the $100,000 increase they saw over the previous year will continue indefinitely, and they will have been willing to overpay to get in on (not quite) the ground floor.”

That kind of thinking led to the 2008 financial crash. However, we are a long way from that, with only some markets showing increased homes underwater while others, particularly in the Midwest, are in good health. 

The same ATTOM data showed that equity-rich properties, where the total secured debt is half of the home’s value, dropped from 46.1% in the third quarter of 2025 to 44.6% in the fourth quarter. However, Case categorizes this as “normalization” rather than a market in free fall.

Stress, Foreclosures, and the Landlord Exodus Narrative

When the decline in home equity and the increase in homes underwater are analyzed alongside the growing issues with household credit, a narrative begins to emerge: The population—especially those with moderate incomes—is under increasing financial strain.

“In lower-income areas and in areas experiencing worsening labor markets or housing market conditions, we are seeing mortgage delinquencies grow at a fast pace,” economists at the Federal Reserve Bank of New York said in a recent report. The states with higher underwater properties and an increase in foreclosures—including default notices, scheduled auctions, and bank repossessions—up 32% from a year ago, according to ATTOM data, hint at a pipeline of motivated sellers and lenders.

A “Landlord Exodus”

Layered on top of these trends is an increasingly worrying one for investors: A “landlord exodus” shows that in certain metros—most prevalently in Florida and Texas—landlords are heading for the hills due to a combination of pricing, rent burden, regulatory friction, and poor landlord-friendliness metrics. 

The analysis, a January 2026 report, “Landlord Exodus & Housing Stress Index,” which was published by GigHz and combines Zillow housing and rent indices and state regulatory datasets, shows that low-income households in rent-controlled markets apportion roughly 42% of their income to rent, compared to about 29% in more landlord-friendly states, which shows how tight regulation can coincide with higher rent burdens.

The U.S. housing market has split into four capital zones, according to Dr. Pouyan Golshani, founder of GigHz Capital and developer of RadReport AI. “Investors and landlords aren’t villains or heroes; they’re actors responding rationally to regulation, supply, and affordability,” he added.

Why the Midwest Keeps Coming Out Ahead

Conversely, certain Midwest and Northeast markets remained resilient, according to the landlord exodus report:

• Rockford, Illinois
• Erie, Pennsylvania
• Utica, New York
• St. Joseph, Missouri
• Janesville, Wisconsin
• Canton, Ohio
• Syracuse, New York
• Cleveland, Ohio

In these markets, affordability and job stability have created a favorable environment for homebuyers and landlords alike, in stark contrast to speculative spikes seen in the Sunbelt and coastal markets. 

This was echoed by the Neighbors Bank’s Best Cities for First-Time Homebuyers in 2026, which was dominated by Midwestern cities. 

The Play for Landlords

Landlords looking for a deal have a few options. The trend line in certain Southern and Sunbelt states is of homeowners under increasing financial strain. If a house has negative equity, a “We Buy Houses—are you facing foreclosure or underwater?” mailer, online ad, or bandit sign will be of little use—if you wish to get a home at a discount—unless you can work out a deal with the lender.

Many lenders are sitting on the sidelines, waiting to see what happens with interest rates and hoping for a rush of buyers. However, when owners have credit card debt, are behind on payments, or landlords are burned out from bad tenants and restrictive municipalities, it might be possible to strike a deal, ask the owner to hold the note, or assume a mortgage if the interest rate is low. Or if there is equity, simply buy it outright.

Final Thoughts

For landlords unable to make a move now, there is plenty to keep an eye on. If the trend for underwater or near-underwater homes in specific markets continues, with declining values and interest rates remaining where they are, motivated sellers and lenders might be open to creative deal structures, including seller financing, rent-to-own arrangements, or purchasing discounted portfolios, especially if the houses are in need of repair. 

Pair this information with the fundamentals—jobs, population trends, regulatory climate, and realistic rent projections—and the map of underwater mortgages can double as an early indicator of next investment hot spots.

Dave:
The full on buyer’s market is coming for real estate right now. Home buyers are seeing the biggest discounts in more than 12 years, and this is what we’ve all been waiting for. There are deals to be found right now if you’re an investor and in this February housing market update, I’ll tell you how and where to find. Hey everyone, it’s Dave Chief investment Officer at BiggerPockets Real estate investor for 16 years and a professional housing market analyst. And being a housing market analyst is starting to be a little bit fun again these days because there’s so much going on and these are things investors should be paying close attention to because these shifts in market dynamics mean opportunities, specifically opportunities to buy and build out your portfolio. These are the types of changes that we like to see and that we have been waiting for.
So today we’re doing our February housing market update and in it I’m going to cover the full on shift to a buyer’s market that is making deals easier to find. We’ll talk about inventory news that will tell us where the market might be heading next, we’ll of course do a mortgage rate update and my forecast for rates going forward, plus I’ll share my February risk report where I’ll share data that helps you take advantage of the opportunities that are presenting themselves without exposing yourself to the risks that can come in a buyer’s market. So let’s get to it. First up we’ll talk about the big picture, which is this. The housing market is increasingly a buyer’ss market. Now this doesn’t mean that everything is perfect far from it, but it does mean that deals are going to be easier to find, and this isn’t just my opinion or anecdotal evidence, we actually see real evidence of this in the data.
First, we’re going to start by talking about pricing. Home prices are up as of now about 1% year over year, and this is right within the range we’ve been predicting for 2026 where I’ve said things would remain pretty flat and flat is exactly what we’re getting right now, but that 1.2 increase, although it is up in nominal terms, it’s actually below the pace of inflation and below wage growth. And that means when you consider all those things together, that affordability in the housing market is finally getting better. This is something we have been waiting for 2, 3, 4 years now. In fact, Zillow just put out their January, 2026 market report and they found that the typical monthly mortgage payment is now 8.5% lower than it was a year ago. That’s a lot. I know people are still waiting for rates to come down, but 8.4% lower on a mortgage rate is pretty good.
Of course, it is not a solution to affordability. We have a long way to go there, but this is good news for investors and homeowners alike. Things are getting less expensive to buy on top of improving affordability. The biggest headline in the housing market this month, at least in my opinion, comes from a new Redfin report that shows that buyers are actually scoring the biggest discounts since they started keeping this data. It’s only about 12 years, so it’s not going that far back in time, but still that is really good news for anyone who’s trying to build their portfolio. Right now, according to the report, the average buyer is now getting a 3.8% discount off list price. That might not sound that big, but since the median home price right now is over $400,000, that’s about a $16,000 discount on the average property. That means serious equity that you could just be walking right into, and this is something I feel like everyone listening right now should be paying attention to because this right here, this is the benefit of a buyer’s market.
It comes with some downsides of course, like slower appreciation, but our jobs as investors is just to take what the market is giving us and what it is giving us is discounts, and that’s something I will definitely be taking advantage of. Just consider this other finding from Redfin. In the same study, it shows that for people who negotiate below list, because not everyone’s going to do that, but for the people who actually go out and find deals where they can get them under lists, they work with motivated sellers, those people are actually getting discounts of almost 8% off list price. Or if you factor in the average home price, that’s more than $32,000. This is for me the number one shift in tactics. Investors should be thinking about right now. Negotiate being patient, finding sellers who want to move their property quickly because when you find them, there are significant discounts to be had, which can boost your profits on pretty much any acquisition.
Now of course, not all markets have big discounts, but most markets have at least some. The biggest discounts we’re seeing are in Florida and Texas. Not a huge surprise here, but those markets are seeing 10% plus discounts. But even in hotter markets, the markets that have and are still growing like the ones in the northeast and the Midwest, they’re also seeing discounts. Some of the hottest markets in the last couple of years like Milwaukee or Indianapolis, discounts off list are still three to 5%. So to me, everyone, no matter where you’re offering on your next offer, you should be thinking about how do I get this significantly off list price? And even better than that, you don’t just want to get it below list price. You want to get it below market comps because some of these discounts, some of the reason we’re seeing these big discounts is not because home prices are actually falling.
It’s because sellers haven’t really accepted reality. They haven’t really priced appropriately to the market. So not only should you be looking under list price, but work with your agent, do your own comps if you need to and figure out what each property is really worth. Try to buy it three, five, 7% below what current comps are. That to me is the single best way that you can protect yourself in a buyer’s market while still taking advantage of the better and better deals that we’re seeing. So that’s big news to me. The fact that discounts are coming, affordability is getting better, this is good news for the housing market. But before we move on to talking about inventory, I want to be clear that not everything is great in the housing market. I think we all know that. I don’t think we’re really in a healthy market just yet.
We’re moving towards it a more balanced market in terms of supply and demand, but we’re not doing very well in terms of sales volume, the total number of homes that are actually selling. In fact, in January we went backwards. As of January we’re on pace for only 3.9 million home sales, which is below where we were in 2025, which was already a very slow year. We’re basically back down to where we were in late 2024, which if any of you remember was not a great time for the housing market. Just from December to January alone we saw home sales drop 8.5%, which is the biggest monthly decline since February, 2022. This isn’t good for a healthy market. We need more sales volume. I think any agent, any loan officer, any investor or seller knows that we just need more volume and activity in the housing market for it to be healthy.
We want to be somewhere near 5 million, five and a half million. That’s a normal market. We’re at 3.9 right now, so we definitely have a ways to go. And the thing about this is that normally you would think since affordability is improving, we’d have some better sales volume, but I think there are probably two things getting in the way of housing market activity picking up. The first is just general consumer sentiment. It’s low. If you look at any of the many ways we measure consumer sentiment or confidence in the US, it’s not very good. People are worried about layoffs, they’re worried about inflation, they’re worried about AI taking their jobs. There’s a lot going on and when people are worried they don’t make big purchases like buying a house. So that is definitely one thing that’s going on. But the good news is the other thing that I think is probably suppressing activity is only temporary.
It may sound trivial, but I think that massive snowstorm and cold that swept over a lot of the country over the last couple of weeks definitely slowed down housing market activities, these types of events can really slow down the market. I think some of that did happen in January. My bet is that we actually see an uptick in home sales in February because people can actually leave their house, they can go on home sellings and not freeze. So hopefully get back to that four, 4.1 million pace that we were at before January. So that’s where we’re at with general housing market news. And I just want to reiterate that as we’ve been saying for months 2026, the most likely course it’s going to take is what I call the great stall. Basically we’re going to see housing prices be a little bit flat when mortgage rates come down a little bit, wages go up and affordability slowly improves. That was my thesis I presented back in September, October. I’ve been talking about it for a while and that’s bearing out as we speak and I know the great stall. It doesn’t sound like the most exciting thing, but I think this is positive. The gradual return to affordability, better discounts. These are positive signs, but is that going to continue for the rest of the year to understand what happens next? We need to look at inventory and how it’s trending and we’re going to do that right after this quick break.
Welcome back to the BiggerPockets podcast. I’m Dave Meyer delivering our February housing market update. Before the break, we talked about how we are in the great stall prices relatively flat, but we’re seeing slow and steady improvement to affordability and big discounts, all positive news for investors. Now that we understand what’s going on today, we’ll start to look forward a little bit and examine inventory and mortgage rates. Those are going to tell us what happens next. We’re first going to dive a little bit into inventory at the end of January, 2026. Overall inventory across the whole country was up 10% over the year before. And just as a reminder, in the housing market, what we really care about is year over year data. It’s very seasonal, so what happens from December to January is less important than what happens from January, 2025 to 2026. And what we’ve seen is a 10% increase.
That’s growth inventory going up is a sign that we’re moving towards a buyer’ss market, but we’re not in any sort of crash territory. In fact, we’re still 18% below where we were in January, 2019, which is kind of the last normal housing market that we have to compare to. So definitely a softer market than we were a year ago, but well within normal range. And I dug into a little bit more of this data just trying to compare January 19 to January 26th because again, that’s last normal housing market to today. And what you see for most of the country is actually that we’re still well below 2019 levels basically all of the northeast, all of the Midwest, a lot of California still below where we were in the last normal market. And in fact, if you look at the Midwest, the difference is really dramatic still, even though you see these headlines that inventory is rising in a lot of the Midwest, you still see markets where inventory is 50 or up to 80% below where it was in 2019.
That is not a trivial difference and it’s certainly a sign that a crash is not imminent. Now in the southwest, the story is totally different. If you look at San Antonio is the highest inventory growth up 52%. Florida is up 60%, Denver is up 33%. So these are significant increases and it’s why you see prices falling in those areas. I’m bringing this up because I want everyone to remember when you hear headlines that inventory is up or it’s down. It is super market specific and what you want to look for in your own market is changes in recent inventory. If I were you and researching a market, the two numbers I would look at is the difference between inventory in 2019. And now you can look this up on Redfin, by the way, it’s free just Google Redfin data center, you can go check this out.
And then the difference between inventory between last year and this year, year over year data, that’s what’s going to tell you what’s going on in your market. If inventory is climbing fast, that means better deals and bigger discounts, but it also means prices could drop. There’s a bigger chance that prices fall in areas where inventory is going up. That’s how a buyer’s market works. And of course the opposite is true. If inventory is shrinking yet fewer deals harder to find things at pencil. But if you find something that works, you probably will get more appreciation. Just as an example, San Francisco actually has falling inventory, right? Probably because of the AI boom, it’s minus 6% in the last year, prices are going up there, whereas in Seattle inventory is up 30%. Housing prices here are pretty flat or declining just a little bit. Now there’s no reason you can’t invest in either type of market, but it should change the way that you’re underwriting your deals.
If I’m buying a deal in Seattle, I’m going to be looking for steep discounts and I’m going to underwrite for low appreciation. On the other hand, if I’m buying in Jacksonville, Florida also showing inventory declines, I will underwrite for better price growth, but I’m going to have to be more aggressive in my offers because there’s going to be less motivated sellers. So these numbers, inventory numbers, the number one thing you want to look at. If you want to understand where your market is heading and how to formulate your strategy based on current market conditions. The other thing we need to look at of course, if we’re trying to figure out where the market’s going for the rest of year is mortgage rates. This isn’t really regional, but because of where we are nationally with affordability levels, rates are going to provide a lot of headwinds or tailwinds to pretty much every market depending on which way they move.
So we’re going to talk about this just a little bit. As of today, rates are sitting around 6.1% for a 30 year fixed rate mortgage, right where I predicted the average would be for 2026. Now, I know for some people this might not feel like the most inspiring number out there, but I want to remind people that we are down a full 1% since last year. It was above seven just a year ago, and that changed just 1% in mortgage rates. Means that in an average deal you’re probably getting hundreds of dollars in better cashflow and that really can make the difference between certain deals penciling or not. So overall that is positive news. Affordability again, is getting better, but to be real with all of you, and you probably already know this, I don’t think rates are coming down that much more anytime soon unless something really dramatic happens in the economy.
I do believe the Fed will cut rates again some point this year, maybe not that soon and maybe not that much. But even if they do, there’s just a lot of other things, a lot of uncertainty in the economy that will prevent rates from falling much more. My prediction for the year is not changing. I said at the beginning of the year that rates are probably going to stay between five and a half and six half percent per year and they would average around 6.1%. That is still my forecast and that is still okay. In fact, I believe the fact that rates are more stable is just a good thing. The fact that we aren’t thinking every single month our rate’s going to shoot up or go down is good news for investors. It allows us to predict what’s going on. It means you’re not sitting around wondering, should I go out and pull the trigger on this deal?
Or are rate’s going to be a quarter percent or a half percent lower in a month? They’re staying relatively stable and for me, whether we’re talking about pricing or mortgage rates, stability breeds the right conditions for making good deals for good underwriting. And so I am relatively happy that mortgage rates aren’t swinging wildly anymore. And yeah, sure, I wish they were a little bit lower that would probably breathe some life into the housing market. But I just want to remind everyone that relatively high rates, they’re not even that high by historical standards but higher than we’ve had. They’re definitely high compared to the last 10 years or so. Relatively higher rates can help prices move down, which improves affordability in its own right. And arguably I would say that it improves affordability in a more sustainable way. If rates come down fast, we’ll just see ourselves in another affordability crisis in a few months or years because prices will just go up.
And even if we have lower rates affordability, that will be sort of a moot point. So just overall with mortgage rates looking forward, probably not much of a change in my opinion. Meaning what you see is what you get. Look for deals, given where rates are today, analyze them using the BiggerPockets calculators and find one that works. Right now the market is steady, which means you’re in a good position to underwrite accurately. And that’s exactly what I recommend you doing. As I mentioned before, there is opportunity right now because we are in a buyer’s market, but there’s always a risk that a buyer’s market turns into a crash when inventory starts to go up, when there’s potentially less demand. It’s a balance that you need to keep an eye on. So I’m going to share with you my monthly risk report that examines exactly risks exist in the market so you can help mitigate them and avoid them. And we’ll get into that right after this break.
Welcome back to the BiggerPockets podcast. I’m Dave Meyer giving you my February housing market update. Before the break we talked about inventory and mortgage rates. I don’t really think mortgage rates are moving all that much inventory is going up, which means deals are going to be more abundant and we are moving towards a buyer’s market and for most of us investors, we want a buyer’s market, but we don’t want that buyer’s market to extend so far that it goes into a crash or we see significant home price declines. I think that’s probably something we can all agree on. We want more deals, but we don’t want a crash. So even though we’re seeing more deals, we need to at the same time assess what the risks of a crash are. Now, as a reminder, I know there’s a lot of fear mongering out there about what can cause a crash, but basically it comes from basic economics.
You have to have an imbalance between supply and demand. You need significantly more supply than demand. That is what creates the conditions for a crash. And so how would we potentially move from where we are today, which is relatively balanced, tilting towards a buyer’s market to a crash? We need to see either demand evaporate, buyers just leave the market, or we need supply to go up. We need a lot more people trying to sell their home or some combination of both. So let’s look at those. Are those things happening in the market today? When you look at the demand side, it is not very strong. You don’t have 3.9 million home sales in a market where there is strong demand. But the good news is that it’s pretty stable. And if you look at the data, it’s actually up a little year over year. We did have a little setback in January, but if you look at mortgage purchase applications, I’m personally not super worried right now that demand is going to evaporate.
I know people like to say that there are no home buyers, but it’s sort of stable right now because even though demand is relatively low, so is supply, it’s both relatively low and that means the market is somewhat in balance. To me, the bigger risk, at least as of today for a crash, would be a big increase in supply. Either tons of people list their properties for sale all at once, which also isn’t happening. If you look at new listing data, they’re actually down year over year. So all those crash bros saying people are selling in droves, not really true. It’s actually down 2% year over year. So that is another positive sign that although we’re in the buyer’ss market, we are not coming close to a crash. But the other thing you have to keep an eye on is something called forced selling. This is basically when people are no longer paying their mortgage, they are delinquent and they are get foreclosed on and that can increase inventory.
This is similar to what happened in 2008, and this is really what can create a foreclosure issue in the market. I want to remind people that prices going down does not lead to a foreclosure crisis. It doesn’t lead to this increase in supply that could cause a crash. What leads to that is people not paying their mortgage. You don’t get foreclosed on because your mortgage goes underwater. That is a common misconception. That is not how it works. You can only be foreclosed on if you stop paying your mortgage. And that’s why in this risk report, I always focus a lot on foreclosure and delinquency data. And I do have some new data to share with you. This actually came out from the New York Fed a couple of weeks ago, and what it shows is that transition rates from mortgages are still quite low. Transition rates basically means from paying your mortgage as agreed to being some sort of delinquent.
Now, they’ve definitely gone up from 2021, but they’re at about 1%, which is also where we were from 2014 to 2020. And I know there’s a lot of news showing that foreclosures are up and delinquencies are up. And it’s true, they’re up from pandemic lows because of course they are. There was foreclosure moratoriums during the pandemic. So seeing them come back up from that artificially low level is not a concern. In my opinion, they are right in line with historic norms. Could that change if unemployment spikes to 10%? Yeah, it definitely could. But employment, we just got the data the other day. Unemployment is relatively low right now it’s at 4.3%. And there just isn’t evidence really that this is going to happen. If you hear it is it’s just speculation. It is not evidence. The reality is that people still have super low mortgage rates and they have high credit scores.
People can and are paying their mortgages, which means the risk of a crash remains very low. So overall, just to summarize our housing market update, what we got for you today is that better deals are here and I think more are on the way. This is showing in the data as we are seeing with bigger discounts, higher inventory. And I’m also just seeing this anecdotally, I have the great fortune of talking to a lot of investors from all around the country who are doing everything from flips to burrs to co-living. And I’ve just noticed in the last two or three weeks, honestly, second half of January, first couple of weeks of February, I have been hearing people excited for the first time in a while. I keep hearing that they’re seeing great deals right now and are loading up for people who buy a lot are starting to load up.
And so this is great news as an investor, we haven’t seen these kinds of buying conditions, I think like three or four years even in the hot markets. Inventory is rising, which I think means that we’re going to get flatter markets, more stable conditions. And again, those are the conditions you need to be able to underwrite. Well, stable is good. It means less guesswork. It means that you can put better assumptions into the BiggerPockets calculator when you’re going and analyzing your deals. And this is something I think every investor should be taking advantage of. So my advice, keep your eyes open. There’s still going to be a lot of junk out there. Don’t get me wrong. There’s not all of a sudden just amazing deals everywhere. There’s still a lot of things that are overpriced. You need to be patient, you need to negotiate. You need to use the tactics and strategies that we talk about in the upside era during the great stall period that we’re in.
And if you do that, you are going to be able to find better and better deals. And the good news is, even though those discounts are coming, the risk of a full on crash remains relatively low. So get out there, look for deals, negotiate, be patient, buy under market comps. These are the keys to finding great deals right now, and I assure you those deals are here and more are coming. That’s what we got for you today in our February housing market update. Don’t forget to subscribe to the podcast on Apple or Spotify or on YouTube to ensure you don’t miss any updates that help you gain an edge in your investing. Thank you all so much for listening. I’m Dave Meyer and I’ll see you next time.

 

Ashley:
What if the hardest part of real estate isn’t finding that first deal, but knowing what to do after you get it.

Tony:
Today we’re answering three real questions from the BiggerPockets forms that hit the exact pain points that Ricks like you are running into scaling the right way, pricing rentals correctly, and setting up a short-term rental without all of those costly mistakes.

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

Tony:
And I am Tony j Robinson. And with that, let’s get into today’s first question. So our first question again comes from the BiggerPockets forms and it says, I currently own a property that has around $110,000 in equity. While I do not have a renter in this property yet, my plan is to have one by the end of the year, currently still renovating parts of the house with the amount of equity that I have. I’ve been thinking a lot about investing in a second property. I’ve always had the dream of owning vacation rentals. However, I don’t have that much capital and I worry about the feast or famine aspect of short-term rentals. I guess my main questions are what’s the best next investment for someone who is relatively new to real estate investing? Is the Burr method smart for me and should I do a cash out refi to help fund the next investment?
Alright, so basically this person’s just asking a, they’ve got some equity built up. What’s the best way for them to deploy that? I think first let’s just define for other rookies that are out there like equity and what does that actually mean, right? So when we talk about equity, we’re talking about the value of the home. What is the home currently worth, and what is the loan balance on that house? And the difference between those two numbers is your equity. So I think my first question back to the person who asked this question is how did you come up with that $110,000 of equity? Was that based on the Zillow estimate where it said that your house is worth X amount and you know what your loan balance is? Or did your neighbor’s house sell for a certain amount? But I think get some clarity first on how you came to that equity figure would be important because that’ll give you a better gauge on how accurate and how much equity you actually have to work with. So that’s the first part is just defining that. But for you, Ash, I think before we even get into what strategy or maybe what move makes the most sense, this person also asks what’s the best way to tap into that equity? Is it a cash out refinance or is it a heloc? What’s your recommendation?

Ashley:
Yeah, so I would say for this one, they own the property, but it’s going to be a rental. So you would have to do, you couldn’t do refinance or you couldn’t get a home equity line of credit or do a residential refinance. You would have to go and get a commercial line of credit on the property. So look for a local lender that will do these commercial lines of credit. You want to talk to the commercial lender at the small local bank and see what options they have available for you. The two lines of credits that I have are commercial are first liens. So that means that there’s no mortgage and no other debt on the property. So that is something you’d want to clarify and verify with the commercial department that the line of credit will actually be a second lien, which is traditional for most home equity lines of credit.
So you have your mortgage is your first lien, and then the line of credit is the second lien on the property, meaning if you don’t pay your bills goes into foreclosure, the mortgage getting paid first, then the line of credit. So it’s that positioning. And some banks don’t offer a second position for a rental property. So that’s where I would ask and get that clarification on that before you go ahead and start the whole process to get a line of credit. If you do a refinance on the property and it’s going to be a rental, you have a couple options there. You can go to the commercial side of lending for a small local lender, usually you’re going to have to do different amortization and fixed rate periods. Then you would see on the residential side. So for example, you’re maybe looking at a 15 year amortization or a 20 year amortization instead of the 30 year amortization.
Then you’re going to see a fixed rate, not for 30 years, but maybe for five 10, I’ve seen it for seven years, and then it goes into variable. Or you can refinance again to get another fixed rate. You can do A-D-S-C-R loan where this is looking at the debt you are going to put on the property and can the income, so when you rent it out actually support the property and you don’t have to rely on your own income to support the property. And so if you have a high debt to income on the personal side, this is always a great option where they’re looking at the value of the property and the income potential of the property instead of you to making sure it can support itself. And A-D-S-E-R loan, they do have that nice stur year option amortization and 30 year fixed to look at.
So something to take into consideration when you’re looking at two of these options is what is the current interest rate on the mortgage that you have right now on the property? If it’s like a 2.9%, then we’re probably not going to want to refinance. The only reason I would refinance out of this property, if you have a really low rate and you’re going to refinance into a higher rate, is if there is extreme value in that equity where you can put that money into something else and make such a large return, that interest rate and that increase in interest rate means nothing to you because it is very, very minimal compared to the amount of money that you’re making in the new deal that you’re putting that equity into. So look at that upside potential and evaluate that and it goes back to running the numbers in each scenario. So that’s where I would start is looking at those options that you have available for just doing a line of credit or for doing the refinance on the property.

Tony:
Yeah, all great points, Ashley. And the next part of that question is what is the next investment for someone in their position? And I really think that depends on you as an individual investor first. I think if you have $110,000 in equity, let’s just assume that aside from selling, you won’t be able to access all of that. So maybe somewhere in the 80 ish thousand, 70, $80,000 range, which you’ll actually be able to access through a line of credit or potentially refinance. And with that amount of capital, you’ve got to ask yourself, okay, what is the best way for me to actually go deploy that? I think just generally speaking, I’m a fan of the Burr strategy because it allows you to recycle a portion of that capital. But obviously that does require you finding a deal significantly below market value, which is a skillset in and of itself.
It requires you to manage a rehab, which is another skillset in and of itself, right? So there’s some more complexity there, but I think if you have the desire to learn those skills or the ability to do that already, a bur could be a great way to build your portfolio. And I’ve met so many investors who have taken one heloc, combine that with the Burr strategy and built a decently sized portfolio by just recycling that same capital deal after deal after deal. So it is a good way to build that momentum. So I think if you have the ability or the desire, a burr would be a great way to move forward.

Ashley:
And also too, the burr doesn’t just mean a long-term buy and hold rental. It could be your dream of doing a short-term rental too. So that can give you an extra layer of protection by doing a bur for a short-term rental property. You can really have increase the value of the property so you have more equity in the property when you go ahead and finish the rehab on it and pull your money back out. And you have this equity sitting in there to give you a little bit of cushion and security that okay, that feast and famine and mindset that you had. One little tip on that, if you are worried about that, what are going to be your other strategies that you can pivot to with this property. So for example, could you easily pivot to a midterm rental? Can you easily pivot to a long-term rental with this property?
So if that does happen, I had a property listed before as a short-term rental and a midterm rental, and I would leave the midterm rental booking open and I would just change it and I would keep my short-term rental window very minimal, I think only 30 to 60 days to keep it open. So that way someone booked 60 plus days out for a midterm rental, I could go ahead and close off the short-term rental bookings for that period because I would’ve rather have had the midterm rental bookings than the short-term rental. So think about different ways that you can incorporate other strategies if just doing the short-term rental route doesn’t make sense, maybe it’s seasonality or you just have periods of time where there’s a lull that you’re able to pivot when necessary coming up, even the best strategy falls apart if your rent numbers are wrong, we’re going to break down which rent tools you can trust and which ones get investors in after a quick word from our sponsors,

Tony:
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Ashley:
Okay, today’s second question is between BiggerPockets estimator and Prop Stream, which Rent Estimator do you find most accurate or are they pulling from the same data source? I saw a 2-year-old post on this and almost read that as I saw a 2-year-old post about this, but no, he said, I saw a post that was two years old on this, but wondering what’s the most accurate today? Okay, this is a great question as to where are these rent estimators getting their data from? And I’m going to be honest, I do not like Rent estimators every time I tried to use them. Not enough data, not enough data in my small, little tiny rural towns that I invest in. So I have to say I do like I use Turbo Tenant, and when you go ahead and list it, they have a rent estimator for you that you can go ahead and plug it in.
So I always just do it and check, and sometimes it will work for me and there’ll be enough data in some of the areas I invest in, but I think looking at where their data is coming from and when it was last updated. So if this data is from two years ago that they’re pulling, how are they getting their most recent data? This is a very old school way of doing it, but I really do believe it is accurate. And this is how I estimated rents for a very, very long time, was I had a spreadsheet. I would go in and look at the listings every single day for that market. I would put them into the spreadsheet and then I would update them every day. So if a listing was gone, I would assume that that property was rented, that property was rented, and if it was rented within a 30 day period, I would assume that it was rented for the price that they were asking for.
Very rarely have I in my over 10 years of investing in the markets, I choose seen price drops or decreases on rent. So usually you’re getting what those people are asking for, or if it’s continuously sitting and sitting and sitting, I know that’s not a good comp and I’m not going to use that property. And then I would just track it. I would track it and see what was going on. Then I would call property management companies. I would call, if I saw a four rent sign in someone’s yard, I would call that number and I would ask, what are you charging in rent? Most of the time I would just say, Hey, I’m just interested in that apartment, what are charging in rent for? And okay, thanks, have a great day. Or maybe ask a little bit more like how many bedrooms, things like that.
And I could use that as a comp. So you can always do that, but I think especially if you really want to niche down on an area, you can go ahead and do this heavy lifting or have a VA do it for you too. But BiggerPockets, rent estimator, prop Stream, I’ve never used Prop Stream. I love Prop Stream for a lot of things. I’ve never used their Rent estimator though. Turbo Tenant has a rent estimator. I think there’s a website called Rentometer that is out there too. And honestly, I would just use them all. I think they all are free to use.

Tony:
I couldn’t agree more. I think a lot of these estimating tools are good for a general baseline, but when it comes to actually sharpening the pencil on your underwriting, I do think that that level of manual work that you just talked through is beneficial. But I think the one point that I will disagree with you on is that I think your lack of trust, or maybe the lack of usefulness that you get from the estimator tools is probably because the market that you’re in. But I pulled up the BiggerPockets rental estimator tool for Shreveport, Louisiana where I started my investing career back in 2018, and I typed in the address for the very first property that I bought, and at the time in 2018, it was renting for about 1500 bucks per month. And I typed in that same address, and right now it’s showing that it would rent for about 1600 bucks per month, which feels about right.
That was 2018, right? So what is that? I can’t do that math fast enough eight years ago, give or take that we did that, right? So it kind of makes sense now that the rents have gone up a little bit. And I remember doing this when I first bought that property as well, and it was almost spot on to what I was actually charging in rent. So I think depending on how big of a market you are, the BiggerPockets rental estimator could be a good starting point. But still to Ashley’s point, go back, do a lot of that manual underwriting yourself to validate what you’re seeing in these estimating tools. Alright, we’re going to take a quick break before our last question, but while we’re gone, be sure to subscribe to the realestate Rookie YouTube channel. You can find us at realestate Rookie and we’ll be back with more right after this.
Alright guys, we are back. And here is our final question for today’s rookie reply. Are we just closed on our first short-term rental property in the DFW North Texas area? And I’m excited to start setting this property up. A few questions here are regarding cleaning crews for short-term rentals. Could you walk me through an example of your interview and hiring process for short-term rental specific crews in your area? For example, what questions are you asking when interviewing? What qualifications slash traits or must haves do you pay by the job or each visit or by the hour? Do you issue w nines? What accounting software do you use? And do you use your cleaning crews to do laundry or is that a separate service that you all have? Thanks so much. Alright, lots of really good questions here. And this is a pretty tactical question and I don’t think one that we’ve hit before out of all the Ricky reply questions that we’ve had.
But it is a super important question because your cleaners for your short-term rental business are probably the most important people that you hire because they are the last eyes to see the property before a guest checks in. And they’re usually the first ones to see the property once a guest checks out. So they’re the only people that have access to your property in between a guest checking in and checking out. So it’s on them to really be your eyes and ears and boots on the ground to make sure that everything’s flowing smoothly. And if they aren’t doing a good job, it usually has a pretty big impact on you as the host. You’ll see that show up in your cleaning fees or if they’re not telling you about deferred maintenance issues, you’ll see that show up in your reviews. So there’s a lot that your cleaner does that’s really, really important.
So I appreciate this question. So let’s break it down first he about the hiring process. What questions do we ask? What are some of the must haves? How do you pay? And then what services should you expect? So on the interviewing side, I’ll walk through my process and national pur George looks like. But for me, I’ll usually want to get a sense of how big their operation is. I strongly, strongly advise against hiring a person who is a one woman or one man show because if you do that, you are now subject to all of the ebbs and flows of that person’s life. If they get sick, if they get a flat tire, if they have a kid who gets sick, if they need to go on vacation, if they have a death in the family and they need to take some time, whatever it may be, all the things that happen in their life that would prevent them from getting to your property now becomes a fire that you have to put out.
So my strong recommendation is to hire cleaners who have at least a few people that work together. That way if one person’s out, there’s someone else who can step in and fill in the gaps here. So that’s the first piece for me is we got to have someone that’s got a team. Second, I do strongly prefer someone with cleaning experience already. Someone who’s already cleaned short-term rentals, they know the process, they have everything kind of dialed in. That will be a little trickier depending on what market you go into. If you’re in a super small market, that might be tough to find someone who has that experience already. But if you’re in a market that’s decently sized, I would prioritize someone who has that experience. And the other big one for us is being able to integrate into our systems and processes. We have specific software that we use for all of our cleaners where we can track what time they arrive to the property, what time they leave, we get a checklist they have to submit, there are photos they have to submit.
So we have a very specific system that cleaners have to plug into. And if a cleaner’s not willing to do that, then right off the bat we don’t hire them. So making sure that they integrate with our systems and processes. And then the fourth piece is just making sure that they’ll do same day turns again. In some markets or some cleaners who are maybe stretched beyond their capacity, they’ll tell you, Hey, I don’t have the ability to do a same day turn. So if someone’s checking out at 11 and the next check-in is at 4:00 PM I don’t have enough bandwidth to clean that in that timeframe, so I would need you to block the day of checkout so that they can check in the following day at 4:00 PM And that just decimate your ability to really generate revenue. So anyone who can’t do same day turns is a hard no for me as well. So those are kind of the four big buckets that I focus on when I’m talking to cleaners as I’m curious what your processes look like.

Ashley:
Honestly, I haven’t had to hire a cleaner yet because I had someone who was co-hosting for me and they took care of all that, and I kind of just inherited my cleaner from them. So I haven’t gone through that process yet, but I kind of answered some of these other questions about how I manage it now and how I pay them and the bookkeeping and things like that. So right now we use hospitable where we manage our bookings. Then we also pay them per an hour. So my last cleaner that I had for a very long time, it was by the job, and we paid her no matter if it was a super easy clean or was a disaster, it was she charged the same rate every single time. And this cleaner charges by the hour. So it’s from the time they walk in the door until the time that they leave, they’re charged.
They charge us that. And then for accounting software, we use, well, it’s not really accounting software, but to actually pay them, we use Turo. And then for our full bookkeeping of the property, we use a base lane where we’re actually putting in the income that’s coming in from Airbnb. And then the expenses that are going out that include the expenses for the cleaner. And then that last part there of the cleaning crews, if they do laundry or if that’s a separate service, laundry is included. We always have extra sets for each property in each bed, and then they actually take the laundry with them. Our one property, our A-Frame doesn’t have a laundry there at all. So they take it with them to do it, and then they put on the fresh linens that are there, and then when they come back the next time they bring the dirty that’s turned new and then leave it there as the extra step.

Tony:
Yeah, a lot of our process pretty closely with what you said, Ash. I think one of the biggest differences there is that we actually do pay by the job. And the reason that I like that better for the single family space, we pay by the hour for our hotel. Those are like W2 employees that work for us, and there’s a bunch of rooms under one roof, so we can track that a little bit easier. But the reason that we do it by the job for our single family portfolio is because it’s easier to control the cost, and we can make sure that we always have the margin built into the cleaning fee. So for example, unlike our five bedroom cabin, our cleaner charges us 2 25. Well, I know that I need to charge the guest a little bit more than that to account for the fees that Airbnb charges and all those things to make sure that I’m not actually losing money on the cleans.
So we prefer the single family side to pay by the job. And the way that you can gauge what that per job costs should be is to look at the cleaning fees for the other properties in your area, and that’ll give you a good baseline on the max, max, max that a cleaner should be charging you. And again, ideally, you should always be a little bit less to make sure you’re accounting for those fees. So if you get a quote from these cleaners and they say, I’m going to charge you $600 to clean your two bedroom, and you look at all the other two bedrooms and they’re charging 1 75, or there’s a really solid data point for you to take back to that person and say, Hey, 600 seems a little bit unreasonable. So we do like to charge by the job. We also pay our cleaners usually either biweekly or monthly, depending on the cleaner.
We prefer monthly just because it’s easier for us from a bookkeeping perspective. But we have some cleaners who prefer biweekly, so we’ll do the first and the 15th, and then we will just pay them through our business banking platform. We use Relay, and we just issue a CH payments directly into those cleaners bank accounts. So that’s how we pay them. And then we do issue 10 90 nines at the end of the year. All of our cleaners for our single family properties are all contractors. They clean our properties to clean other properties, so we pay them as contractors, and we issue 10 90 nines at the end of the year for them as well. So that’s kind of how we have ours set up.

Ashley:
Yeah, I do 10 90 nines as well. And I think in the Quish question, they got ’em switched up. It’s said, do you issue W nines? And a W nine is actually what you want to give your cleaner, and I highly recommend that you do it upon hiring them and have them fill it out so that you have the correct information. You need to actually issue them a 10 99 at the end of the year, and it could be their company or their personal name, whatever they operate under, unless they’re like a corporation, then you don’t have to issue them a 10 99.

Tony:
And my strong recommendation is to not pay them until you get the W nine, because once you pay someone for a whole year and then you’re chasing them down to get that information, they’re a little less likely to comply. And that’s actually a cool feature inside of Relay is that in this business bank that we use, is that you can issue someone a payment, but it won’t actually send that payment. They’ll see it in queue status, but it won’t actually send until we have a valid W nine on file for them. So that’s a really cool feature that Relay has to kind of automate that process. The last one that I didn’t answer was about the laundry piece. This does vary from market to market, from property to property. For our smaller properties, our cleaners typically do the laundry onsite. We’ve got a 391 square foot tiny house. We can do the laundry while we’re there, but for our larger properties, there’s not enough capacity to turn five beds or six beds or whatever it may be in one sitting. So there are cleaners will take it offsite. So just kind of talk with your cleaner and get a better sense of like, Hey, what do you feel works best for this specific property? But again, making sure that the total cost of the clean and the laundry is still less than what you’re charging to the guest.

Ashley:
Well, thank you guys so much for listening. And this has been Real Estate a Ricky, an episode of Ricky Reply. I’m Ashley, he’s Tony. Thank you guys so much for joining us. And make sure you are subscribed on YouTube at a realestate rookie and follow us on Instagram at BiggerPockets Rookie. We’ll see you guys next time.

 

Dave:
Big economic news dropped over the last week from strong labor data to huge revisions about the data we got last year, a new inflation print. All this together brought us new insights that can help us see where the economy and the housing market is heading. So in today’s episode of On the Market, we’re diving into the latest economic news to help you make sense of the markets and help drive decision making. We’re talking about new jobs, reports, inflation data, consumer sentiment, and how all of that comes together to impact our mortgage rate outlook. We’re also going to discuss some particular sectors, the housing market that are poised to shine and which areas might be at greatest risk. This is on the market. Let’s get into it.
Hey everyone, it’s Dave. Welcome to On the Market. Last week was a big one for economic news and all the things we learned are going to directly impact mortgage rates. They’re going to impact buyer demand and the direction of the housing market. So we’re going to dive into the latest data today and talk about what it means as we head into the hopefully busy spring buying season. First up we’re going to talk about labor data. What’s going on in the job market? This is a big question out there because over the last couple of months we’ve had a lot of conflicting signals. But before I dive into what we learned, I just wanted to make clear why this even matters for real estate investors because labor market might not seem obvious what this means for the housing market. But first, it helps us understand buyer activity.
People who are losing their jobs or are fearful of their jobs, probably not going to buy a house. Second, it helps us to understand rental demand and rent growth because same sort of thing about demand applies for renters. If they are worried about their job, wages aren’t growing, that sort of thing, it’s probably going to stagnate rent demand. Third, it helps us predict what happens with interest rates because the Federal Reserve, they’re watching closely bond investors who dictate where mortgage rates go. They watch these things closely. So we need to keep an eye on what’s going on in the labor market. It really does impact the housing market. So let’s talk about what we learned. Overall, it was good news. We saw strong overall job growth with non-farm payrolls, which is basically how the BLS tracks labor data. We saw an addition of 130,000 jobs in January, which is great.
That actually beat expectations of just 75,000, so that’s a significant beat. We also saw the unemployment rate, which has its flaws, but is still a good metric to track alongside everything else we’re looking at. Unemployment rate actually ticked down from 4.4% in December to 4.3%. Now, I’ll just spill the beans here. That’s not necessarily from an increase in hiring, although we did see jobs added. The unemployment rate most likely is ticking down because we a smaller labor force due to less immigration. When you dig into the labor data, you see that the economy is kind of splitting. Most of the jobs that were added in January, were highly, highly concentrated in healthcare. That area of our economy is still growing. They are hiring, but if you look at other sectors in the economy, it’s not doing that great. We see that manufacturing is down a hundred thousand jobs in the last year.
Same with it. Basically tech. We also see professional and business services down big. These are white collar jobs down 200,000 over the last year. So the big headline is good. It is good that unemployment is shrinking. It is good that we added over a hundred thousand jobs in January, but it really depends on the market. If you work in tech or or manufacturing, you’re probably not feeling great about the labor market because those sectors are actually losing. Whereas if you work in healthcare, you probably feel great about your job prospects. So that was the big headline news, but there was actually some other news that came out with this BLS report that I think maybe is even bigger news in January. The BLS always releases their annual revisions. Basically the way that the BLS tracks employment data is not very good. I don’t know how else to say it.
People have been critical of it for a long time. What I always say on the show when we talk about labor data is that there is no one perfect labor metric. You kind of have to look at the big picture. There’s 5, 6, 8 different things that you should be looking at and you can, if you look at them, all get a holistic sense of where things are going. That said, the BLS, this is the big thing that investors look at. It’s on the front page of the Wall Street Journal. This is the big number, but it’s also not very good, and you see massive revisions from time to time where the BLS actually says what we released. That preliminary estimate wasn’t very good and actually the data is changing and they released their big annual revision for the year in January. So what it actually shows that between 2024 and 2025, the total number of jobs that they had previously announced was revised down by nearly 1 million jobs.
That is crazy. So basically they were releasing data, thought that we had these million jobs added. They said more than that, but they’ve come out and said, actually, we overstated how many jobs were added by a million jobs. And I know that’s a lot. It’s crazy. It’s actually the second largest negative revision on record. So yeah, that’s a really big revision, but if you pay attention to this stuff, you probably already know that the BLS, the Bureau of Labor Statistics, their data isn’t perfect. And I’ll just say I don’t think that these revisions are a scam. I don’t think they’re necessarily playing games. I just think they have a very bad imperfect way of collecting data. They extrapolate a lot and this has been going on for a long time. This has been going on for 20 years. So it’s not like something has really changed.
And I think it’s natural that during times where the economy is shifting a lot like right now or like 2009 when they released the other biggest revision ever, that it’s not as accurate because they’re extrapolating a lot and when patterns shift, it is harder to extrapolate. But I will also say I think these revisions are needed. I would rather them admit that they were wrong and then to release new numbers even though it’s frustrating and it makes it a lot harder to trust the new numbers because they are probably going to change it. And this is one of the several reasons that we need to look at the big picture. Again, many different data sets, none of them. Perfect. We got to take in the whole thing. So beyond just this BLS data, what else are we seeing? We’re seeing that A DP, which is a private company, they track jobs numbers every single month, but they’re a private company, not the government.
They showed only 22,000 jobs added, which is a major divergence. It’s still up, that’s good. Still jobs being added but off by over a hundred thousand. So it kind of is a head scratch or it makes you wonder which one is accurate. To me, I think the most important indicator that I’m looking at right now in February of 2026 is job openings. This is a really important indicator of just how many companies are feeling bullish and want to invest in labor and are out there hiring. It is down to 6.54, which in a historical context, it’s a pretty normal number, but it is falling quickly. It is going down a lot in the last two months down almost a full million in two months. That’s like 15% in two months. That’s a big deal and it’s something that I think indicates that companies are going to pull back more on hiring and hiring.
So that’s concerning. And something I personally think is going to continue. If you just look at trends in AI and investment cases, people aren’t hiring that much. But on the other side of things, layoffs are really not as bad as the media makes it out to be. If you look at initial unemployment claims, this is a weekly set of data that comes out that just looks at how many people are filing for unemployment insurance for the first time. So that’s a good indicator of who got laid off. People who get laid off, they file for unemployment insurance. And so you look at those claims and they’re actually been really flat. They fluctuate week to week, but if you just look back over 2025 and into early 2026, it really hasn’t changed that much. Jerome Powell, the chairman of the Fed actually said, we’re in the no fire, no hire economy.
I think that was like two press conferences ago. If you care about these things, and I think that’s a pretty accurate assessment of what we’re seeing. We’re not seeing massive layoffs, but we are not seeing people hiring either the direction of the labor market, not super strong, but definitely not that weak either. I think we’re still sort of in limbo trying to understand what direction this is going ahead. Alright, so that’s what we’ve learned about the labor market so far. More conflicting signals. Personally, I am not feeling like we’re in a very strong labor market, but I am encouraged to see that we’re not in an emergency status either. An unemployment rate of 4.3 is really low, but there are signs that things are starting to weaken and so we need to keep an eye on that. The other major economic indicator we as real estate investors should be paying attention to is inflation. And we got a brand new report on inflation last Friday and we’re going to get into that right after this quick break.
Welcome back to On the Market, I’m Dave Meyer giving you an economic update on all the key indicators we as real estate investors should be watching. First we talk about the conflicting labor data that we have received over the last week or so, but we also got an inflation report, which is going to be really important for the future of mortgage rates. So let’s talk about what was in that. Mostly it was good news. We got a good inflation print last week, which personally I find encouraging the CBI rose 2.4% in January year over year, which is not bad. In December it was up 2.7%, so it actually came down a bit and it was below the 2.5% that economists were expecting. Yes, it is still above the 2% fed target, but it is also way down from where it was a few years ago when it briefly topped 9%.
So it’s not where it needs to be, but for me, if we have a 2% fed target, we’re at 2.4%. We’re getting pretty darn close to where we want to be for inflation. I also want to call out that it has been almost a full year now since the quote liberation day tariffs were announced and although data shows that US consumers are footing roughly 90% of the bill for those tariffs, it is not businesses or other countries paying it, 90% of those costs are going to US consumers. Overall. Inflation has not gone up significantly. The products that are subject to tariffs have certainly gone up, but that has been offset by falling prices elsewhere. We see increases in things like ground beef. That’s the highest one is up 17% year over year. Home healthcare hospital care watches, those are all up well above the target, but we’re also seeing declines in gas prices.
That’s probably the major thing that’s driving down the overall CPI is that gas prices are going down. We’ve also seen declines in used car prices, which everyone knows have been crazy over the last couple of years and we saw a big drop in eggs. The egg drama continues, it’s down 7% in just one month. Truly, who would’ve thought three years ago that egg prices would be such a subject of interest on an economic show? But here we are, my friends talking about eggs and they’re down 7%, which is good news. Now when we combine these things together, when we look at the labor data and the inflation data that we just got last Friday, it starts to inform what we should be expecting for mortgage rates because as we know, the Federal Reserve, their job is to sort of walk this type rope, keep the seesaw in balance between the labor market and inflation.
They don’t want to cut rates too much because they fear that can cause inflation, but if you keep rates too high to control inflation, that can hurt the labor market. So they’re always trying to find this neutral rate is this magical number that they’re trying to achieve that gets us the optimal labor market and the optimal inflation rate and the economic reports, the two that I just shared with you should show you why they have a difficult job right now and why I don’t think rates are going to come down that soon. Look at these reports, hiring was solid, unemployment rate is low. That would suggest holding rates higher, not doing more cuts because the economy, it doesn’t need stimulus right now. However, with lower inflation, many would argue that we now have wiggle room to lower the federal funds rate, lower short-term borrowing costs and provide some juice for the economy.
The fact is we just can’t get a clear signal. Everything is too uncertain and often it’s contradictory. Mortgage rates did happen to fall this week. I’m recording this a few days before the release, but we may even see rates in the high fives this week, which would be exciting. I think mentally, psychologically that is helpful. But we’ve seen it before. We know that this could go right back up and I just don’t think we are going to see big moves in the mortgage market because we have constantly contradictory data and there is no clear signal on which way things are heading. Are we going to see inflation spike? Is it going to continue going down? Is the labor market going to be decimated by AI or is that all overblown hype? So that being said, I’m sticking with my forecast this year as of now for mortgage rates to remain in the five point a half to six point a half percent range because nothing in the data suggests that we’re going to see anything else.
And I’ve said it before and I’ll just say it one more time that I think this is a relatively good thing. Mortgage rates being stable is what we want as investors, whether you’re, even if you’re an agent or a loan officer out there, more stable conditions create predictable underwriting, it creates home buying conditions that people can wrap their head around. They’re not sitting around waiting, wondering if they wait a month, is there going to be a quarter point better rates or a half point better rates? People will get used to it if we have these stable rates. And so when we look at the labor market and inflation data together, I think stability, it’s still going to fluctuate a quarter a point here and there, but I think it’s going to stay in this five and a half to six point a half percent range and personally that is something I can deal with. Now of course, I would love to get to a place where we don’t have to talk about mortgage rates all the time, but the fact is it is going to impact the direction of the housing market and there is one other dataset I want to go over that is also going to impact the direction of the housing market, which is consumer sentiment. How people are feeling about the economy is going to impact demand for rentals, it’s going to impact demand for homes and we’re going to dive into that data right after this break.
Welcome back to On the Market, I’m Dave Meyer going over the latest economic data. Before the break we talked about the confusing signals from the labor market, the good inflation print that we got, but how those two sort of conflicting pieces of information are probably going to keep mortgage rates relatively stable and that should help the housing market gain a little bit of traction. Stability is good. Mortgage rates, yeah, they’re not going to move that much, but they’re down a hundred basis points from where they were last year. But there is one other less talked about variable in the housing market that we should talk about, which is consumer sentiment. It as of three months ago was just dropping, dropping, dropping was really at one of the lowest points we’ve seen in a long time and the good news is that over the last three months it has gone up.
We’ve seen it start to inch back up, but I want to be honest that it’s still not very good. It’s still 40% roughly below where it was a year ago. So people are not feeling great about the economy. Now when you dig into the data, and this is going to really inform sort of what we should be thinking about as investors. When you dig into the data, there is a big gap in consumer sentiments. It reflects a lot of the K shaped economy that we have in the United States right now. If you look at sentiment for consumers who have large stock portfolios, they’re actually feeling really good about the housing market. We’ve seen sure stock market fluctuate over the last couple of months. It’s not just going up and up and up, which is normal I should mention. But those people who own assets are feeling pretty good about the economy.
They’re out there buying, they’re making up a huge percentage of consumer spending right now, but for consumers without stockholding, so folks typically on the lower end of the income spectrum sentiment, those for those consumers has not gotten better. It’s actually stagnated at really, really low levels and this K shaped divide matters for the housing market. It matters for housing demand because wealthier buyers are probably more confident. Meanwhile, first time entry level buyers or renters are feeling far less confident. It is one of the reasons you’ve probably seen in recent months these headlines that show that the luxury housing market is on fire. And that is true if you look at listings for crazy listings like over a million dollars, but also listings over $5 million, listing over $10 million. That is one of the strongest areas of the housing market right now while other areas are starting to stagnate.
So this is something I want everyone listening to this to take note of because it really matters whether you’re buying an A class, B class, C class, D class neighborhoods, if you’re buying workforce housing, if you’re buying for people for renters in the middle or lower end of the income spectrum, demand is probably going to be softer. Just you have to expect this, right? Sure, affordability has gotten better, but when people are not feeling very good about the economy, they don’t buy a lot. Economics sometimes is called the dismal science because honestly some of it is science, yes, but a lot of it is just some psychology. A lot of what happens in the economy and therefore in the housing market depends on how people feel and in a relative sense, people do not feel good. Yes, people at the high end of the spectrum feel okay, but the majority of people are not feeling very good.
We see that reflected in the consumer sentiment survey that comes out every month. We also see that in other surveys in 2025, Gallup actually released some data recently that showed that in 2025, only about 59% of Americans gave high ratings when asked to evaluate how good their life will be in about five years. That’s a pretty important question. It sort of tells you a lot about how people are feeling and 59% might sound high, but it is actually the lowest rating ever. They’ve only been asking this question for 20 years, but in 20 years of data, so that includes the financial crisis, more people are feeling bad about their life prospects in five years than at any other time this data was collected. Now, is this the worst economy it’s been in 20 years? Personally, I do not think so. I think that prestigious award should probably go to 2008 or 2009, but my sense is that there is this cumulative effect going on here.
The economy, at least in my opinion, it’s not great. I also don’t think it’s terrible. There are some bright spots, there are some weak spots. What worries me personally is that the bright spots are really concentrated in certain sectors. We’re seeing labor growth in healthcare. We are seeing infrastructure spending in ai. Sure, those are carrying a lot of the economy, but whenever a lot of growth or a lot of strength is concentrated in one area, it feels a little more volatile. It feels more likely to decline in the future than if you had every industry growing, right? That never really happens. But if you had lots of industries that were growing, to me, that would feel better. But the reality is there are bright spots, there are weak spots. It is neither great nor terrible, but I don’t think the average person who’s responding to these consumer sentiment surveys is really looking at geopolitical unrest and monetary policy and fiscal policy.
I think the reality is that we have had stagnant wages in the United States for like 40 years, right? They’ve gone up about 12% in real terms in the last 40 years. That is really pronounced in certain industries like manufacturing. And then on top of that, we’ve had just five-ish years of higher than expected inflation, which also followed a period of unnaturally low inflation, right? In the 2010s. We had really, really low inflation by historical standards and people got used to that. We are not as a society used to high inflation. The last time we’ve seen this was in the seventies and eighties, and so most people alive today, myself included, were not prepared. We’re not used to or have no frame of reference for this kind of inflation, and we’ve now had it for five-ish years. The fact that we have 2.4% inflation right now is relatively good news.
That’s not a crazy high inflation number. But what people want, whether it’s realistic or not, whether it is good or not, is they want deflation. They want prices to go down. Now, most economists would tell you that’s probably not a good thing. What you want is disinflation and you want the pace of prices going up to slow down, but you don’t actually want prices to go down because that actually creates all these other economic problems. It removes the incentive to spend and continue into this tailwind, or at least that’s the theory. But theories aside, that’s what people want. People want their grocery bill to go down. And so consumer sentiment I think is just reflecting five years of frustration. Now, just think about this. If inflation were at 2.4% in 2017 after years of low inflation, would anyone have even noticed? I don’t even know if it would have made the news.
I’m saying this because I just think that the sentiment that is out there is a reflection of people’s fear about their jobs and fear about layoffs. That is true, but I don’t really think it’s an accurate assessment of what’s going on in inflation. I think it is a combination about fear of the labor market and this cumulative effect of being above the Fed target for five years. Look at the cost of housing. Look at the cost of groceries. There is a reason people are feeling GLO about the economy because their pocketbooks are hurting and they’ve been hurting for four or five years now, and I talked about this a lot in an episode back in November when I came up with my concept of the normal person recession. This is basically my concept that yeah, GDP is growing. It’s been growing for years, but people feel further and further behind.
And that’s because GDP doesn’t really measure the personal finances of the average American. And as we can see, the average American is not feeling very good about the economy, and I think we are awfully close to what I would call the normal person recession. And although a lot of this is kind of semantics, what’s a recession or not, the fact that people are feeling less confident about their economic prospects will weigh on housing, it will weigh on the economy. It just does, and this is going to matter for real estate investors. It’s going to matter for both housing demand if you’re trying to sell a home. It’s also going to matter for rental demand. I don’t expect a lot of rent growth in the lower ends of the market. I know a lot of people have said that we are working our way through the supply GLO and rent growth is going to be strong.
I’ve debated my friend Scott Trench about this. He thinks it’s going to be super strong. I’ve said I think it’s going to be pretty stagnant this year, and I’m sticking with that. When you have low consumer sentiment, people are not as willing to go move into that new apartment or to stop living with roommates or to move out of a family home because they’re worried either about inflation or about the labor market. So I’m just telling you all this because I think it’s wise to underwrite conservative right now for both appreciation and rental growth. I’ve said that before. I know people are getting excited that we have a new fed chair and that things are going to go up and home prices are going to go up. Maybe that’s true, but I still think given what we’re seeing in the economy right now, the smart bet is to be conservative right now to not stretch too far on any deal, on any estimations of red growth because consumer sentiment is indicating people don’t want to spend that much right now.
Now, there is a positive flip side to this for real estate investors. If rental demand is a little bit slow, if people are still going to be listing their homes, that means that better deals are going to be coming on the market. We have seen indications of this all across the housing market. We’re talking mostly about macro today and not about the housing market, but just as a reminder, inventory is up about 10%. There was a recent Redfin report that showed that buyers are getting the biggest discounts they’ve gotten in more than 13 years. So there are still good things going on here for real estate investors, but you need to adjust your tactics. This is exactly why we look at this economic news every single month because it helps us understand what segments of the market are going to be strong luxury. We’re seeing that high end stuff is still doing well, and which ends of the market have the highest risk.
Now, I’m not saying things are going to crash or that things are falling apart, but the data that we have shows us that there’s probably not going to be strong rent growth and that at the lower ends of the market, we’re probably not going to see enormous housing demand. And so that’s just something you need to take into account as you formulate your strategy going into the spring buying season and as you make decisions about your portfolio in 2026. For me personally, I’m still interested. I’m still looking at deals. I haven’t pulled the trigger on anything in 2026 yet, but I’m seeing better and better deals. I actually was talking to James and Henry the other day. They said they were both loading up, was the exact words both of them used in different conversations. They both said they were unquote loading up on projects Right now. They seem optimistic about buying better and better deals, so there’s still good things to be looking at. I just want to point out where opportunity and risk is. That’s the whole point of the show. That’s the whole thing that we’re doing here on the market community. So that’s it. That’s what we got for you guys today. Thank you all so much for listening to this episode of On The Market. I’m Dave Meyer and I’ll see you next time.