This article is presented by Express Capital Financing.

If you spend enough time around real estate investors, you start to notice there are two types of people entering 2026.

The first group is still whispering to itself that rates are “definitely” going back to 3%. They’re convinced the economic stars will align, Jerome Powell will have a spiritual breakthrough, and mortgages will magically become cheaper again. These are the same people who think Blockbuster might return if we all “manifest” hard enough.

The second group? They’re building wealth regardless of what interest rates are doing. They’re refinancing, pulling equity, and rolling cash from deal to deal, using momentum as their strategy rather than waiting for the perfect economic weather report.

This guide is for them.

And before we jump in, thank you to Express Capital Financing for helping shape this updated 2026 BRRRR playbook. Their team has seen every version of the refinance universe—and still picks up the phone when investors call (which says a lot these days).

The 2026 Reality: Refinancing Still Works

Let’s kick off with a real story. Back in 2020, an investor named Sarah bought a duplex in Ohio. She did what many rookies do: She over-renovated the kitchen, underestimated her contractor’s ability to disappear without warning, and spent six months in a stress dream.

But she did one thing absolutely right: She refinanced. When the dust settled, she pulled out $52,000 and immediately bought a fourplex. 

Fast-forward to today, and she’s sitting on 22 units. And this is not because the market was easy, but because she didn’t wait for perfect conditions.

That’s the whole lesson for 2026: You don’t need to be perfect. You need to make progress.

Here are the steps to take.

Step 1: Stabilize Like You Mean It

Every lender wants proof that your property is functioning like a stable adult, not a chaotic group chat. That means no lingering repairs, mysterious leaks, or tenants who pay rent based on vibes and lunar cycles.

A BiggerPockets member recently shared that their lender required them to show a full month of on-time rent payments before the file was touched. They tightened operations, stabilized the property in 45 days, and the refinance sailed through.

A smart tactic is keeping a stabilization folder with:

• Before-and-after photos
• Repair receipts
• Contractor invoices
• A list of upgrades

Hand this to your lender, and they’ll trust you immediately.

Step 2: Raise Rent (Thoughtfully) and Lock In Leases

Value comes from income. That part is simple. What’s more complicated is navigating a 2026 rental market where half the country feels soft, half feels hot, and the rest feels like a confused middle schooler trying to pick a personality.

This is not the year to wing it. Make small improvements, run clean turnovers, and lock tenants into 12-month leases. Predictability equals a higher value on paper.

Step 3: Build Your Digital Paperwork HQ

Refinances often die because of messy paperwork, not bad deals. Lenders now expect everything to be clean, digital, and accessible. That means:

• E-leases
• A rent roll
• Income and expense statements
• Insurance documents
• Utility bills
• Property tax history
• Rehab receipts
• Bank statements
• Before/after photos 

Put everything in one shared folder titled “Refi 2026—[Your Property Address].” Send it early. It makes the entire process faster.

A fun pro move is to record a two-minute walkthrough on your phone explaining every upgrade. Appraisers appreciate the context more than you’d think.

Step 4: Call Your Lender Before You Need Them

If you’re waiting until the very end of your renovation to call your lender, you’re already behind.

One investor working with Express Capital Financing called during demolition. The lender walked him through expected LTV, required documents, appraisal timing, and how soon he could close after stabilization. That single early phone call saved six weeks and unlocked an additional $18,000 in cash-out.

Step 5: Date Around (Lenders, Not People)

Relying on one lender is the refinance equivalent of only eating at one restaurant, and then complaining that the food “lacks variety.”

You want at least three lenders in your corner. Each will give you different LTVs, fees, underwriting styles, and flexibility.

One Phoenix investor recently got two quotes: 6.5% and 7.3%. The 7.3% lender offered an 80% LTV and a 30-year fixed. The 6.5% lender capped his LTV at 70%. He took the higher rate because it got him the capital he needed to buy another property. Cash matters more in these situations.

Step 6: Negotiate the Whole Package

Most beginners only negotiate the rate. Veteran investors negotiate the entire loan. Ask your lender about:

• Fees
• Amortization
• DSCR minimums
• Interest-only options
• Reserve requirements
• Fixed-rate periods

Many lenders have quietly increased “admin” fees this year. Ask for a full breakdown so nothing surprises you at closing.

Step Seven: Tell a Value Story to the Appraiser

In 2026, conservative appraisals are more common, which means you need to help appraisers understand what your property was, what you transformed it into, and why it deserves your target valuation. Create a packet with:

• Before-and-after photos
• Full upgrade list
• Nearby rental comps
• Rent roll
• Neighborhood developments

A BiggerPockets investor once submitted a nine-page binder. The appraiser increased the value because the packet demonstrated the actual improvement. That binder was worth $14,000, and only cost the time it took to put it together.

Step 8: Pull the Right Comps

Some comps are garbage, while others are gold. In 2026, the difference matters more than ever.

One investor in Charlotte had an appraisal come in way too low. They challenged it using comps from the correct micro-neighborhood—literally the next block over. The difference in valuation? $62,000.

Your comp homework can make or break your refinance.

Step 9: Treat Your Refi Like a Project

Refinances stall for three predictable reasons: slow paperwork, appraisals, and underwriting. Avoid that mess by creating a timeline of important dates, set milestones for completion, and follow up proactively.

Express Capital Financing is designed for this pace. Their team does fast underwriting, specifically for BRRRR investors.

Step 10: When the Appraisal Comes in Sad

If your appraisal comes in low enough to ruin your afternoon, breathe. You still have options. You can:

• Challenge the report.
• Send better comps.
• Highlight missed upgrades.
• Request a second appraiser.
• Wait for rents to trend up.
• Switch lenders entirely.

A Colorado investor challenged a $47,000 low appraisal and recovered $39,000 after showing the appraiser what they had missed. That’s the power of pushing back with facts and evidence.

Step 11: Leverage Your Track Record

After your second or third BRRRR, lenders stop seeing you as a risk and start seeing you as a pipeline. Show them:

• Rent growth
• Payment history
• Low vacancy
• Successful past refinances

Lenders love predictability. Use that to negotiate better terms for yourself.

The Fast Track System

Express Capital Financing specializes in investor-focused refinances. This means fast underwriting, high-LTV cash-out options, bridge-to-rent structures, and complete transparency on fees and terms.

One investor in Michigan needed a refinance to close fast so he could lock up another property. Express Capital Financing closed in 21 days, freeing up enough cash to buy his fifth property without raising private money.

Final Thoughts

Every BRRRR investor eventually reaches the part of the journey where the work turns into leverage. You found the deal, took on the renovation, and got the property performing. Now you’re standing at the moment that separates stalled portfolios from growing ones: the refinance. It’s the inflection point where sweat equity becomes opportunity, and where momentum finally kicks in. 

Treat this step like the engine that powers everything that comes next. Use the insights in this blog (and this downloadable guide) to keep the energy moving forward.

And when you want a lending partner designed for speed and investor needs, start the conversation with Express Capital Financing. The leap to your next property is closer than it looks.

Dave Meyer:
This investor has acquired eight units in only three years. Now he’s cash flowing 1600 bucks per month and is on a path to financial freedom that would’ve been impossible with only his middle class day job. He didn’t start with a huge pile of cash or any other built in advantages. Some of his Midwest properties cost less than a hundred grand, and he is buying and managing them all from his home in California, thousands of miles away. This is a simple, repeatable investing formula, but it yields life-changing results. Hey everyone, I’m Dave Meyer. Been investing in rental properties for more than 15 years, and I’m the head of real estate investing at BiggerPockets. Today’s show is an investor story with Ben Vidovich from Santa Clara, California. Ben is a high school teacher and he’s passionate about that job, but he knew it didn’t provide the financial upside that he was looking for.
So in 2022, he bought his first rental property in Indiana. Since then, he’s scaled a portfolio by repeating the same investing formula, buy affordable homes, fix ’em up a little bit, then rent ’em out. There’s no tricks here, there’s no gimmicks, just a proven path to a better financial future for Ben and his family. During today’s episode, we’re going to discuss how Ben found the confidence to buy his first investment property in an out-of-state market he’d never visited. Why he’s comfortable buying properties with existing tenants in place, and how he decided putting more money down could actually accelerate his timeline for purchasing additional units. Let’s bring on Ben. Ben, thanks for being here. Welcome to the BiggerPockets podcast.

Ben Vidovich:
Great to be here. Dave. Thanks for having me on.

Dave Meyer:
I’d love to start by just learning a little bit about you. Where are you from? What brought you into this world of real estate investing that we’re in?

Ben Vidovich:
Well, I’m from the Bay Area. I was born and raised here in California and still here to this day. I’ve always kind of seen real estate at play. My dad worked as a property manager for some apartment buildings that are kind of in the family, so been watching him do that. Never really learned the business per se, but I’d get in there and paint the walls and rake the leaves and that sort of stuff. So I think it was just something I grew up around. And then when I got older and I was about to have my first child, I was like, man, I really got to do something to change my trajectory. I work as a teacher, I love that job, but I needed to do something to change the course we were on if I wanted to provide a better future for my family because as all the old people say out here in the Bay Area, the valley has changed quite a bit.

Dave Meyer:
Did you go into teaching at a young age? How long were you teaching before you realized you needed something else in addition to teaching to secure the financial future that you’re looking for?

Ben Vidovich:
Yeah, I joined a school and started teaching and I loved it. So I was doing that for a long time and was able to save a good amount of money. I always kind of lived frugally. Somewhere along the lines. I think I read Rich Dad, poor Dad, like many people. And during COVID times I read that and started really thinking about investing out of state just because there weren’t a lot of options here. And so I spent the next maybe couple of years in analysis paralysis, scouring the forums of BiggerPockets listening and reading everything I possibly could. And then like I mentioned earlier, as soon as I knew I was going to be a dad, I was like, okay, I got to take action. We got to stop. You can only learn so much at some point you have to take a first step, you have to dive in and you’ll get better from the practice and the implementation rather than just thinking about it all the time.

Dave Meyer:
And what about real estate in particular appealed to you when you sort of realized, Hey, I need something to augment my teaching. What about real estate made you think that’s it for me instead of going into another job or there are other entrepreneurial pursuits you could consider?

Ben Vidovich:
I think it was the best avenue for the amount of time that I had and the amount of money that I had. So prior to investing in real estate, my wife and I invested a lot just into low cost index funds and we put most of our savings in that for a long time, and that was great. But then once you sell the index funds, which we did to buy a mobile home that we lived in for a while, that’s it. You’ve done what you can with it. Whereas with real estate, you can keep saving the money and you can benefit from the cashflow, the appreciation, and there’s just more ways that I think it generates wealth than what the traditional path is for a lot of other Americans, which is just putting it in the market in some form or another.

Dave Meyer:
It’s just that level of control is so nice too. Again, it’s kind of the idea behind flexibility too. If you put in an index funder or 401k, it’s kind of locked in there, but real estate, yeah, you can buy something, hold onto it for 30 years. You can also optimize, you can refi, you can just get more creative and have a much more hands-on tangible thing that you control and can really contribute to that financial freedom, which is such a nice part of real estate investing. Now, I don’t want to be presumptuous Ben, but I’m guessing on a teacher’s salary in California, the options for investing locally were not abundant When you were getting started.

Ben Vidovich:
No, you assumed correctly. I mean, it’s tough out here to buy a home with a down payment and then rent it out. That’s just the reality of it. In the Bay Area, it’s really high cost of everything that you would have to put into the home to maintain it. And then you have property taxes which are higher out here, interest rates went up. So yeah, it’s not really tenable. So you run one or two deals analyzing it here and you’re like, okay, it’s not going to work. So I turned just to other parts of the country in the analysis paralysis phase and eventually wound up in a southern Indiana, made some calls that as I finally took action and just hit it off with some different people that I felt good about working with and eventually was able to muster up the courage to buy the first deal.

Dave Meyer:
That is a bold first step. It takes a lot of people’s understandable time to get comfortable with the idea of investing out of state. So how did you go through that process of thinking about buying something that is cash intensive so far away without really being able to see it and feel it and have your hands on it?

Ben Vidovich:
Yeah, it was weird explaining it to my dad, you’re not flying out there. You’re not what? So it does take that, but I would say a lot of people have done it before me. So that gave me some confidence. I would scour the forums of BiggerPockets to just read about what other people did and things I could avoid and just telltale signs. The long distance investing book by David Green was really useful. Just tried to apply all the steps from that. Literally read a chapter, okay, look up the property taxes on this website and make sure it lines up. So I was just really trying to apply everything when I was finally taking action. And it led to phone calls and then as you start making phone calls, you can kind of see who you enjoy speaking with, get a sense of who’s going to call you back or not on the property manager side of things or agents, whatever.
So that was all really critical. And then just leaning into referrals. So if I talk to you Dave, I’m going to ask for some referrals and then I’ll call those people and what do you guys think about working with Dave? And so there’s a lot of that and you can get pretty far with it. So eventually after having someone tell me no to a couple of deals who I was looking to work with who was a property manager, which by the way, that’s a good thing if they tell you just don’t buy the first thing. I was able to find one that looking back on it probably overpaid a little bit, but it got me in the game. It gave me proof of concept, which is what I think all the newbie investors need really. And it’s been rolling since then. So it really is true that first one opens a lot of doors and confidence.

Dave Meyer:
I want to hear about this first deal, but before we do, you could have picked anywhere in the us. You’re investing from California. What about this area of Indiana appealed to you?

Ben Vidovich:
It felt affordable. It was not too big, not too small, about a hundred thousand people or so diversified job industries. They got a good hospital system, good school system. There’s a steel industry across the river right on the border of Kentucky, so there’s a good amount of people living out there. So that was good. And then just the affordability was huge because on the first deal I did do a 25% down payment and I had a 30 year fixed loan, and that came with a certain loan payment every month. And I just didn’t want to feel like, gosh, if there’s no tenants, what am I going to do? So the price point needed to be one that I felt comfortable with if there was a vacancy for a little bit. And just the people I ended up talking to there, because I spoke with agents in other markets and stuff, just felt like I hit it off the best with them and really connected with some people that had worked with other out-of-state investors before so I didn’t have to reinvent the wheel and took the leap of faith.

Dave Meyer:
I really like that approach of not stretching yourself too thin. Everything else you said about figuring out where there’s demand, something you can afford is so important, but whether you’re investing in your own backyard or you’re going to invest somewhere further afield, making sure that you are super comfortable that you’re going to sleep at night if things don’t go well, that is so important on your first deal, especially while you’re still learning, you may have a little bit more vacancy than an experienced investor before you learn how to market things and how to turn things over efficiently, just not using every single dollar to maximize what you can buy and instead making sure that you find something that you can comfortably hold, even if things go a little off track in the first couple months of your business plan is such a good approach. And it sounds like you found a really good area of the country, Ben. So let’s hear a little bit about this first deal. Did you have a very specific buy box you were looking for?

Ben Vidovich:
Not entirely. I was just looking for something that was in a good area. I didn’t want to get too risky with the location, so it had to be in a better part of town and it had to be, I think I had about 45,000 I wanted to spend on the down payment, so it couldn’t have been any more than that. So I was looking like 200,000 as a price point and below. And after looking at some things here and there that just didn’t make sense, I found a duplex, or I should say my agent found a duplex that I probably wouldn’t have found on my own, and she sent it to me and they wanted, I think two 10. We put in an offer much lower. It had been sitting a while and I think we ended up getting it under contract for one 70.

Dave Meyer:
Oh wow. And this is in 22?

Ben Vidovich:
Yeah, it was in October. It needed a new roof, so that’s part of the reason why there was a discount. So that was a bit concerning and it was like, all right, we’ll see if this property manager knows his stuff or not. And I closed on it. And what I really liked about it, Dave, is that it came, this is not everybody likes this, but it came with tenants who were paying rent. And so not everybody likes inheriting tenants, but those tenants were paying rent that I knew would cover the mortgage taxes and insurance from day one. And those rents had a lot of room to go up. So I was like, if I can just get this thing, fix the roof and kind of hold on for a while, eventually I’ll do a turnover, I’ll get the rents up. And then I think the first rent, everything’s paid after there was no roof cost, I think I got 200 bucks and I was like, alright, and this is only going to go up. So that was in 2022 and I was pulling in just short of 1500 on the rents for both combined. Both combined.
And then now in 2025, they’re pulling in over 1700. And honestly I think it could pull in more than 2000, but I don’t really want to force a turnover if I don’t have to and everybody’s paying on time. So we’ll just kind of let that thing keep riding.

Dave Meyer:
So let’s dig into this a little bit. You paid one 70, you’re getting 1500, that’s close to a 1% rule deal, so you’re probably getting a pretty good amount of cashflow right off the bat. What’d you put down? 20%, 25%?

Ben Vidovich:
I’d put 25% down.

Dave Meyer:
Okay. And then how much did that roof cost?

Ben Vidovich:
Only about $7,000, which out here and where I’m from for context on the listeners put a

Dave Meyer:
Zero on it,

Ben Vidovich:
More like three exit.

Dave Meyer:
Okay, so you were probably all into this thing for what, 50 50 grand, something like that,

Ben Vidovich:
Including the roof I think around there.

Dave Meyer:
Okay. And then talk a little bit more about inheriting tenants. This is a debate and I’m curious, how did it play out for you? How long had those tenants been tenants in that place and how did it work out for you now that you’ve owned the property for three years now? Three.

Ben Vidovich:
One is still there. We’ve increased her a little bit over time, nothing crazy. She pays on time, she keeps it clean. So we got no issues there. And I just know that at some point when there’s a vacancy, we’ll get the higher rent. So I’m not worried about it. I think the people that perhaps don’t love inherited tenants, they’re trying to maybe force appreciation and a get in, get out maybe a bird. I’ve been there on some projects where I’m like, ah, it’s going to make this a lot harder if there’s a tenant in place, but if you’re just buying and holding, it’s already kind of livable and the numbers kind of work and they’re going to get better in time. I mean as long as there’s proof that they’re paying rent. That’s something I would ask for before you close on it is just proof of the rent roll. I don’t really have a big issue with it. And if my property managers don’t have an issue working with those tenants, I’m all for it.

Dave Meyer:
I personally really like the approach that you’re using. I do the same thing where it’s like I could buy this property and having these tenants who I know are going to pay rent reduces so much risk to me, the risk of having one of those tenants not be great is less than buying something with vacancy, especially in a market that you don’t know because you don’t know how long it might take to fill. And so to me, the idea of just, Hey, I know I’m going to be able to make my mortgage payments for the first couple of months, I could build up a little bit of a cash reserve, I could get this thing rolling. Well, that often outstrips the downsides unless you want to do that forced depreciation. If you’re just eagerly trying to do a bur, that’s a different situation. But for those of you who listen to the show a lot, I like this thing called the slow burr, which is kind of the same thing.
It’s like I just wait until people move out to do the renovation. I’m not going to force anyone to leave. I want people to stay in an apartment if they like it and they’re living there. To me, that’s great. And it just allows me to be more opportunistic about the upgrades that I make instead of putting this time pressure on myself to get things done really quickly. All right. Well, this sounds like an awesome first deal. Congratulations on pulling the trigger on this from long distance, but I want to hear more about how you scaled From there. We’ll be right back. Running your real estate business doesn’t have to feel like juggling five different tools. With three simply, you can pull motivated seller lists, skip trace them instantly for free and reach out with calls or texts all from one streamlined platform. And the real magic is AI agents that answer inbound calls, they follow up with prospects and they even grade your conversations so you know where you stand. That means you spend less time on busy work and more time closing deals. Start your free trial and lock in 50% off your first month at reim.com/biggerpockets. That’s R-E-S-I-M-P-L i.com/biggerpockets.
Welcome back to the BiggerPockets podcast. I’m here with investor Ben Vidovich talking about how he bought his first property while living in California as a teacher in southern Indiana. It sounded like the first deal was solid, right? You’re making good cashflow, it seemed like you bought in a good part of town. Once you did that, what was your next thought? Where’d you go from there?

Ben Vidovich:
Well, I have to credit my lenders for really helping me here. And a key piece of information I gave them when I was kind of researching what lender to use on that first deal was I made sure I let them all know I was looking to scale. I didn’t want to just buy one and be done. And the lender I used kind of picked up on that thread and they transferred me to their commercial side of the lending business that they run, and commercial lending, man, there’s just so much fun stuff you can do. So the second deal actually came from those lenders who are pretty connected. They invest themselves in the area and they said, all right, Ben, we have this special loan that’s called a subject to appraisal loan where you can buy a property and then also get money for the renovations, and the funds you get are based on what it’s going to be worth when those renovations are done.
So what they described it as is kind of like a reverse bur where you get the money upfront, it’s all kind of rolled into this loan. You don’t have to do a refinance at the end. You get it up front. And all of those loans that I have are less than a hundred thousand. They’re 20 year adjustable rate every five years, which I know is not, maybe not every investor loves that, but my kind of thought pattern is 20 year loan, less than a hundred thousand dollars. Even when that rate adjustment happens, it’s not going to be a crazy difference because the loan amount is very small to begin with. And in those five years, you’re probably going to get some rent increases over time too. And it’s adjusting on the new principle, not the original principle that you pulled out.

Dave Meyer:
Okay, that makes sense. Yeah, I never really considered something like this, and I’m a big fan of fixed rate debt, but I do think there are applicable times to do it. I’ve used arms, I’ve used interest only loans for certain times, and I think that’s a really good point that I never really thought about that with an arm, if it adjusts after five years and it goes from five to 7%, that stinks. But the amount when you’re borrowing 80 grand, I don’t know what that comes out to, but I imagine it’s maybe less than a hundred bucks a month in deference.

Ben Vidovich:
I think so. And I mean, just looking at the way interest rates have been, I mean hopefully it doesn’t swing big in the up direction, but it really hasn’t been swinging all that much. It’s been a slow trickle to come down to where it is now. So on some of these subject to appraisal loans, because you’re baking the equity into the deal by saying it’s going to be worth this, and the LTVs kind of already baked in at that 80%, I didn’t have to really bring any money to the closing table because I just had to float the costs of the loan while I had it before a tenant in there. So my thought pattern is if an adjustment comes, I can always put a down payment and kind of recast the loan if I need to, if the payment gets too high. So it’s just been a cool tool that I’ve been able to use to help scale a portfolio without having to come out of pocket on a lot of the deals I’ve done.

Dave Meyer:
What did that do for you without that? Would you have been capped out or sort of delayed in buying your second deal?

Ben Vidovich:
Oh, most definitely. That second deal, like I said, I didn’t have to really bring anything to closing because the margins were good enough that the bank was willing to lend the money. They knew all the guys that were going to do the work, they knew the property managers, and I kind of just got brought into the fold, I think because I was a strong borrower and followed through on that first one with them and just kind of showed credibility and got the roof done. And banks know your information once you do a conventional loan with them. So they’re like, all right, we can do one with him and see where it goes from there. And so the second deal was not really anything out of pocket except for, like I said, those monthly holding costs.

Dave Meyer:
And what did you buy?

Ben Vidovich:
It was a single family, three bedroom, two bath, but it had a tenant that had been living in there for a long time. So the upstairs was pretty much unlivable, kind of a destroyed home by the end of it, sadly. And it took about six months to renovate. It was pretty big to turn it back into the three two. But again, another thing that I should point out here is I wasn’t using a general contractor. I was working through my lender and they have their guys that do in-house property management, so it’s more of a property management company that’s doing this turnover. So they probably are moving a little slower than a gc, but I was just making the loan payments on this subject to appraisal loan and it was like 500 bucks, so 500 bucks a month for six months, and then after that, the tenant got in there and that tenant’s been there ever since, and it pulls in about 200 bucks every month now. So I think it’s a win if you can scale and just kind of hold on to assets. That’s kind of my philosophy right now is I’m just kind of trying to grow slow and smart, and then as those principles get paid down and properties appreciate a little bit, you can have some options in the future.

Dave Meyer:
I love slow and smart. Slow and smart is the way to go. You’ve got plenty of time to figure this out, do it in a way that makes sense to you, is not stressful to you where you’re learning and growing a little bit and not taking on more than you can chew. But a three day roof job to a six month renovation is a pretty big swing. Is kind of a unique situation where your lender is a property management company, is doing the renovation. Were you just letting them figure out the scope of work? Were they picking out materials or how involved were you?

Ben Vidovich:
I got the scope of work and I asked the questions that I wanted to know the answers to. Like, Hey, what are you guys doing here? But in terms of making decisions, they kind of have a product. They have their own items that they always do in their rentals. So they showed me photos of different projects they had done in the past. I said, yeah, it looks pretty good to me. I live in that. So I kind of entrusted them to do the work. It was a little more nerve wracking than I thought it would be, but I was just patient and I would get photos periodically, so I knew it was happening, and it was pretty awesome when they finally got a tenant in there and I didn’t really look at deals or analyze and do anything. I was like, let’s just get this one done. I think that’s really important to just go one at a time, especially in the beginning.

Dave Meyer:
What was nerve wracking about it for you?

Ben Vidovich:
Well, I didn’t know how long it was going to take per se. And so a month goes by, two months go by, and I don’t think people understand how slow real estate is until you experience it because it looks fast online, but it really is a slow game. How

Dave Meyer:
Did you plan for this to make sure that you had realistic expectations? I don’t know how much of a burden for you at that point, $500 a month was? How did you sort of offset some of the understandable nerves that you have at the outset of the deal?

Ben Vidovich:
Well, I underwrote it with the broker who has done these before, and we used a really conservative rent estimate. I think we used like eight 50 for this three bedroom, two bath home. And then by the time we got a renter, it was a thousand. So we wrote it very conservatively, and then I think it was a 30 5K purchase, and then our rehab budget was another 30 5K, so all in around 70. And that’s pretty much what the balance of the loan was. They rolled in the closing costs. And I’d say in the meanwhile, since then I’ve just been trying to learn more about what it means to make good offers and get a little bit better on the investing side of things so I don’t have to quite rely on other people as much and can be responsible for the decisions I’m making too.

Dave Meyer:
I love this approach, Ben. I got to say, this is a deal. If you’re listening to this and you’re thinking, I need to get into real estate, I just don’t know how to do it. Correct me if I’m wrong, Ben, but this just feels like a very replicable model that almost anyone could do. Do you think this is something our audience should be considering if they maybe live in an expensive market, California, wherever on the coast, somewhere like you?

Ben Vidovich:
Yeah, I think you need to get interested, but once you’re interested and you do some basic education and you put a little work in to understand some of the elements of what it means to have a good deal and whatnot, I mean, yeah, anyone can do this.

Dave Meyer:
Thank you for sharing that story with us. I do think I’ve done this too. Investing long distance buying something that’s turnkey is not that hard, especially if you have tenants in place. But doing the renovation is kind of another level of nerves, and my recommendation is to just ask as many questions. Even if you feel like you’re being annoying, ask what the layout’s going to be. Ask them for photos frequently. Ask them if they comparison shopped for a couple of different things, even if they’re trustworthy. Just learning the process will make it feel less nerve wracking and scary. I think if you can ask questions and you see, hey, they’re actually doing their due diligence, they’re smart about this, they’re thinking about it, that will calm a lot of the nerves. And if you do that and then realize they’re not doing your due, maybe you need to fire them and find someone else. But I think just staying really involved, even though it’s far. And even if you don’t know a ton about construction, just learn. It’s your money, it’s your deal. Use it as an opportunity to learn so that the next time you go do this, you’re going to be feeling better about it and be more efficient about it. So those were two deals, Ben. How far apart were those two?

Ben Vidovich:
I think that second one came about a month after the first one, so pretty quickly.

Dave Meyer:
That is awesome. Congratulations. I’ve not heard many people being able to pull off two of their first deals in just the first two months. I want to hear how you’ve scaled from there to today, but we got to take one more quick break. We’ll be right back. Welcome back to the BiggerPockets podcast. I’m here with investor Ben Vidovich talking about how he bought two properties in two months basically in southern Indiana while living in California. A really cool replicable model that almost anyone listening to this was an interest in real estate and has saved up some capital to get started, could replicate, but obviously you probably wanted to scale from there. Ben having two wins in just a couple of months. So where have you gone since then?

Ben Vidovich:
Well, after that second deal, I did a third one, pretty much the same idea with the subject to appraisal loan. And then somewhere along the way, I read the small and Mighty Real Estate Investor by Chad Carson and I was like, great book. Yeah, maybe I should do a really big boring down payment. And so I saved up some money for a while, kind of took a break. I was like, it’s great to scale and kind of do it without putting a ton down, but you’re also pretty leveraged. And maybe there’s a little bit of margin because the bank wouldn’t loan if there wasn’t. But still I wanted to try to see if I could do something a little different on the next one. And so then I kind of went full in on that. My wife and I were in a mobile home. We had some money that we had used to buy that out here, and we were like, you know what? We can’t really do anything with it. And this thing might depreciate it one day. I mean, probably not in the Bay area, but still didn’t love it. So we sold and we went back to renting and we kind of redeployed that capital into buying one rental that is just free and clear, which has been really kind of a nice breathing room for our portfolio.

Dave Meyer:
Nice.

Ben Vidovich:
And then we’ve been kind of going in between, now let’s do some that are not really leveraged and trying to scale when leverage makes sense.

Dave Meyer:
Okay, so let’s talk about that because Chad’s friend of the show, I love Chad and his approach is that it’s often better to just buy fewer rentals. And the less leverage you use, the less debt you take out on them, the fewer you need to buy because you can replace your income sooner. It’s less operational headache, you have less risk in your portfolio. And so sometimes making bigger down payments makes sense. So that’s a very different approach to the one you were just doing where you’re putting almost nothing down. And so what about Chad’s philosophy resonated with you, and was it hard to shift from doing a high leverage deal to a no leverage deal?

Ben Vidovich:
The resonating was the cashflow aspect and just having a little bit less risk after doing two where I didn’t really have a down payment, I was like, yeah, that’s awesome, but there’s not a lot of cashflow. Something goes wrong, then you’re kind of on the hook for it. So the next one, we did the big boring down payment and the money’s sitting in it now. And I thought, yeah, that could be a problem. What if I’m not using that to recycle the money more? But then this is where the commercial loans came back into play. This is pretty cool. So what I’d learned out there is the commercial lenders will let you buy another rental property using that same commercial product of 20 year loan, and you just have to bring your 20% in the form of cash or equity. And I was like, wait, equity, I just made this big boring down payment.
Can I borrow against that? Nice. And I said, yes, you can. So I basically deployed the money to have more cashflow, but then I was also able to still use it to buy what became another duplex deal where it was like we talked about earlier inherited tenants kind of thing. And the seller wanted to get out and he sold it to me out of good price, and we’re just kind of waiting to do turnovers there. But I didn’t really have to come out of pocket for that one because I already came out of pocket on the one prior with the big cash down payment.

Dave Meyer:
So you kind of blended, you’re kind of putting, I mean, you’re not really doing this, but you’re able to buy one property using no debt and then one putting 20% down. And so you basically got two properties basically putting 50% down total.

Ben Vidovich:
Yeah, it’s kind of like one big down payment that buys you two houses, but not in the same transaction. It’s just kind of over time. So now that’s given me confidence to pursue Chad’s strategy a little more intentionally. It’s all right to pay down some of this debt because I know I can borrow against it in a safe way, and I can be very selective when I do that.

Dave Meyer:
So Ben, now we’re sitting here end of 2025. We’re recording this. Where does your portfolio sit today? What does it look like?

Ben Vidovich:
Got about eight units that are within my portfolio, and then I have a couple more that I have acquired with partners and it’s all in the same market, so that’s been fun to work with some other people there too. And right now we’re just kind of wrapping up two end of the year projects that are going well, and then we have yet to sit down and kind of do some goal setting for next year. But again, just trying to be intentional and don’t grow for the sake of growth grow so that you can have security and stability in it

Dave Meyer:
Just in an average month. Ben, what does your portfolio bring in these days in terms of cashflow?

Ben Vidovich:
Well, the number that hits my bank account is a bit above 2000 every month. But remember, you always have to set aside a little bit for reserves and whatnot, so I put about 20% away for that, and then the rest I just reinvest. I’m not really pulling anything from that at the moment because I’m still doing projects and investing dollars into renovations at the moment.

Dave Meyer:
I love it. That’s awesome. Before we get out of here, Ben, I’m just curious, you said you got started because you wanted to change your trajectory. You were starting a family and felt that teaching wasn’t sufficient for your financial goals. Is it fair to say that just three years into this, you have put yourself on the financial trajectory that you were looking for?

Ben Vidovich:
Oh, 100%. I mean, I don’t want to mislead people to say I’m retiring tomorrow or anything like that, but there was no trajectory like that. I mean, we were putting money in the market, and we all know the market’s been pretty up and down, and that gives people a lot of panic. But real estate is pretty steady, very slow, and you can control so much of it. If you want to add value, you can do that. If you want to just buy and hold and let tenants pay down your debt and that increases your net worth, you can do that. There’s just so many ways that you can make money in real estate. It generates your wealth in a variety of ways, and it’s just super accessible. It’s a tangible thing. You can underwrite it and have a fair degree of certainty that the numbers are going to be pretty close. And I don’t think that’s something you can do in other asset classes aside from maybe owning a business, but that’s kind of what owning a rental portfolio is.

Dave Meyer:
Well, Ben, thank you so much for joining us today. We really appreciate it.

Ben Vidovich:
Oh, likewise. Super glad to be on. Thank you so much, and thanks for all the great work you guys do here at BiggerPockets.

Dave Meyer:
Oh, we love it. Love hearing these stories of people who are taking what we’re learning here, applying it, and getting on a better financial trajectory in just three years. Ben, congratulations on all your success. Thank you all so much for listening to this episode of the BiggerPockets Podcast. I’m Dave Meyer. We’ll see you all next time.

Ashley:
This is one of the easiest ways to become a real estate investor using an asset you already have.

Tony:
Today’s guest is Alex Boing. He just became a landlord. Everything is fresh in his mind to share all of his experiences with you rookie, so you guys can hopefully get your first or your next deal as well.

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

Tony:
And I’m Tony j Robinson. And with that, let’s give it a big warm welcome to Alex. Alex, thanks so much for joining us in the show today.

Alex:
Hey Ashley and Tony, thanks for having me on. It’s great to be here.

Ashley:
So Alex, let’s start at the beginning. When you bought your first primary home, did you already have plans to turn it into a rental someday or did that kind of happen about later on?

Alex:
Yeah, when we, obviously our first goal was just buying a house, but I think my dad was a landlord, my mom was a landlord. They both owned rental properties. So it was always in my mind that I would do that one day if the opportunity came up. And I think after we were able to buy our first home, that obviously became a reality that if we moved into another house we can rent this out. So the prospect of passive income was always in my mind and I was always interested in that being a part of my future.

Ashley:
And how long did you live in this primary residence before you decided to rent it out?

Alex:
So we moved in 2019. It was my wife and two kids and they were pretty young at the time and we lived there for about six years.

Tony:
And Alex, as you came to the decision of moving from that residence, how did you decide between keeping it as a rental and selling it? Because sometimes you can sell that, maybe use those funds to get a nice, bigger, better primary for the next one. So what was your thought process on keeping it as a rental versus selling it?

Alex:
Yeah, it’s always been in the back of my mind that we could make some passive income from our home. And I think that was always something we discussed and that was something that was at the forefront of our minds. Obviously the Denver market was pretty pricey, so we thought about selling as well. But I think the main thing that came up was that we had locked in that refinance post COVID and had a 2.6%

Ashley:
Interest rate. Definitely a motivating factor to keep that.

Alex:
Absolutely. And I think because you hear for a lot of people, they’re the golden handcuffs or it’s the golden goose depending on what you’re trying to do. And for us, we were like, okay, we’re not going to sell this when we’ve locked in historic late rates. Let’s figure out how we can rent this.

Ashley:
So when was that decision made as to, okay, we’ve lived here for six years, we’re going to go and buy another property? What was involved in the timing of that decision that okay, it’s now is the time to turn it into a rental?

Alex:
We had been casually looking at getting a new place and it just wasn’t the right time just for us to make a down payment. Just financially didn’t make sense yet. And I think really the biggest precipitator of us moving into our new place was we had our third child and our original starter home. We were just outgrowing it and we had lived there for a long time, so we wanted a little more space. And it was just a matter of what are we going to do with our starter? Are we going to sell it? Are we going to rent it? And like I said, I’ve always had it in the back of my mind. We’re always daydreaming about ways to make that extra cash, whether it’s through stocks or through rental investing. And obviously rental investing and renting out your property is a stable way to go about growing equity and making money passively. So that was always the reality that we would do. And I think we realized once we found the house that that was what the route we were going to take, especially because we locked in that post COVID interest rate.

Tony:
We recently interviewed Matt Krueger on the Ricky Podcast and he followed a very similar process to what you just described where I believe Ash check if I’m wrong here, but it was like every year for a decade, his wife and their growing family would every 12 months go move into another primary residence and turn the previous property into a rental. And that he was able to reach financial independence by doing that. But part of the reason that he liked that strategy was because of the financing options that came along with living in that property as a primary residence. So when you guys bought that first starter home, what kind of financing did you guys use to take it down?

Alex:
We just did a conventional down payment. We had saved up for a few years. We were very fortunate to just have stable jobs and to be making decent money. And like I said, that first hurdle is always the biggest of buying that first home. But we didn’t do any unorthodox financing. I mean for the second home we did kind of look into home equity loans and HELOCs, but once again, those are additional payments you got to make. And once again, I said we’re fortunate enough to have just been saving and to use that for conventional down payment.

Ashley:
And Alex, you say fortunate enough, but also there’s discipline involved there because you have to give yourself some credit as to not just being lucky because there’s a lot of other people that aren’t taking the time to build that personal foundation first to actually take the leap into real estate investing by just going the boring simple path of saving up money and living below your means and budgeting and things like that so that you are able to afford that down payment. Now did you do 20% down or how much did you do down on that first one

Alex:
For the property? We just bought our new primary. We did 15% about that.

Ashley:
And then for your first primary,

Alex:
I think that was less, that was probably five to seven, I want to say thereabouts,

Tony:
But I think that’s an important point, right? A lot of people hear conventional and they automatically think 20% down, but you said 15% on this one and five to 7% on the first one. There are options out there at 5% down on a conventional. So Ricky’s need to understand that there’s more than this 20% when we say conventional.

Alex:
Yeah, I think there’s a lot of options out there depending on your financial situation and even to just bring up the fortunate, but we’ve just had stable jobs and we’ve been able to have jobs that have given us the luxury to be able to save. But yeah, definitely taken and put in a little way each paycheck. It takes a little discipline not to spend that going out to eat that week, but it’s worth it because you want to live in a nice home, especially if you’re raising a family.

Ashley:
Now, when you went to go get the second property, did you have any trouble with the financing as to keeping the first property, the loan in your name, or was there no problem at all with that?

Alex:
No, there was no problem with that. Yeah, that was very straightforward.

Ashley:
And I think a big thing too is that you went conventional for both loans where we often see it as someone gets an FHA loan, they’ve gotten the low interest rate, they don’t want to refinance out, but then they can’t use the FHA loan again to purchase the second property because they already have it in their name once. So their option would be to use conventional for the second, or they have to refinance out of the FHA loan and go ahead and go into the conventional. So just another reason, we like the conventional loan less hoops to jump through and you still can sometimes get down to 5% for your down payment where FHA is three and a half percent. Oh, we have to take a short break, but before we do, what are the things and the steps that you had to take to prepare your home for your tenants before you actually moved out of the property? Did you have any repairs or changes that you needed to make to the property to actually get it rent ready?

Alex:
Absolutely, and like I said, I had three children at that point living in that home for six years. So it was lived in. And when you’re living somewhere when working hard and you’re busy and raising kids repairs and a lot of those things aren’t always at the forefront, oh, this light doesn’t work. I didn’t replace it right away. There’s just things, I have a pretty low tolerance for repairs and that kind

Ashley:
You learn to live with things.

Alex:
Yes, exactly. But when you’re about to prepare that home for someone to come live there and you want ’em to be happy, you start noticing how many things you might have left or swept under the rug, so to speak. So we had a fair share. We obviously had plenty of cleaning, lots of repairs, painted the walls. We had some plumbing things we needed to fix. Of course there was some last minute maintenance issues that cropped up just as bad luck I would have it, but we were able to get it ready. But yeah, no, there was lots of prep that we had to do to get ready for the tenant.

Ashley:
Now did you do this before you moved out of the property or did you wait until after you moved out and would you do it differently if you did it again?

Alex:
I think we would’ve just, you can always say this, we probably procrastinated a little longer than we should have. We did have a week gap where we were able to move into the new house and also before the tenant came, I think it was actually, it was more like two weeks the tenant came and the house was just empty and vacant and we were able to go back and just really walk through the house and make sure everything was up to par for her to live there. And yeah, no, it was like I said, I think if I could go back, just giving ourselves more time, it always just feels like a rush during move week because you’re not only preparing the house for the new tenant, but you’re trying to get your new house ready to go for you

Ashley:
Coming up, we’ll go through the steps that Alex took to go from homeowner to landlord and the operations he put together from listing the unit to getting the first tenant moved in. We’ll be right back. Okay. Welcome back from our short break. So Alex, part of the listing process is actually listing the property for rent and how much is going to cost. How did you decide on a rental amount to charge for your property?

Alex:
Yeah, it was a combination. Obviously we looked at what other properties were going for in the area and what they were renting for. Also, I used Turbo Tenant. I was fortunate enough to have been working for a property management software all in one landlord software for the past year and a half. And I had said that really contributed to me being motivated to do this in the first place. I think it just reinforced everything I had always wanted to do by renting out the property. But I’m just blessed to have had this. I think the biggest thing going into this and renting out your property is you want to have systems in place to be able to do that and processes. And I think Turbo Tenant for me kind of streamlined that and made it all there in one place and I didn’t have to think too much. It kind of holds my hand during the whole process. So in that initial step to list it, I was able to list it through Turbo Tenant. I was able to use a rent estimate calculator to kind of determine what we could rent that for. Also, in addition to just looking at what other properties were renting out for in the area,

Ashley:
I actually just did this yesterday on Turbo Tenant. I listed a property for rent and it is so easy just following the process, going step by step. But yeah, and I also use the comparables and looked up the rent estimator. I’d never used it before on Turbo Tenant, but there’s a ton of other ones. BiggerPockets has a rent estimator, but you can do that to pull comms. And then also just looking on Facebook marketplace, I always look there to see what’s listed. I also look on Zillow apartments.com to see what’s listed. And even though those aren’t rented, you can usually tell if it was just listed, it could be a good comparable comp. But if it’s been sitting listed for 60 days and no one’s renting it, it’s probably not a good comp then because that rental price point is probably not accurate. Then another way you can get comparables is calling property management in the area and asking what does a two bedroom in this market go for? What do you have available? Are there even any units available? So you can get also what’s the vacancy rate in that area too, based off of calling the property managers and then posting in local groups, Facebook groups for real estate investors and asking what are other people charging for? Two bed, one bath, X amount of square footage, decent shape in this area, and you’ll get people that respond to. And even in the BiggerPockets forum also,

Tony:
Alex, one of the decisions you made was to self-manage. And I think for a lot of folks, even when they’re following your process of buying a property, moving out into a new primary, turning the old one into a rental, they still don’t necessarily want to become landlords. So what was your thought process or how did you come to the decision to self-manage versus hiring a property manager?

Alex:
We didn’t have the budget for a property manager. Also, we’re starting out with one property. We’re really attached to that property too. I can imagine hiring someone to watch it. Like I said, we raised our kids in this house, so it’s got that sentimental value that I’m willing to take the extra steps to go there and do upkeep and have a relationship with the tenant to see how they’re treating it. So yeah, I think that played a big part in it.

Tony:
I got one follow up for you, so it makes sense why you chose to self-manage. What was your first step in educating yourself on how to do this correctly? Because every state, every city, every county has tenant landlord laws. There’s a certain way you’re supposed to do the listing and the tenant screening. What was your first step in educating yourself on how to be a good landlord?

Alex:
It’s one thing to learn about something and read so many books about it, but then it’s a completely another thing to actually do it right. I think that goes for anything, and it was no different in this case.

Ashley:
Now, Alex, you’ve had a good support system to help you get started on this track. What about the actual showings of the property? How was your turnout? Did you get a lot of interest? Did you get a lot of applications and were you the one that actually went and showed the property to people?

Alex:
Yeah, no, that’s probably the most exciting part of the process for me is because you just get to meet people who might live in your home.

Ashley:
This is the one process I avoid doing. I do everything on the computer, but I no to do the showing.

Alex:
I’m a pretty social guy and just interested in what people are looking for. So for me, it was really exciting to just meet these people that are going to live in the house that we spend so much time in. But yeah, we had a pretty good turnout. I think we had a good turnout. However, we did have a pretty short turnaround time to avoid vacancies, so that was always the big concern for us. So we wanted to get in as many applicants to pick the perfect one as possible. So we went through, I think ended up 10 to 12 people ended up coming to look at the house.

Ashley:
Did you do an open house where it was a window of time for people to, or did you set individual showings?

Alex:
Individual showings. So yeah, they would come by and we’d show ’em the place and a lot of just different people in different stages of their life. We had a group of college girls fresh out of college that wanted to stay there. We had a couple families that wanted to stay there. We had people with extended family. It was all walks of life. So once again, which I found interesting, I got to meet these people and eventually we settled on someone who didn’t even come in person to do the walkthrough. I did a virtual walkthrough and that was enough for her to want to rent the place out and she ended up being the tenant that’s there. Now,

Tony:
Alex, since you did all of these showings yourself, to me, that kind of sounds like a lot. You said 12, 15 different showings. Would you have done it the same way moving forward, or would you have done the open house that Ashley mentioned?

Alex:
I didn’t even think about it. We’re just trying to accommodate people, get them in as quickly as possible. Yeah, I think that probably would’ve made more sense is to do something where they all come at once. However, the tenant who ended up staying there, for example, she didn’t even live in Colorado, so I had to do a virtual walkthrough with her. So that might not have been something that would’ve worked out for her, but I think there’s plenty of scenarios where that would’ve been something that would’ve been more pragmatic to do

Ashley:
Wherever you moved to. Was it convenient for you to do the showings?

Alex:
I should have said this, the house we moved into is two blocks away. We did not even leave the neighborhood. We’re really happy with the school there. It’s a great little neighborhood. We’ve got a big beautiful lake and we’re pretty much just settled there. And like I said, our kids are both well into elementary school. My son’s about to go into middle school next year, so we didn’t move far. This wasn’t really inconvenient for me. I had to drive less than a minute away to go show the house.

Tony:
Ash, what about for you? What’s your preferred way of showing units today? Are you doing virtual remote showings where you’re not even meeting them, they’re doing it themselves? Are you doing open houses? What’s your preferred method?

Ashley:
First of all, I’m doing none of them. That’s the preferred method that I don’t do. The last time, the last time I did a showing, we did an open house and Daryl and I did it together, but usually for properties that are 20 minutes or more away, I’ll set it for open houses and we’ll usually do one in the evening and then maybe one a Saturday morning or something. But for other, or we’ll do turbo tenant has the scheduling. And when we use AppFolio, they had that too, where you can set your availability. So we would just do 15 minute windows for an hour and then we would set it so multiple people could schedule the same 15 minute window. So I do think people like to schedule their own window, so I do think that is better for the tenant and you’re more likely to get people than just saying, oh, we’ll be here from five to six if you want to come.
I’ve seen better results with more people attending from doing the actual window blocks and them setting their showings. But we only do that with having software that shows and not going back and forth like, oh, are you available at one? Oh no, one 30. Okay, let’s do that. They have to pick from a calendar, just like if you’re scheduling a meeting from someone and they have their availability, that’s the only way that we’ll do individuals showings is setting it that way. But we still kind of block that time where it’s not like you can pick any 15 minutes within an eight hour window. It’s like literally pick a 15 minute window from five to six 30 or something like that. So we know someone has to be at the property from five to six 30, and then nobody books at five, but somebody books at five 30, they don’t have to come until five 30 or whatever. So we’ve definitely done both. I prefer the open house model just to get it all done with, but I think for the tenant perspective, they seem to prefer and you get a better outcome with doing the individual ones for sure.

Tony:
And there’s a lot of nuance that goes into that. Asher, I appreciate you walking through that. I think the other piece that I’m curious about Alex though is the actual screening of the tenants, right? Like you said, there is an emotional element to you in renting this house out. So what did your screening process look like to find the right tenant?

Alex:
Once again, we used a turbo tenant to screen and it was really useful. We did have a lot of people that, I don’t want to say a lot of people, but several people that didn’t qualify after we screened them, and we did have to deny them. So it was good to be able to check for all that and have a tool where we could jump in and see those things and have it be accurate because obviously we wanted good tenants, we wanted people that would take care of the house and where there wasn’t a lot of risk involved, so that mitigated that.

Ashley:
Yeah, and I think when going through the screening process, one thing that’s really valuable for rookie investor to know is what you state laws are, and just fair housing laws are in general as far as when you can deny someone and when you can approve them, there’s a lot of local housing authorities that will give you free classes, virtual or in-person, or they cost $10, or you can go to your city hall and they have pamphlets that’s like a landlord guide to the state laws and know what you can and cannot deny. And then I think setting some kind of metrics like Alex, you said some didn’t meet your metrics or your criteria and having that set and clear as, so mine is, depending on the area, it could be two and a half times the rent or three times the rent. They need to make an income to be able to be approved.
Their credit score needs to be sometimes at 600 or above. Sometimes we do in some markets we had gone down to five 50 and above. But just setting those metrics for that area, for that property as to what is going to be approved and what’s going to be denied. And you can even put those right into the listing too, so it’s very clear. And that also can cut out the people who already know they don’t qualify, don’t waste your time for showing they don’t spend the money paying for the application to be completed for the screening. So before you’re even starting to list the property, you should know what your screening criteria is going to be and that it really fits the criteria, the requirements by state and local laws and fair housing laws too.

Alex:
Yeah, I think ours were, luckily they weren’t super nuanced. It was like people with an extensive criminal history or even that kind of thing. So it wasn’t anything super nuanced in that way, but it was good to have that and for us to be able to see that this tenant is going to be someone who’s going to take care of the place.

Tony:
Alright, up next we’re going to get into Alex’s decision on his next property, which is his new primary. And we’ll cover that right after. Quick word from today’s show sponsors. Alright, Alex, I’m curious, so the new property that you bought that’s two blocks down from your current rental, as you were shopping for that home, were you also thinking about the possibility of that becoming a rental in the future?

Alex:
Oh, absolutely. I think, and especially when you’re renting out one and you moved the tenant in and it’s working out, you kind of get excited at the prospect, oh, I can do that with this one. And like I said, I’m excited at the prospect of being able to rent this one out potentially in the future. So it’s absolutely in the cards to do that.

Tony:
Just one follow to that, Alex. I’m curious, since you had that in mind already, were there certain things that you had maybe learned from your first primary to rental experience that you’re like, okay, we need to make sure that we have this in the next property that we do this primary to rental in?

Alex:
Yeah, in a general way. I will say luckily the house was just an overall upgrade as it should be if you’re moving into the next place. So it was a newer house and it was way better kept up. There was so many less repairs and maintenance that needed to be done on move-in or that we even had the inspection process was so much cleaner and just overall a better experience than our first house. I think our first house loved it at the time and we were super excited about it, but there were a lot more things that came up during inspection in the new house. It was the best inspection experience I’ve ever had. We hardly had to ask for anything, which was awesome to have happened for us.

Ashley:
Do you have a plan in place for how long you want to stay there?

Alex:
No, and I think that’s where kind of the personal aspect comes in, because I would love to be able to rent out this place when the time comes, but we’re even closer to my children’s school, so they’ve started walking to school. So that kind of comes into place and we’ll definitely be all the way, or at least in this location for the next several years till they’re through middle school because that’s where school goes all the way up through eighth grade. I think maybe once we’re choosing a high school forum, then the possibility of moving again and renting this one out would come up.

Ashley:
Do you foresee yourself buying other rentals outside of them being your primary residence?

Alex:
Yeah, that’s definitely something I want to look into more. Once again, I think you grow up and you think of ways to make money outside of your passion. My passion has always been producing videos or music and that kind of thing. I’m in that creative sphere, but in addition to your nine to five, you’re just thinking, oh, how can I make more money? And real estate is always doubted as the most stable way to do that. So I’ve always thought about it and I think just working here and hearing influencers such as yourself, talk about how they did it has piqued my interest in just buying a property as a rental.

Tony:
So I think my last question for you, Alex, is do you have any maybe last minute advice for Rick’s who are thinking about turning their current primary into a rental from your experience going through this for the first time?

Alex:
Yeah, I mean, I would say it’s funny because I think it brings me all the way back to my first jobs that I had in customer service. It feels like a very customer service oriented business when you rent it out. Specifically for me, like I said, everything from the showings to hearing your tenant ask for requests and accommodating that to make sure they’re happy. I’m still in customer service to a degree, or at least that’s how it felt to me during the process. So treating it that way and having respect for the tenant as a customer, I think that that would be the biggest advice I have for someone. It’s not something where we say you’re making passive income, which is true to a degree, but I still think you’re actively having to participate and make their experience better if you want to have a successful business.

Ashley:
Now, Alex, the question that everybody’s wondering is what is the cashflow on this property?

Alex:
Okay, yeah. So our mortgage for the original property was 1800 and we charged rent for 3000. So it’s at $1,200 cashflow.

Ashley:
That’s great. That’s awesome. We shoulda have started the episode with that. And I’m assuming your mortgage payment, does that include escrow, your insurance, and your property taxes?

Alex:
Yep. Yeah, yeah, yeah.

Ashley:
Wow. That’s great. Congratulations. Well, Alex, thank you so much for joining us today to share your experience getting your first rental property. We really appreciate it. We love when rookie investors come on right after they got their first deal and it’s fresh in their memory. So if this is, please go to biggerpockets.com/guest and fill out a form to come on just like Alex did to share his journey. Alex, where can people reach out to you and find out more information?

Alex:
If anybody has any questions or can take any value from my experience, you can shoot me an email at [email protected]. Would love to help anybody on their journey if I’ve got something, a value to offer.

Ashley:
Well, Alex, thank you so much. We really appreciate it and you provided a ton of value today for our rookie investors. I’m Ashley. He’s Tony, and we’ll see you guys on the next episode of Real Estate Rookie.

A dog is not just man’s best friend; it’s turning out to be a landlord’s, too. Pet-friendly rentals garner considerably more cash flow than no-pet rentals, according to a study from RentCafe. 

According to proprietary stats, the website states that U.S. landlords can charge an average nonrefundable pet fee of $315 on top of the average pet rent of $36/month. With rental margins tightening due to higher expenses and rising mortgage rates, saying yes to pets could not only yield higher rents but also lead to renewed leases and happier residents.

In a High-Stress World, Pets Are an Anxiety Buster

As of 2024, about 66% of U.S. households owned a pet, a sharp rise over the last 40 years, according to Forbes Advisor. It’s likely no coincidence that nearly 6 in 10 renters now have a pet, according to Zillow, up from 46% before the pandemic. The website says that almost half of renters said they passed on a rental because pets were not allowed.

“Allowing pets can be a strategic edge for landlords competing to fill units,” said Emily McDonald, a rental trends expert at Zillow, explaining that pet-friendly listings attract more interest in today’s market.

Zillow Trends found that listings that allow pets tend to lease up to eight days faster than those that do not. In New York City, generally one of the least pet-friendly cities, apartments that welcome furry friends attract pet parents about 26 days faster than those that don’t.

A 2025 report from the Michelson Found Animals Foundation, a philanthropic organization, found that pet-inclusive policies reduce tenant turnover. The report’s authors note that communities that embrace pet-inclusive strategies generally see residents staying up to 21% longer, lowering leasing and make-ready costs for landlords. 

“Property owners who respond to this trend can expect stronger tenant loyalty, reduced vacancies, and a significant edge in the competitive rental market,” Ross Barker, director of the Pet Inclusive Housing Initiative at Michelson Found Animals Foundation, said in a statement.

The cost of pet ownership is nothing to bark at. Americans spent roughly $147 billion on pets in 2023, according to Reuters, including food and treats, veterinary care, insurance, and supplies. 

For owners who cannot keep up with costs, pet care can be a significant source of financial stress. However, it also illustrates the demand for pet-friendly residences with modest pet fees.

What a Pet Package Looks Like

According to RentCafe data, a standard pet package includes:

• Approximately $35 in monthly pet rent.
• Refundable deposits over $300.
• Nonrefundable fees that average $315.

Dog Breeds, Insurance, and Liability

The RentCafe report shows that dog breeds, insurance, and liability are among the concerns of many landlords. To address this, most rentals have targeted restrictions that limit the types of dogs allowed based on size and “aggressive” characteristics.

Although dogs are predominantly the main pets tenants have, they are not the only ones. However, bans on domestic cats are rare. Rather, restrictions focus on litter-box training and vaccination requirements.

The New York Times reported that of America’s renter population, 59% of whom own pets, the majority are likely to be lower income, and for them, the additional cost of owning a pet can present financial difficulties in the housing crisis. As such, state and federal bills targeting pet fees have become an issue for housing advocates. Colorado became the first state to enact a law capping pet rent and deposits and prohibiting home insurers from imposing breed-based restrictions.

“Unless you can afford to rent in a luxury building, or absorb potentially hundreds of dollars in monthly or one-time fees, you may be forced to choose between housing and your pet,” Barker of Michelson Found Animals told the New York Times. “It’s not just an animal issue; it’s equally a human issue.”

A Contentious Issue

This, along with other similar proposals across the country, has evoked a strong response from landlord groups, concerned about the damage pets can cause to their properties and the inadequate compensation pet caps could engender.

“There are bad people, and there are bad dogs, and our job is to screen that and make sure that we’re providing a safe environment for everyone,” Russell Lowery, executive director of the California Rental Housing Association, told Fox News in response to his state’s proposed legislation advocating for eased pet rental restrictions, which was withdrawn after considerable opposition.

Under the California proposal, landlords would have had to provide “reasonable justifications” for denying a pet.

“Chasing mom-and-pop landlords like myself—small investors like myself—out of California is not going to solve the high price of rent; it actually is going to make it worse,” landlord Ivan Blackshear told Fox News last year, before the bill was withdrawn.

It’s important for landlords to remember that, under the Fair Housing Act, landlords generally cannot charge pet fees for support animals.

Final Thoughts: Welcoming Fido Without Killing Your FICO

Landlords who want to make their rentals pet-friendly without incurring the financial setbacks that a cat-trashed or dog-demolished residency can cause should adhere to a structured, repeatable playbook. Here are some steps to take.

Create a formal written pet policy 

Such a policy standardizes the following:

• Permitted type of animal
• Size or weight limits
• Number of pets
• Required vaccinations and local registrations

RentCafe finds that landlords with such policies experience fewer disputes and insurance issues than owners with a more informal approach to tenants.

Set transparent pricing

Create a predictable set of costs that lets renters know what to expect. These should include:

• A refundable pet damage deposit.
• Modest monthly pet rent.
• One-time nonrefundable cleaning fee.

Demand documentation

Treat pet documentation in the same way as you would pay stubs: as a requirement, not an option. It will serve both as liability protection and as behavioral screening. Standard pet documentation should include:

• Proof of vaccination
• Local licenses
• Flea/tick treatment records
• Emergency vet information

Make low-cost, high-impact property upgrades

Making your property pet-friendly can be relatively budget-friendly. Common-sense, durable design choices will help limit wear and tear and are a good idea to incorporate, whether your tenant has a pet or not. These include:

• Semigloss or scrubbable paint in high-traffic areas
• Vinyl plank or tile flooring
• Door kickplates
• Corner guards
• Easy-to-clean baseboards

This article is presented by Range.

If you’re a high earner juggling rentals, RSUs, a W-2, maybe some freelance income, and a growing investment portfolio, your financial life might be costing you more in taxes than it should. All these different streams of income can end up being too complicated for any one professional to track properly. Companies like Range see this firsthand across thousands of clients.

As your income rises and your wealth grows, the tax code actually gives you more opportunities to optimize. This means more deductions, timing strategies, and ways to offset gains. The more moving parts you add—equity comp, rental losses, stock sales, pass-through income—the easier it becomes to accidentally trigger a tax landmine that wipes out thousands of dollars you didn’t need to lose.

Most people assume overpaying taxes happens because of one big mistake. In reality, it’s usually the result of dozens of small, seemingly harmless decisions made throughout the year. This could mean an RSU vesting at the wrong time, a bonus hitting the same year you sell a property, a renovation completed in January instead of December, or an entity structure set up years ago that no longer fits your portfolio.

Individually, these moments feel insignificant. Collectively, they quietly inflate your tax bill—sometimes by five or even six figures.

We’ll break down why financial complexity is the silent tax you’re probably paying, and how smart investors simplify before they optimize. 

The Hidden Cost of Financial Complexity

When your income comes from multiple sources, your tax picture becomes less predictable. A bonus paid the same year as a property sale can bump you into a higher tax bracket. Capital gains can trigger the 3.8% net investment income tax. Short-term rental income may be treated differently than long-term rentals.

The issue isn’t that these events are inherently bad. It’s that most people discover the tax consequences months after the decisions were made, when it’s far too late to optimize.

High earners often assume they’re getting every deduction the IRS allows. But without proactive planning, it’s easy to miss:

• Real estate professional status opportunities.
• Cost segregation timing.
• Loss harvesting opportunities in equity accounts.
• Timing income to avoid bracket creep.
• Aligning deductions to offset large gains.

The tax code has plenty of doors you could walk through, but complexity makes them hard to see.

Gains, losses, and timing mistakes

Many investors don’t realize how much timing matters. Sell stock with a gain in the wrong year, and you lose the opportunity to pair it with a property loss. If you exercise incentive stock options too late in the year, you accidentally trigger AMT. And if you sell a rental in a year when you also have high W-2 income, depreciation recapture hits harder than it needed to.

Each individual decision, such as vesting stock, renovating a property, or selling an asset, might be perfectly reasonable. But without coordination, the tax effects stack, compound, and can eventually blindside you.

This is why high earners often feel like their tax bill “doesn’t make sense.” It’s not that anything went wrong; it’s that everything happened in the wrong order.

In a complex financial life, nothing exists in isolation. Every decision has a tax consequence, and every tax consequence affects decisions you haven’t made yet.

Most Common Places High Earners Leave Money on the Table

When your financial life gets busy, it’s easy to assume your CPA will catch everything, or that tax software will flag opportunities automatically. The truth is, most tax-saving moves must be planned in advance.

High earners consistently miss them for the same few predictable reasons. Here are the biggest areas where complexity quietly costs people thousands each year.

1. Depreciation mistakes and poor timing

Real estate investors often:

• Forget to add capital improvements to their depreciation schedule.
• Miss the chance to group properties for tax purposes.
• Delay or skip cost segregation studies that could accelerate massive deductions.

The mistake isn’t technical, it’s timing. These moves only work if you plan them shortly after acquisition, or before major renovations. Wait too long, and the benefit shrinks or disappears.

2. Equity compensation without a tax plan

RSUs, ISOs, and NSOs can be incredible wealth builders, but they also create enormous, unexpected tax events. Common pitfalls include:

• Exercising options late in the year and triggering AMT.
• Vesting RSUs in a year you already have high income.
• Selling shares too quickly and losing long-term capital gains treatment.

Without proactive planning, equity compensation can easily push you into higher brackets, reduce key deductions, and limit your ability to use real estate losses.

3. Entity structures that no longer fit your portfolio

Many investors set up LLCs when they buy their first property. By the time they own multiple rentals, short-term rentals, or active businesses, that structure may no longer be optimal. Common issues include:

• Using a simple LLC when an S-corp election could reduce self-employment tax.
• Having each property in a separate LLC when a holding structure would simplify taxes.
• Not considering a series LLC or the need for a different filing status.

Entity decisions affect tax brackets, QBI deductions, liability, and even financing options.

4. Stock gains and losses that aren’t coordinated with real estate

High earners often have assets spread across multiple brokerage accounts, sometimes with different advisors; sometimes forgotten entirely. This can lead to:

• Missed opportunities to harvest losses.
• Unplanned short-term gains hitting in high-income years.
• Selling appreciated stock without pairing it with passive losses.

One untimed trade can offset the benefits of an entire year’s tax strategy.

5. Waiting until tax season to look at your tax situation

By the time your CPA sees your documents in March or April, every meaningful tax decision has already passed. You can’t change your entity structure after the year ends, retime stock exercises or RSU vesting, or reclassify income or expenses. And you can’t retroactively harvest losses or plan property sales.

Most of the tax code’s best opportunities exist during the year, not after it.

Why DIY Coordination Doesn’t Work Anymore

By the time most high earners realize their financial life has become unmanageably complex, they’ve already tried the two default solutions: more spreadsheets or professionals. Unfortunately, neither solves the real problem.

Spreadsheets work when your financial life is simple: one job, bank account, a couple of investment accounts, and maybe one rental. Your spreadsheet can become a liability rather than a tool once you layer in your financial reality:

• RSUs and stock options
• Multiple rental properties
• A short-term rental or partnership
• A side business or 1099 income
• Several brokerage accounts
• Different advisors and systems

Manual tracking falls behind almost immediately. You can forget to update vesting schedules, lose track of taxable events, overlook how one decision changes your projected tax position, or discover half your income sources weren’t modeled correctly. Complexity increases faster than you can organize it.

So, you’ve outgrown your spreadsheet era. Most high earners will move on to hiring an expert to help with their tax tracking. This means adding: 

• A CPA for taxes.
• A financial advisor for investments.
• An attorney for entity structure.
• A planner for insurance or estate decisions.
• A bookkeeper for rentals.

Expanding your team of professionals might sound like a good idea, but none of these professionals see the full picture:

• Your CPA never sees your vesting calendar.
• Your FA doesn’t know when you’re selling a property. 
• Your attorney doesn’t know how equity comp affects your tax bracket. 
• And your bookkeeper doesn’t know your long-term investment plan.

You become the quarterback: translating advice, reconciling contradictions, and trying to make everything line up. This is where most tax inefficiencies are born.

When coordination depends on you, you can:

• Get tax advice that contradicts your investment plan.
• Make investment decisions without understanding tax consequences.
• Choose entities that don’t match your long-term goals.
• Time income and expenses in ways that clash across assets.
• Lose deductions because something changed and no one updated the strategy.

You’re not unqualified—your financial life is just too big to run solo.

Without one place where everything comes together—your rentals, stock compensation, business income, long-term investments, tax planning, and estate plan—your strategy can’t keep up.

This is exactly why many high earners, even extremely successful ones, unintentionally overpay taxes year after year.

The Case for Integrated Tax Strategy

By now, one thing should be clear: You might be overpaying taxes, not because you’re careless, but because your financial life has become complex, and you can’t be reactive during tax season. When your income, investments, equity compensation, and rental portfolio all move in different directions, the tax code rewards people who coordinate those moving parts—and penalizes those who don’t.

If your CPA, financial advisor, and attorney all operate in separate silos, you’re guaranteed to miss opportunities. This is exactly the problem Range set out to solve.

Range brings all this under one roof: your tax strategy, investment picture, equity compensation, real estate, and long-term planning. Instead of guessing how one decision will affect everything else, you finally get a forward-looking strategy that adapts as your life changes.

With an integrated team working year-round, you can:

• Time RSU exercises and vesting for maximum tax efficiency.
• Coordinate property sales with gains and losses across your portfolio.
• Optimize depreciation and cost segregation timing.
• Align your investment strategy with tax brackets and phaseouts.
• Reposition entities as your rental or business portfolio grows.

You stop leaving money on the table simply because no one was looking at the full picture.

Your Next Step: See How Much You Could Be Saving

If you suspect your financial complexity is costing you more than it should, or you simply want a clearer, more proactive plan, now is the moment to take action.

Range will analyze your full financial life, identify inefficiencies, and build a coordinated strategy designed to keep more of your money working for you.

Ready to see how much you’ve been overpaying, and how much you could be saving? Schedule your personalized Range demo today.

Disclosures:

Range is an SEC-registered investment adviser. Registration does not imply a certain level of skill or training. Investing involves risk, including possible loss of principal. The information provided is for informational purposes only and is not investment advice. Past performance is no guarantee of future results. This material is advertising and is not intended to be individualized investment advice.

These figures are gross of annual fees, reflect specific client situations, and are not indicative of future results or the experience of all clients. Actual results may vary significantly. These results reflect actual historical client outcomes achieved while under Range’s advisory services during 2025. They are not hypothetical or back-tested. The sample was not selected to present higher performance.

Additional fees may apply for certain services. Please see Range’s Form ADV Part 2A and Client Agreement for complete fee details.

A copy of Range’s Form CRS and Form ADV Part 2 is available at https://adviserinfo.sec.gov/ or upon request.

This article is presented by Baselane.

If you own or plan to own a short-term rental, there is one phrase you will eventually hear: the short-term rental tax loophole. It sounds like something accountants whisper about at conferences, but it is actually one of the most powerful legal tax strategies real estate investors can use. This rule allows many Airbnb and vacation rental owners to use their property’s paper losses to offset W-2 or business income, potentially saving thousands of dollars in taxes.

Let’s look at what it means, how it works, what qualifies, and how Baselane makes it easy to stay organized and compliant.

Why Short-Term Rentals Get Special Treatment

The IRS usually treats rental income as passive income. That means losses from your properties can only offset other passive income. For example, if your long-term rental loses $10,000 on paper, that loss cannot reduce your salary from your day job. It just carries forward to future years.

Short-term rentals are different. Because they operate more like businesses or hotels than traditional long-term rentals, they can be classified as active trades or businesses under certain conditions.

Once your short-term rental is treated as an active business, any paper losses from depreciation, repairs, or startup costs can offset your active income. That is the loophole. Instead of paying taxes on all your W-2 income, you can legally reduce your taxable income using losses from your Airbnb or vacation rental.

The Two Big Requirements

The IRS does not hand this breakout freely. To qualify, you have to meet two key requirements.

1. Average stay must be short

Your average guest stay must be seven days or less. If it is between eight and 30 days, you may still qualify if you provide substantial services, such as daily cleaning, linen changes, or concierge assistance. The property should feel more like a short-stay accommodation than a long-term lease.

2. You must materially participate

This is the rule that separates real investors from set-it-and-forget-it landlords. To qualify for active status, you must demonstrate that you personally participate in managing and operating the rental. The IRS offers several ways to prove this, but the most common are spending more than 500 hours per year on the property, or spending over 100 hours and ensuring no one else spends more time than you.

Material participation includes things like communicating with guests, organizing maintenance, updating listings, and scheduling cleanings. The IRS expects you to track your time, down to the hour, so you can prove it if ever questioned during an audit.

The Tax Savings

Investors love this loophole because of the bonus depreciation. Every rental property owner can deduct depreciation, but short-term rental owners who meet the participation test can use those deductions to offset regular income.

Imagine you buy a vacation rental for $500,000 and run a cost segregation study on the property. Between depreciation, furniture, appliances, and startup costs, your accountant calculates a paper loss of $40,000 for the year. You did not actually lose that money in cash, but on paper, the IRS counts it as a business loss.

If your property is considered passive, you cannot use that loss to reduce your job income. But if your short-term rental qualifies as an active business because you manage it yourself and guests stay for a week or less, you can.

Now picture this: You earn $150,000 at your job. That $40,000 paper loss lowers your taxable income to $110,000. Depending on your tax bracket, that could save you $10,000 or more in taxes in a single year.

The Catch

The IRS knows this rule is powerful, so they expect proof. To qualify, keep detailed records of your average guest stay, the hours you spend managing the property, and all income and expenses. You also need accurate depreciation schedules and receipts.

It is a lot to track, and most hosts quickly realize that DIY accounting does not cut it. That is where Baselane comes in.

Simplifying the STR Tax Game

Baselane is an all-in-one banking and bookkeeping system built for landlords and short-term rental operators. It helps you stay organized, compliant, and ready for tax season without drowning in spreadsheets.

Automatic bookkeeping

Once you connect your bank or use Baselane’s integrated account, all your transactions are automatically imported and categorized into Schedule E categories. This takes the guesswork out of whether a Home Depot purchase should be labeled repairs or improvements. Baselane learns your patterns over time, helping you capture deductions that most hosts forget.

Separate accounts for each property

If you have multiple properties, Baselane lets you open separate virtual accounts. This makes it easy to see income and expenses for every property without mixing transactions. It is also a lifesaver if you need to show records of material participation for one property but not another.

Tax-ready reports

At year-end, Baselane automatically generates a tax package that includes your Schedule E report, cash flow summaries, and year-end statements. You can hand it straight to your CPA; they will have everything they need without your shoebox full of receipts (we’ve all been there).

Real-time cash flow and documentation

Baselane gives you live dashboards so you can see exactly how each property performs. It also lets you attach receipts directly to transactions, keeping everything in one place. If the IRS ever asks for proof, you will have it ready in seconds. This kind of recordkeeping not only supports your deductions but also helps prove your material participation, a key element of the rule.

Common Mistakes

Even well-meaning investors can slip up. Here are a few common errors to avoid:

• Not tracking time: The IRS expects detailed logs. Saying you worked a lot is not enough.
• Too much personal use: If you stay in your property for more than 14 days a year or more than 10% of the total rental days, it becomes a personal residence, not a rental business.
• Relying entirely on property managers: If someone else spends more time on your property than you do, you do not qualify as materially participating.
• Sloppy bookkeeping: Mixing personal and rental expenses makes it almost impossible to prove what is deductible.

Baselane helps prevent these by separating transactions, tracking expenses, and creating organized records.

The Bottom Line

The short-term rental tax loophole is a legitimate IRS rule designed for people who actively manage their rental business. Used correctly, it can save you thousands each year and accelerate your path to financial freedom.

The loophole only works if you qualify, track everything carefully, and file correctly. Baselane takes the stress out of that process. It tracks every expense, organizes your income, creates tax-ready reports, and helps you stay compliant without becoming your own accountant.

So while other hosts are sorting receipts at midnight, you can relax knowing your books, reports, and CPA package are done with ease. Your short-term rental is working just as hard for you as you are for it.

Dave Meyer:
Are you calculating cashflow the right way? Because this is the key metric that will tell you if a property is the right deal to buy and how your investments are actually performing. But it only works if you’re including all of the necessary inputs when you do the math. If you’re only subtracting your mortgage payment from your rental income, that is not cashflow. This is how you calculate cashflow the right way. Hey everyone. I’m Dave Meyer. I am a data analyst. I’m the head of real estate investing here at BiggerPockets, and with me today on the show is Ashley Care co-host of the BiggerPockets Real Estate Rookie podcast. Ashley, thanks for being here.

Ashley Kehr:
Dave. Thank you so much for having me today. I am excited to talk about cashflow.

Dave Meyer:
Yeah, it’s a super crucial thing and I think some people oversimplify it, but it doesn’t need to be hard. You just need to make sure that you follow the right steps. I don’t know if you ever see this Ashley, but I see these people on the internet all the time claim that they have this incredible sort of almost unbelievable cashflow on real estate deals, and then you sort of dig into it and you realize they’re clearly just leaving out some of the expenses or just not doing the math. So today what we’re going to do is show the audience how to do the real math, and I’m actually going to use a real on-market deal that I have recently been analyzing. I’m going to show you all every single number you need to include in your cashflow analysis. Explain why your vacancy, maintenance and CapEx expenses should be consistent every month, whether you spend that cash or not, and then we’re going to talk about how much cashflow you actually need right now and what constitutes a good deal. Because once you know that and how to calculate it correctly, then you can actually go out and pull the trigger on some great deals actually. Ready?

Ashley Kehr:
Yeah, I think we should start off with explaining what cashflow is to get started.

Dave Meyer:
Okay, well, it sounds simple, but how do you define it?

Ashley Kehr:
Yeah, so cashflow is the amount of cash or revenue each month on the property, or it could be for the year. So that’s after you get your rent income and then all of the expenses that are paid. So basically you’re taking your total expenses fixed and variable for the property and spreading them out over time so that it’s calculated monthly.

Dave Meyer:
I’m so glad you broke it down by fixed and variable expenses. I think that’s sort of the division where people get confused because sort of easy to do the fixed expenses, your principal and interest, your mortgage payment’s going to be the same every month. You know what your taxes, your insurance are going to be if you have a property manager, you know how to pencil that in. But then there’s this entire other expense category for real estate investors, which Ashley called accurately variable expenses because it varies every single month for your repairs and maintenance. You don’t know how much you’re going to have to come out of pocket in any given month for repairs and maintenance. Same thing with capital expenditures if you’re not familiar with that. Capital expenditures or CapEx is basically just bigger improvements that you make to a property. These are things like adding a new roof or doing an expansion, doing a renovation. Those can all be qualified as capital expenditures. Those are also variable expenses just like turnover costs and vacancy costs as well. And so there’s this whole bucket of unknown expenses that come into your underwriting when you’re figuring out cashflow. And understandably, this is where a lot of people get confused and hung up. So Ashley, how do you build this unknown quantities into your underwriting?

Ashley Kehr:
So a big measure of how much I am accounting for with those variable expenses is the age of the property

Speaker 3:
And

Ashley Kehr:
Also the market. So when I’ve invested in C class areas, even some D class neighborhoods, the turnover and the vacancy was way more consistent and I needed to increase the amount that I was adding in for those properties, repairs and maintenance and capital improvements. I needed to account for more for older properties that weren’t getting a full renovation. So age of the property and also the neighborhood, the market that the property is in I think can really help you factor those things in.

Dave Meyer:
Yeah, if you’re buying an A class, brand new construction, your expenses, your repairs, your CapEx are going to be pretty low probably for five or 10 years at least. But I think what you called out is probably the most missed part of cashflow calculations, vacancy and turnover. It’s pretty normal to have one month of vacancy every other year or maybe even every year depending on the market. And this is something you absolutely need to factor in. It doesn’t sound like a lot, but if you have one month of vacancy that’s 12% of your revenue for the entire year, that is the difference between a good deal and a bad deal actually, presuming that you could come up with a number, right? It’s going to be 1200 bucks a year for vacancy or turnover, whatever, how do you factor that in because you don’t know when those things are going to actually come up. So how do you put that into your deal analysis to make sure that you’re covered for that?

Ashley Kehr:
Yeah, so in your example, Dave, you just gave, if you’re thinking one month a year, every other year, you could account for one month’s rent, but I think if you don’t know that or understand the market in your area yet is using a percentage. So I think 5% should be the bare minimum. If you don’t have any vacancy, great, that’s just a bonus that you’re getting more rental and come back in your pocket. But I think 5% should be the bare minimum and then you can kind of increase it to there. So depending on the property, sometimes I’ll go as high as 10% to save per a line item. So that’s 10% for vacancy, that’s 10% for CapEx, 10% for repairs and maintenance. So it really depends on the property type and where it is, but I think a percentage is a great place to start and once you look at those expenses, sometimes it can be like, wow, I thought this was going to cashflow really, really great, just thinking, here’s my rental income, here’s my mortgage payment. But once you start to add in those percentages, it really does add up and sometimes can kill the deal, but you have to be so diligent that you’re not saying to yourself, oh, well this might happen.
I might have a vacancy, so this could be cashflow. So yeah, if that doesn’t happen, I could be cash flowing $500 per month, and I think that’s where a lot of investors get in trouble is they’re thinking of that variable expenses as maybe will happen. That’s worst case scenario when they should be thinking this is going to happen. This is money I’m putting towards the property.

Dave Meyer:
I think that’s just an important mindset for people to have that it’s not cashflow just because one month you had positive number in your bank account, what you need to do is average it out over time. You have to spread those costs, the CapEx, the vacancy over every month and just say on average, this is what if I think all these things, these variable expenses are going to amount to 10 grand in a given year. I don’t know what month they’re going to hit, but I have to take 10 grand, divide it by 12 months to 800 something dollars and I’m going to put that 800 something dollars into my deal underwriting and just putting that aside and making sure I know that Dave, that is not your money. That is the business’s money that is, this property’s money. So that’s sort of the mindset that I think people need to take and not to just look at that best case month that you may have and count that as your cashflow. You’re just going to be disappointed down the line. Alright, well I want to actually go through this and walk step by step how to do this the correct way so everyone who’s listening to this knows how to do this analysis, but we got to take a quick break. We’ll be right back. This week’s bigger news is brought to you by the Fundrise Flagship Fund, invest in private market real estate with the Fundrise Flagship fund. Check out fundrise.com/pockets to learn more.
Welcome back to the BiggerPockets podcast. I’m here with rookie co-host Ashley care talking about cashflow, how to calculate it the right way, and we sort of talked about the mindset that you need to have the way to start thinking about this, but I actually want to go through and just run a deal analysis to show you that this doesn’t need to be hard if you’re following the right steps. And so I’m going to pull this up. If you’re watching on YouTube, you could see this. I’m just going to pull up the BiggerPockets calculator, but if you’re listening, I will do my best to explain everything that I’m doing. It’s a real deal that I’m looking at in western Michigan. This is a duplex. It’s a three one on each side. It is very old. It was built in 1890. It’s listed on the market for 350 grand.
It’s been on the market for like 75 days, so I think I could realistically get it for cheaper, but let’s just start here and we’ll see how it goes. I will pay probably five grand for closing costs, so underwriting that and then I would do a modest rehab. If you listen to the show, you’ve heard me called the slow. This is this thing that I like to do, which is renovate a property, but I don’t try and do it super quickly. I wait until the tenants move out, opportunistically, renovate the property, make the units nicer and add value, drive up the rents a little bit. But I think I could probably get this thing to maybe be 380,000 and I would only need to spend probably let’s say 18 grand. So not adding a huge amount of equity in terms of a RV at the current price.
So I’d probably want to buy it for lower, but also just want to reiterate that the reason I would spend that $18,000 is not only for equity, it would probably bring my rents from about 16, 1700 bucks a month, probably closer to $2,000 a month. And to me, that’s why I would do this, but I’ll go into that in just a minute. Then we will be doing our financing details. This part should be easy for everyone. I would buy this property putting at least 25% down and I got quoted 6.8 ish. Then I actually know exactly what the rents are going to be for this one, which is really nice. It’s two section eight tenants been there for a long time, so I like that. Property’s in good condition, four being really old. So I should just describe now that the floors need work. They’re pretty old.
The kitchen is dated, the bathroom is dated, the systems are okay. The plumbing and the electrical have been updated. It’s not like knob and tube, it’s not galvanized pipe, and there’s about 15 years left on the roof. Now there are some additional fixed expenses that we know too. This should be pretty easy to get. So the taxes on this property are actually about 2100 bucks right now, but property taxes everywhere going up. So I’m going to put it in $2,400 just because I think it makes sense to just make sure. Now I own a similar kind of duplex in the same market, so I’m going to say 1300 bucks for insurance. That’s about what I pay there. Now this is where we get to repairs and maintenance. So Ashley, help me out here. A 130 5-year-old house in Michigan, cold weather climate similar to buffalo. What do you put for repairs and maintenance here when you’re first underwriting a deal?

Ashley Kehr:
I think I’m going to do 8%.

Dave Meyer:
8%.

Ashley Kehr:
I like it.

Dave Meyer:
So one thing I often think about, I’m curious how you handle this is if I wasn’t going to invest that $18,000 I mentioned earlier I’d probably bump this up to 15%. If I was just going to buy this and hold onto it and not make any improvements, I would, but I’m comfortable this eight 10% because my intention is to go in and probably replace the floor soon to redo the bathroom and probably upgrade at least part of the kitchens. Those are a lot of the big ticket items. And I’m not talking about CapEx yet. This is just repairs and maintenance. So I am essentially going to proactively hopefully offset a lot of repairs and maintenance because I’m going to pay for that upfront. Do you do anything similar to that?

Ashley Kehr:
Yeah, especially if we’re going in and rehabbing the property. I think one thing that’s different with yours though is that you are waiting until the tenant moves out. So you’re running the numbers now that someone’s in there, but we should increase your vacancy more because you do know that it definitely is going to be vacant during that period of time when you’re going to be holding the property.

Dave Meyer:
Exactly. Yeah. So that’s definitely something to do. I’m doing this with another duplex right now and it’s going to take three months to do the renovation, and so three months of vacancy is a lot. It’s a considerable expense on top of the labor and materials that I’m already going to be paying. So what would you put in vacancy there for a property like this? Because that would be 25% vacancy, but that’s not going to be a going forward. So how would you think about putting in the right number here?

Ashley Kehr:
What class area is this?

Dave Meyer:
I’d say it’s like a B minus.

Ashley Kehr:
I’d probably do eight to 10% on this too.

Dave Meyer:
All right. I’m going to put it at 8% right now as well. And for me, this stabilization period, this first year probably I am not really looking that much at how it performs the first year, I am essentially saying this vacancy of three months, that’s an investment that’s basically similar to the money I’m spending on a rehab. It’s just more money I’m putting to position this for long-term success. I will put the vacancy at 8%. I think that’s a good number going forward. And maybe what I’ll do is I will just put in my repair costs instead of $18,000, which is my estimate for materials and labor. What I’ll do is add three months of vacancy costs here, which is another nine grand. So I’m going to put this at $27,000 in repair costs just so that when this calculation is done, it’s the stabilized performance of the property. And I don’t get hung up on what happens in year one while we’re doing things at 8%. I’m going to put my management fee at 8%. That is what I pay.

Ashley Kehr:
See, I usually bump it up depending on what the 8% is. So right now I self-manage like the deals I’ve partners with. I pay myself a property management fee. But I think it’s really important if you’re going to self-manage, you still bake into that management fee that you still put it in there in case someday you do want to transition to a manager. It doesn’t kill your cashflow. But also too, when I did have a property management company, there was a lot of additional fees that aren’t included. So I always like to bump it up a little bit. Like you said, the leasing fee they would do if there was an after hours, there would be a $25 fee or something. There was additional things added onto it.

Dave Meyer:
Okay, I like that. Then let’s do 10%. All right, then capital expenditures. This one is tough. How do you think about this one?

Ashley Kehr:
The same with the age of the property and what needs to be done. So when you have your inspection, one thing I always like to do is ask the inspector, okay, what needs to be replaced today? What needs to be replaced within the next two years? What needs to be replaced in the next five? What needs to be replaced in the next 10? And that’s kind of going to give me more and an idea of how much I need to go into it. But I’m thinking on this as an older property, I’m probably just going to do 8% on it too. Knowing you’re going to go in and put that 18 grand into it.

Dave Meyer:
I think that’s great advice, getting that information from the inspector. The other thing I think people really need to look at, especially when you’re doing small multifamily like this, is how many of each system are there? I’ve had triplexes or four units that have one boiler and that reduces your total expense because you have one thing to service and those things are enormous. They last like 30 years, whereas if you have a bunch of newer forced air furnaces, one in each unit, that’s going to be a lot more expensive. Those things break a little bit more frequently and you’re going to have to think about that. So the same thing goes for example for appliances. Appliances famously don’t last that long. If you have four units, make sure that you’re considering the fact that every seven to 10 years you’re probably going to have to replace that dishwasher, but you have to do it times four, unlike at a single family home. So make sure you’re sort of thinking through all of that. The benefit of course to small multifamily is that you spread the cost of the big things like a roof or siding across four different units. So there are some cost efficiencies, but just make sure you think each of these things through.

Ashley Kehr:
I think that’s a great point as to thinking about what type of mechanics you have in the property or appliances. A lot of properties around here have electric baseboard heat. It is super cheap to replace one of the baseboard heaters and not a big deal at all, but like I said, to do a whole HVAC system, a furnace, a boiler, those things very expensive. So looking at what type of mechanics are important too.

Dave Meyer:
I have this little spreadsheet that I use sometimes it just says, what’s the average lifespan of the item, the mechanic, whatever you’re looking at, what do I think it’s going to cost to replace that? And then you basically divide those things and you can figure out what it is annually. So if I think the roof has 15 years on this and its replacement value or cost is going to be $20,000, then I know 1300 bucks roughly per year I need to set aside for this roof eventually. Or a hot water heater is going to be four grand installed or whatever lasts for 10 years, that’s 400 bucks that you need to set aside. So you can actually do this kind of back in the napkin. You don’t need to get overly scientific with it, but just spend the time to think it through. That’s it in the BiggerPockets calculator.
If you’re watching this on YouTube, you could see that there are other fees like HOA fees, electricity, gas, but because this is metered separately, the tenants will pay this. I do pay garbage. It’s like the less than 50 bucks a month, but I’m just going to round up to 50 bucks a month. That’s all the input that we need to do. Hopefully you could see that this is not so difficult. You just need to think through each of these steps. We’re going to take a quick break, but when we come back, I will share with you if this property is going to cashflow and by how much stay with us. The Cashflow Roadshow is back. BiggerPockets is coming to Texas, January 13th to 17th, 2026. Me, Henry Washington and Garrett Brown will be hosting real estate investor meetups in Houston and Austin and Dallas along with a couple other special guests. And we’re also going to have a live small group workshop to answer your exact investing questions and help you plan your 2026 roadmap. Me, Henry and Garrett are going to be there giving you input directly on your strategy for 2026. It’s going to be great. Get all the details and reserve your tickets now at biggerpockets.com/texas. Hope to see you there.
Welcome back to the BiggerPockets podcast. I’m here with Ashley Care talking about the right way to calculate cashflow. Before the break, Ashley and I talked through how to do cashflow calculations properly using the BiggerPockets calculators. Now let’s see if this deal cash flows. So actually it’s not bad. It comes out at $388 a monthly cash flow, which amounts to, I’m rounding up a little bit, but basically a 4% cash on cash return. Is that a good enough deal for you?

Ashley Kehr:
No,

Dave Meyer:
Me neither. I’ve talked about this on the show. I would take a deal with the 4% cash on cash return using this kind of disciplined underwriting. If this was a neighborhood or an a plus neighborhood, this just isn’t. It’s a B minus neighborhood. I do think it’s in a good location for future growth, but that growth might be five years from now. It might be eight years from now. And so I would need to see a higher cash on cash return than this. But just given the spirit of this episode what we’re talking about, I do believe this property cash flows and I would feel comfortable that I would get this 4% return. And on top of that, you would also get amortization and all these other benefits. The BiggerPockets calculator tells us it’s about an 8% annualized return, which for me is too low.
When I look at deals generally, I say I need at least a 12% annualized return that’s handedly beating the average for the stock market, and I want to at least beat the stock market by a few percentage points. So this deal doesn’t work for me, but while we’re here, Ashley, should we just see what it would take to make this work? Because as we’ve talked about it before, this was buying at rental at full price and it’s assuming that I stay with the current rental model and don’t get increased rents because of improving the property. So let’s see what

Ashley Kehr:
Happens. This is my favorite part of it is decreasing the purchase price and seeing what I can offer.

Dave Meyer:
Exactly. And I know people get confused about this and they’re like, you can’t just lower the purchase price. No, you can’t, but you can offer whatever you want. That is entirely up to you. And this property has been sitting on for at least 70 days, maybe more. And so the negotiating leverage is there. What would you bring this down to? It was three 50 is what they’re asking right now. What would you test out?

Ashley Kehr:
Let’s test out 300. That may be too low, but let’s try that. And then that can give us if we can increase our offer a little or go down a little bit. But this is the easiest number to manipulate

Speaker 3:
Because

Ashley Kehr:
You could go and say, you know what? I think I could increase rents a little bit. Let’s change that. Or you know what? I actually think I can get the insurance cheaper on it or whatever. Those are the numbers you don’t want to mess with or manipulate. This is the one, the purchase price, what you’re going to offer.

Dave Meyer:
So if I drag this down to 300 grand, I would get a 7% cash on cash return significantly better. So that’s $630 a month, and the annualized return jumped from 8% to 16%. Wow, that is significantly better because if you think about this, yes, you’re coming out of pocket for less money, so your cash on cash return is going to get better and you’re taking out a lower mortgage, and so you’re going to have less interest to pay, especially over the lifetime of your loan. So actually to me, this is getting to a deal. I would buy a 7% cash on cash return to 16% annualized return. What do you think of this one?

Ashley Kehr:
How much are the fixed expenses a month?

Dave Meyer:
The total expenses are 3094, and of that the variable expenses are 1,266.

Ashley Kehr:
So that’s 1,266 of unknown example. That’s actually quite a bit of money that you are accounting for those other things too.

Dave Meyer:
So yeah, if you look at it when I’m taking vacancy maintenance CapEx, that’s 900 bucks a month essentially that I’m setting aside just gut check. I feel pretty good about that. That feels right. And to me, this is starting to feel like I feel confident if I could get this at 300 grand, I would get that 7% cash on cash return. And to me, that’s now an attractive cash on cash return. I don’t know if you have a rule of thumb you look for. Is yours higher or lower the same?

Ashley Kehr:
Actually, I would take a little less than this. This would be a good deal for me. I would take this. All right. The one thing that I would think about going back and changing after we’ve gone through all of this is instead of using the percentage of repairs and maintenance, I would add in, since this is in Western Michigan, snowplow removal as a fixed thing,

Speaker 3:
Because

Ashley Kehr:
That was a mistake I made on my very first deal in Buffalo, New York, not accounting for snowplowing. And it can be so

Dave Meyer:
Expensive, so expensive, it’s ridiculous

Ashley Kehr:
What they charge. The plow that killed my cashflow. I think we ended up cashflowing a hundred dollars on the first deal because I didn’t account for the snowplowing and how much that would be. So that’s something else to watch out for. What are those maintenance expenses you do know will happen that you need to maintain the property? Even landscaping too, maybe it’s a big lot and you’re not going to ask both of your tenants to share the lawn mowing responsibilities. So another one too is common areas. If there’s common areas, I have a five unit building and I have to pay a cleaner to go in and clean the common area. So I think once you get the basis of this, then that’s when you go and you start to nitpick the deal and break it down even more and see

Speaker 3:
Exactly

Ashley Kehr:
How accurate you can get it. But this gives you such a good basis. I can’t even tell you how many calculator reports I’ve saved in my portfolio. I think I became a member in 2017. I probably have a million of deal analysis

Dave Meyer:
Calculator reports, thousand deal

Ashley Kehr:
Analysis. And it’s so interesting to go back and to see those very first deals, how I’ve changed analyzing and gotten better at fine tuning than those first basically back of napkin math ones I

Dave Meyer:
Did. I think, yeah, I have gone from seeing everything with rose tinted glasses and being like, this is all going to work out to being completely the opposite. Everything’s going to be terrible. And if it’s still good on paper like this, then I’ll do it. That’s basically my criteria. So that’s helpful. I went back in and added another a hundred bucks a month in just general expenses for probably plowing something like that, still at six point a half percent ROI, which I like. And if you listen to the show, I’ve been talking a lot about this framework for upside era investing that I am a big fan of. And to me it’s like how do you underwrite super conservatively and then hopefully get better returns than even you’re analyzing? Because to me, the whole trick is like, okay, I feel confident I get at least a 6.5% cash on cash return.
That’s good, a 15.6% annualized return, that’s good. That is assuming no rent growth from this renovation. And so I would still underwrite this, but then what I would normally do is say, okay, what if I went up to 3,900? What if I could grow rent? Maybe not. But if I did, okay, then that gets me to an 8% cash on cash return and a 16.4% annualized return. I underwrote this deal with just 2% appreciation. This happens to be a B nine in this neighborhood, but in a very good growing market. And so maybe I get three or 4% appreciation, what happens then? I probably get a 20% annualized return. And so this is sort of the phase where I start to think about this is like, what is the minimum cashflow that I’m going to get? And then am I comfortable with the minimum? And then everything else on top of that is just a benefit that I hope I get, but I’m not counting on it mentally. So I’m not disappointed if this things don’t happen. I’m just delighted and happy if they do wind up coming about.

Ashley Kehr:
One thing that I had another realization as an investor over the years is that watching not only the cashflow increase over time because my expenses didn’t increase as much as the rental income did. One property I bought in 2017, I was cashflowing $300 a month when I bought it, and now I cashflow a thousand dollars per month on it, and it also has $150,000 in equity in it. And I think I put my down payment was maybe 35,000 on it, whatever. So now that I look back, I realize that’s the true value holding these rentals over long-term, getting them in a good area where they’re going to appreciate and you’ll be able to increase the rental income. So that makes me more excited than cashflow today, but especially as a new investor getting started, that little bit of cashflow is going to be so helpful with you in changing your life.
But when you are analyzing deals, you need to understand why you’re investing and what you’re investing for. Maybe cashflow isn’t really that important to you and you’re okay with a really small amount. You just want something that in 15 years has appreciated and so much and you’re just going to cash out and retire. Or maybe you want to quit your job now. So you want more cashflow than appreciation. Maybe you have a ton of time and you want those headache properties and class C areas like I did, I bought those $20,000 duplexes, great cashflow, but man, lots of turnover, lots of repairs, lots of headaches. So really think about that too as you’re figuring out what cashflow is good for you.

Dave Meyer:
I couldn’t agree more people always ask for a rule of thumb for cashflow. I always say to me it’s like they got to break even. I don’t personally buy properties that don’t break even. I know some people do. I don’t think that makes a lot of sense, particularly in the kind of market we’re in where appreciation might not happen for the next year or two. We might be in a flat market. You need to have some cashflow to be prepared and to cover any expenses that you have and to be able to hold on. But once I’ve reached that threshold, you got to look at it holistically. You can’t just say, I need 10% on every cash on cash return. Because the reality is ones where you get 10% are, as Ashley said, either big headache properties or in areas that are less likely to appreciate.
And so it really comes down to what your goals are as an individual. And personally, like I said before, I would buy a three 4% cash on cash return deal if it’s in an A or a plus neighborhood because I’m going to get other benefits if I’m in this beep minus neighborhood, 6, 7, 8 is probably the minimum that I would take on that kind of deal. And if I was in an area that I didn’t think would appreciate at all, I’d probably want 10 plus. So those are just rough rules of thumb, but unfortunately you can’t just say there’s this one hard and fast rule. You kind of have to look at the whole big picture of returns that you’re going to get and think about it as just a piece of that puzzle. Alright, well thank you Ashley. This is a great conversation. Anything else you think the audience should know before we get out of here?

Ashley Kehr:
Don’t forget your snowplow removal and your bags of salt and your shovels.

Dave Meyer:
I know half the country’s like, what are you talking about? Why would you even count snowplowing? But if you know, it’s so expensive. All right. Well thank you Ashley. We appreciate your time.

Ashley Kehr:
Yeah, thanks so much for having me.

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

Ashley:
What if the only thing keeping you from your first deal is not knowing what a good deal actually looks like,

Tony:
Or maybe you’ve got your first flip lined up, but you can’t decide if you really need a general contractor or if you can manage it yourself.

Ashley:
And finally, the million dollar question every rookie is asking is now the right time to buy. We’re answering all three of those questions and helping you make smarter moves in any market. This is the Real Estate Rookie podcast. I’m Ashley Kehr.

Tony:
And I’m Tony j Robinson. And with that, let’s get into today’s first question. Now this question comes from Eric in the BiggerPockets forms, and his question is, I’m new to real estate investing and just finished reading Brandon Turner’s book on investing with no Money Down. I found myself particularly interested in multifamily properties, but I’m struggling to grasp what exactly defines a quote. Good deal when evaluating listing. Should I primarily focus on properties that seem undervalued? Are there specific market indicators or property traits that I should be paying attention to? I feel like I’m missing the bigger picture of what makes a property a great investment. If anyone could share some pointers or insights on how to identify a good deal, I would appreciate it. This is a really good question, right? Just how do we know if a deal is a good deal? And he asked a few different data points that he should be considering property traits or the value of the property.
And I think the first thing that I’ll say is that a good deal to me could be a bad deal to you and vice versa. And what Ashley looks at as a good deal could be a bad deal to me. And part of that is because we all invest for different reasons. We all invest with different inherent skills and we all invest with different amounts of time, effort, and energy that we’re willing to put into real estate. So for someone who is a busy corporate executive that works 80 hours a week and makes half a million dollars a year, a turnkey property at 20% down at a 6% cash on cash return could potentially be a good deal for them because they don’t have the time, energy, or desire to do anything more than that. And that could be a great deal to the person who asked this question 20% down on a turnkey short-term rental that’s cash flowing at 6% could be a terrible deal because you just talked about, hey, you’re looking for no and low money down strategy, so that doesn’t work. So I think the first thing to ask yourself is what am I looking for when it comes to real estate investing? What are the things that I need to understand before you even get into good deal versus bad deal as guess? I’m just curious, is there anything else just like strategically or from a theory perspective that we should be focusing on before we get into the details of the answer?

Ashley:
I think maybe just what is, like you said, your why for getting started, but define what actually gets you to that point. So if your goal is to build legacy and build wealth, well, do you want to put a ton of time and effort into doing that or do you want to maximize passive income to be able to generate that wealth? So I think the time and money commitment are two big pieces to the puzzle that you need to be really heavy on either one of them or have a mix and balance of the bolt so that one doesn’t outweigh the other six, seven. If you’re watching this on YouTube,

Tony:
If you don’t have a kid that’s maybe my son’s 17, so 17 or younger, you probably don’t get that reference, but six seven’s been everywhere, but I couldn’t help myself. I just saw you doing this. I was like, we got to get

Ashley:
That in, I’m proud of you. Yeah,

Tony:
My son’s going to be proud of me too when I tell him this story. So I think let’s talk a little bit about what actually makes a good deal. So when we talk about real estate, we talk about a specific property as an investment. There’s the cashflow that it produces, right? Like the actual cold hard money that comes off of the deal on an annual basis. There’s the cash on cash return, which is a measure of how good of an investment it is because maybe I’m getting a hundred dollars a month in cashflow, but if I invested nothing into that deal, technically I’m getting an infinite return if I get $1,000 from month in cashflow, but I’ve got a million dollars of cash sitting in the deal, more cashflow, but it’s actually a really bad return on my investment. So we look at the actual cash flow, we look at the cash on cash return.
The other piece that we can take into account is the appreciation. If I hold this property over the life of the loan 30 years, is it reasonable to believe that this property is going to appreciate a significant amount over that timeframe? Some markets appreciate faster, some markets appreciate slower nationally post COVID. I think we’ve seen a lot of appreciation across most of the United States, but some markets do it faster than others. So I think those are really the two big things that most investors today. There’s also the tax benefits and maybe that’s an entirely different story, but I think based on how this person asked the question, they’re probably not too concerned with tax sheltering at this point. So cashflow, cash on cash return and equity growth or appreciation I think are the big things to focus on. Am I missing anything there?

Ashley:
No, and I just thought of this, and we don’t ever really talk about this as one of the pieces of a good deal, but also I would say regulation security as in there’s been towns near me where people have short-term rentals and all of a sudden the towns say, you know what? Unless this is your primary residence, you can’t do short-term rentals anymore. And all of a sudden people are like, what am I going to do with this house? I can’t rent it out. It doesn’t make enough money as a long-term rental. So I think it would be a good deal if you can actually do that strategy. So just another little aspect and there’s I think a lot of those little nuances we could probably do a whole episode on, but thinking a little outside the box too.

Tony:
Yeah, real estate nuances as our next episodes. If you guys want to see that, let us know. Let us know in the comments. Then I think that the next piece here too is just defining your buy box. And I think that’ll also help you identify whether or not what you’re looking at is a good deal for you specifically. And I’ll give you a recent example. When we were shopping for our first hotel, we had a very specific buy box. We had a buy box of, we wanted a purchase price between one and $3 million. We wanted a value add opportunity. We wanted to be in either an urban or a vacation market, and we wanted, I think there are 10 to 30 rooms. So those were all the things we were looking for. And once we had that buy box built out, it became significantly easier for us to say yes or no to certain deals because now it’s just like, does it match our buy box or does it not?
So I would encourage you to, and this is for everyone that’s listening, to think about building your own buy box and how that can make it easier to identify the right deal. And then just there’s some basic rules of thumb as well when it comes to buying rental properties that don’t necessarily give you the cold hard to the penny return, but directionally, I think they can kind of point you in the right direction. But there’s the 1% rule that says your revenue or your rent in this case should be 1% of the purchase price. So if I have a house that is $100,000, if I can rent that property out for $1,000 per month, that would be meeting the 1% rule. The other is the 50% rule where 50% of your revenue, or sorry, lemme say that again, then there’s a 50% rule that says your expenses shouldn’t exceed 50% of what that revenue is. So using that same example, if I’ve got a $1,000 a month in rent, my expenses hopefully shouldn’t exceed 500 bucks on that, right? So there’s different rules of thumb that you can use to help guide you in the right direction to quickly either say yes or say no to these deals aside from fully underwriting them.

Ashley:
And just to remember that a good deal doesn’t mean it has to be the greatest deal of all, or you have to get the best benefit. You have this money because we see a lot of times like I have $50,000. What’s the best way that I can use this money? Even if it doesn’t turn out to be the best way there Ended up you could have got a 2% more return or something doing something a little different or buying a different property. As long as it ends up being a good deal, it is going to make you so much more money because that first deal propels you it, you took action and it’s going to start your investing journey. So don’t get too caught up in analysis paralysis thinking you need to find the perfect deal.

Tony:
Ash. That is a great point. The last thing I’ll add to that is we need to give ourselves more permission to learn when it comes to real estate investing. And I’ve given the analogy of if you have a child or if there’s a child that you’ve ever met in your life, chances are that child did not come out of the womb walking. And there was at some point in their early life, somewhere between eight to 12 or maybe sometime shortly after months where they started to learn how to walk. And I haven’t met anyone yet, though I could be wrong, but I haven’t met anyone yet who at 12 months old when they fell down for the first time after walking, their parents just kind of scooped them up and said, you know what? Walking’s just not for you. Usually the kid falls down, parent picks them back up, and then they keep that process going until they finally find the strength to sound on their own.
And I think real estate investing, and really this is for learning anything new, it’s the same process. The goal is that we can lay a foundation with that first deals not to be perfect. And sometimes that means stumbling. Sometimes that means everything doesn’t go according to plan. Both in my portfolio and Ashley’s experienced that and many of the guests that we’ve interviewed on this podcast have experienced that as well. So if we give ourselves more permission to learn on that first deal, we can take off some of that pressure of it being perfect and position it as an opportunity to get better for the second deal and the fifth deal and the 10th deal

Ashley:
Coming up. When you’re tackling your first flip, should you really pay for a general contractor or is that just wasted money? We’ll break it down right after this quick word from our sponsors. Okay, welcome back. Today’s second question is, my partner and I have started a house flipping business and plan to use local workers whom we trust and who we have done remodels on investment properties for us before. However, these workers are not licensed, but they work hard and efficiently. Most of the rehabbing we are planning for these flips is cosmetic. The most recent house we offered needs a complete remodel inside, but the structure is sound. For example, we need new kitchen cabinet, sink paint, flooring and drywall in certain areas of the house that have been damaged as well as new light fixtures and interior and exterior paint. The work is mainly cosmetic except for the drywall repairs.
We are concerned about hard money lenders requiring licensed professionals to do the work or requiring licensing later on, having a scramble to find a general contractor. Fortunately, one of our hard money lenders said they will not ask to see any licensing as long as we are not doing anything structural to the house. Another one of our hard money lenders has stated that they want to see licensing anytime we were going to have any work done to pull permits. We are brand new to this, as you can tell. So the first thing that kind of stands out to me is the hard money lender that’s saying they’ll want to see any licensing when they pull permits. In my experience, I mean I live in very rural areas where a lot of my projects are like no permit or very get a permit this morning, start the roof that evening. But the flip I did last year was in more of a village within the city and there was a lot more stricter permit requirements, but I had to show, for example, the plumber was a licensed contractor just to get the permit on the property too. So I think that no matter what, depending on your city’s regulations, you might have to show that it’s somebody licensed doing the work like electrician and plumber. Two big things that usually you would have to show.

Tony:
And I also, if your lender is requiring that you have a GC to do it, then I mean that kind of answers the question for you, right? I wouldn’t tell my lender that ham, I’m going to use a licensed contractor and then I don’t because that could create its own world of issues. But I think maybe the bigger question here is why are you opposed to using the general contractor? Is it the idea of cost savings? Because if so, unless you’ve got a lot of experience managing these types of projects before because you didn’t say nothing, right? It wasn’t like you were just doing paint or you were adding some turf or replacing some hardware. We need new kitchen cabinets, sinks, paint, flooring, basically an entire new kitchen drywall where there’s been damage.
It does seem like a decent amount of work for someone who’s doing this for the first time. And even though you’re not changing the layout as a rookie investor, sometimes there is value in having an experienced general contractor guide you through on this first project and the amount of insights you can pick up and gain from that person, they’ll stick with you for the rest of your life. One of the first rehab projects that we did, we had a juicy walk through it. He ended up not taking the job because he was too busy, but I remember he gave us a layout suggestion we had never even thought about before. He was like, Hey, you should actually close this wall off that way we can make your master bedroom bigger and we can do this and do that. And we’re like, man, I walked right through this a thousand times. I never even thought of that. And he was in there for 20 minutes and was like, yeah, you need to do this, you need to do this, he needs to do this. So there’s value I think in just learning from a good general contractor, especially if this is your first time out, obviously you want to make sure that they earn their keep and hopefully a good GCL do that. But I dunno, I think there’s value Ashton and rookie investors when they’re first getting started having a good GC to lean on.

Ashley:
Yeah, two of my easiest projects, I had really great GCs that actually did a lot of the work themselves too. When I built my personal residence, my GC pretty much built the house himself. He was a licensed electrician, a licensed plumber. He was a jack of all trades. And if I could have him do every house that I ever touch, I would 100% consistently use him. No matter how much he paid, I’d work it into the numbers because that was just the easiest most passive thing I ever did was build that house. And he did one rehab for me for a house that was flipping. He came in after it became too much for just me and my partner to try to handle ourselves. And he came in and finished the whole thing with very little oversight. And that I think is just tremendously valuable.
Having somebody you don’t have to micromanage that can make basic decisions without ever having to bother you or tell you decisions you should be making in your point Tony, as to put a door here or something like that, that’s going to maximize your space. Or I had a GC that did put a slider door here, don’t, you’re limiting the bathroom by putting the same door back in. Do this and it will be cheaper and had all these great ideas. So I think a GC is worth it for the project, especially if you don’t have experience yourself. But also another thing they could do is they could go and one of them could get licensed to be a gc. I have no idea what the process is, but I’m assuming it’s achievable and doable to go and get your GC license.

Tony:
I think just one thing to call out, we’ve all heard the horror stories of general contractors or even just tradespeople in general disappearing into the middle of the night. So my strong recommendation, whether you hire a GC or a sub yourself, is to make sure that the payment structure protects you in the event that the work isn’t done correctly. So do not give them a super large deposit upfront, right? So say that the labor for this job, maybe the total bid for this house is like 60 grand. Don’t give them $30,000 upfront to go start their work. It does not cost that much to go buy whatever materials they need to go buy to get this job started, break it out into very clear milestones, and then only issue those payments once you validated that those milestones are done like demo. Once they finish demo, then you can release another payment.
Once they’ve done the rough plumbing and electrical, you can issue another payment. Once the flooring is in, you can do another one. So identify what those milestones are based on the scope of the job and that’ll save you in the event that these contractors don’t work out. We actually had a rehab once where we withheld the final payment because the general contractor just wasn’t great and we had a lot of issues throughout the life of the project and I ended up managing the subs myself because GC wasn’t doing a good job. So when it came time for the final payment, and Sarah, my wife still recall this, one of her crst moments with me, but we’re in the house arguing with each other and I’m like, dude, I’m not paying you. I’ve done more work on this project than you have. So anyway, you can save yourself, I think from some of those bad experiences if you make sure the payment structure is set up in a way that protects you.
Alright, we’re going to answer our final question right after we’re from today’s show sponsors while we’re gone. If you haven’t yet, be sure to subscribe to our channel on YouTube. You can find us at realestate Ricky. Alright guys, we’re back with our final question. So let’s see what we’ve got today. The third question comes from Grant in the BiggerPockets forums. And Grant says, is there ever a right time to buy a house? A lot of people around me keep saying, wait until the market crashes, because right now it’s high, but it always seems like it’s going to keep going up. So I know that there were times or moments when it goes down a little bit, but it’s always going to go up, isn’t it? This is a great question. And we just recently interviewed Thatin and James Dard about a topic very similar to this because they both invested through 2008.
Thatch was even investing in the nineties during the dot-com crash. Now, that impacted the markets, and I think they both echoed the same message. Ups and downs will always happen in real estate, but it’s the people who continue to invest through those downturns that make the most money when the market starts to swing back up. So is there a right time to invest in real estate? Yes. And that time is today, right? Very simple answer. There is a right time, and it’s right, actually it’s yesterday. Yesterday was the best time to invest in real estate and today’s the second best day. I think where people get into trouble is trying to time the market, but no one has a crystal ball. No one has a crystal ball. And I would venture to say, grant, that the majority of the people who are telling you to wait for the market to come down or wait for the market to crash, probably haven’t invested in a lot of real estate themselves because I only hear that advice from people who haven’t done it.
And I almost never hear that advice from people who are doing this actively every single day as their main way of making a living. So we’ve got to be able to filter out the advice that we get from very well-intentioned friends and family and be able to say, Hey, look, I appreciate that you’re looking out for me, but I’ve got to take advice on wealth building from the people who’ve actually done it and not necessarily from my friends and family who have only seen the headlines or maybe heard stories from a friend of a friend of a friend about why real estate investing is the wrong thing to do. So it’s all about time in the market, not timing the market.

Ashley:
And one thing that thatch and James said too was making sure you have exit strategies as in, especially if you’re doing a long-term play on a property, you can ride out the cycles, get that 30 year fixed rate loan, your mortgage payment is going to stay steady and you can hold that property long term and let it appreciate and your mortgage pay down happen. But if you’re on a shorter term project such as you’re doing a flip, what is your exit strategy to get out of that deal? If the market does take a big downturn, right? When you list it, is it, can you turn it into a rental? Can you furnish it, turn it into a short-term rental? If you unload it, how much of a loss can you actually take? And they both told how they’ve had bad years, they’ve taken losses, but they keep going because the winds during the great years outweigh those bad years.
So you have to be prepared to ride the rollercoaster and be in this for the long term. For the long play. This really isn’t a get rich quick scheme. Yeah, maybe a couple years ago you could get rich real quick off of a couple deals, but that was not sustainable. You can’t consistently do that every single year and make those great returns that everyone talks about a couple years ago with your 2% interest rate. So having those exit strategies and also having a long-term game plan and growing consistently, but not growing and scaling too fast too. Well, thank you guys so much for listening to this episode of Ricky Reply. I’m Ashley Hughes, Tony, and we’ll see you guys on the next episode.

This article is presented by RentRedi.

There’s a big difference between working in and on your business. When you bought your first rental property, doing everything yourself probably felt right. You knew the tenants, collected rent, patched the drywall, and scheduled the pest control. 

Being a self-managing landlord is no joke, and it’s definitely not for everyone. If you’re constantly texting tenants, manually tracking rent payments, and spending your weekends fixing leaky toilets, you start feeling like you’re being spread too thin.

Instead of growing your cash flow, you might be just trying to survive the week. If you’re losing sleep, time with your loved ones, or even struggling to keep up with repairs, that’s when it’s time to fire yourself. But don’t worry, you’re still the boss—only instead of doing the work yourself, you can adopt smarter systems and workflows that make it simple for you to scale confidently and successfully. Here’s how to get a complete overview of your business and develop deeper insights that you can focus on growing your portfolio.

Are You Working Smarter or Harder?

Working smarter on your business means building systems, automating tasks, and making decisions that allow you to grow. It means treating your rental portfolio like a company, rather than a never-ending to-do list. Too many landlords get stuck doing everything themselves—and wonder why their growth plateaus.

The truth is, you simply can’t scale chaos. But you can scale success. 

Your Growth Will Only Go as Far as Your Systems

Every successful real estate investor eventually realizes that growth requires some type of infrastructure. 

You wouldn’t try to build a house without a foundation. So why are you managing a five-, 10-, or 20-unit portfolio with a stack of receipts, a personal Gmail account, and a dozen spreadsheets? This system may have worked for you initially, but it is also difficult to manage long-term. For a more sustainable process, pulling all your investment properties and organizing them into one system will save you so much time and stress. You might not even realize how much inherent stress you’ve been feeling until the sigh of relief when you see your entire rental operation organized in a smart system designed to simplify your property management workload. 

A strong, scalable system should allow you to:

• Accept rent online and track payments in real time
• Automate late fees and rent reminders.
• Screen tenants consistently, with applications and background checks.
• Log and organize maintenance requests, with status updates and photos.
• Keep digital copies of leases, inspections, and notices.
• Collaborate with your team or contractors securely and efficiently.

These key systems are must-haves for anyone who wants to grow beyond just being a landlord and for folks who want to work on their business.

How Property Management Systems Work For You

Hiring a third-party property manager can cost 8% to 12% of your gross rent, and there may be additional costs for leasing or repairs. This can be a worthwhile investment to alleviate your workload, but setting up a property management software that can organize your business and articulate rental data back to you is an essential tool for scalability and cash flow growth. 

Using a smart property management software like RentRedi gives you the power of a professional system without the overhead of outsourcing everything. You can:

• Log in to one dashboard to see how your portfolio is performing.
• Get alerts when rent is paid or late.
• Generate reports for tax time.
• Store all your documents and communication in one place.
• Let tenants submit requests without calling your personal phone.
• Stay organized without hiring a team.

A manual system can impede your growth as a real estate investor. Not only is it taxing on your time, but your energy as well. Imagine if you could reallocate the investment of your resources…back into investing? That’s working smarter, not harder.

The Hidden Costs of DIY Landlording

Let’s talk about what you’re actually losing when you try to do it all yourself.

1. Time

Every minute spent on administrative tasks is one you’re not underwriting new deals, building relationships with brokers, or thinking strategically about your business.

2. Tenant satisfaction

Delayed responses, inconsistent communication, and poor maintenance follow-up make tenants unhappy. That could mean more turnover and longer vacancy periods.

3. Financial accuracy

If you’re not tracking expenses properly or logging deductions, you’re leaving money on the table every year at tax time.

4. Burnout

This is real. The back-and-forth phone calls, a mountain of maintenance tasks, and overlooking late or missed payments all add up. For you and your business. A primary reason for utilizing real estate investing to achieve financial freedom is to generate revenue without strain on your finances, time, and wellness. So if your future is looking forward to financial freedom, finding sustainable, customizable, automated workflows is #1 on your priority list.

How I Knew It Was Time to Fire Myself

There was a point in my journey where I looked around and realized my portfolio was growing—and with it, my workload. 

I had more properties, tenants, and rent coming in. This was exciting, but I was more stressed than ever. I wasn’t spending my time doing the things that mattered. I was putting out fires, logging into my bank account to check if rent came in, and calling vendors to schedule minor repairs. Basically, I was babysitting my business instead of scaling it thoughtfully.

Making the decision to implement systems like automated rent collection, streamlined maintenance, and consistent tenant screening with software like RentRedi had several benefits beyond saving time. This was a turning point in my investor journey, as I finally had the breathing room to grow.

How to Know It’s Time

Here are a few signs you’ve outgrown the DIY property management stage:

• You’re managing more than two properties.
• You’re repeating the same tasks every month.
• You spend more time being reactive than proactive.
• You can’t remember which tenant has a pet, or whose lease is up next.
• You feel overwhelmed during tax season.
• You dread tenant calls or emails because you’re already behind.

If any of that sounds familiar, you’re not alone—and you’re not failing. You’ve just hit the ceiling of what can be done manually. Now it’s time to build the business.

Owning the Role of CEO

Stepping into the role of CEO means you recognize not only the worth and value of your rental business as a cash flow, but also your time as well. Each property has the potential to bring you one step closer to a future that feels more like freedom. Adapting smart property management systems like RentRedi saved my sanity, my time, my energy, and my resources. So if your goal is to grow financial sustainability, own your role as a business owner. 

The most successful investors are those who learn how to delegate, automate, and systemize their portfolio. Firing yourself doesn’t mean you stop caring about your tenants or the properties you’ve invested in. It means you’re ready to build a business with smart systems in place that not only help you streamline what you already have, and scale to something bigger.