This article is presented by BAM Capital.

You bought your first rental, or maybe your second and third. You learned how to screen tenants, handle maintenance calls at 11 p.m., and navigate the slow grind of building equity one unit at a time. That took discipline and real courage, and most people never do it.

But the skills that make you a great single-family landlord aren’t the same ones that build lasting, scalable wealth. At some point, the model starts working against you.

More properties mean more tenants, calls, and systems to manage—and more of your personal time tied up in something that was supposed to give you freedom. The returns can plateau. The complexity increases. And you start wondering if there’s a smarter way to grow.

There is. And thousands of experienced landlords are already making the shift.

The Ceiling Every Single-Family Investor Eventually Hits

Single-family real estate is a genuinely great starting point. It’s tangible, relatively straightforward, and easy to finance. But it has structural limitations that become more painful as you scale.

Vacancy hits harder

When a tenant leaves a single-family home, your income from that property drops to zero. No other unit absorbs the blow. Every empty month is a full month of paying carrying costs, such as mortgage, insurance, and taxes, out of your own pocket.

Your time doesn’t scale

Ten single-family homes mean 10 roofs, HVAC systems, sets of appliances, and potentially 10 different property managers spread across different neighborhoods. The coordination alone becomes a part-time job.

Appreciation is hyperlocal and unpredictable

A single-family home’s value is heavily tied to what comparable homes in that specific neighborhood are doing. You’re exposed to local market swings with limited ability to diversify within a single asset.

Financing gets harder

Conventional lenders typically cap the number of financed properties you can hold. Once you hit that wall, your options narrow and get more expensive.

All this means there’s a natural evolution point from single-family housing, and multifamily is often where sophisticated investors land next.

Why Multifamily Performs Differently

The economics of multifamily work in fundamentally different ways than just “more units”—and most of those differences favor the investor.

Built-in diversification within a single asset

A 100-unit apartment complex doesn’t go to zero vacancy when one tenant leaves. Occupancy fluctuates, but cash flow continues. This natural smoothing effect is one of the most powerful risk-reduction tools in real estate—and it’s baked into the asset class.

Income drives value

Single-family homes are valued primarily by comparable sales. Multifamily properties are valued on net operating income (NOI). This is a critical distinction: If you increase rents, reduce vacancies, or cut operating costs, you directly increase the property’s value. You’re not waiting for the market to do it for you.

Operational efficiency at scale

One property manager, maintenance team, and insurance policy—managing 80 units in one building is not 80 times harder than managing one. The infrastructure consolidates. Costs per unit drop. Systems actually work.

Institutional-grade demand drivers

Multifamily benefits from some of the most durable demand dynamics in real estate. Housing costs remain elevated. Homeownership rates have stagnated among younger demographics. Demand for quality rental housing isn’t a trend—it’s a structural reality.

The Old Barrier to Entry, and Why It No Longer Exists

For most of real estate history, institutional-quality multifamily was simply out of reach for individual investors. A 200-unit Class A apartment complex in a growing metro might carry a $30 million–$50 million price tag. You needed institutional capital, relationships, and infrastructure to compete. 

That changed with the rise of real estate syndication, which allows a group of accredited investors to pool capital and invest alongside experienced operators who source, acquire, manage, and ultimately exit the asset. You participate in the economics—cash flow distributions, appreciation, and tax benefits—without taking on the operational burden.

The sponsor (the general partner, or GP) does the heavy lifting: finding the deal, securing financing, overseeing the business plan, managing the property management team, and executing the exit strategy. You, as a limited partner (LP), contribute capital and receive returns proportional to your investment.

What you give up—and what you get

As a passive LP investor, you give up direct control. You’re not choosing the paint colors or approving the lease renewals. For operators accustomed to having their hands on every decision, this can feel uncomfortable at first.

What you get in return is professional management, deal flow you couldn’t access alone, diversification across markets and asset sizes, and—critically—your time back.

How to Evaluate a Multifamily Syndication

Not all syndications are created equal. Before committing capital, here’s what experienced passive investors pay close attention to:

• Track record of the sponsor: How many deals have they completed? Examine the sponsor’s track record: Have they historically met their targets on a net-of-fee basis, and how have they navigated varying market cycles? How did they perform through adversity?
• Market selection: Is the property in a market with strong employment growth, population inflow, and limited new supply?
• Business plan clarity: Is the value-add strategy specific and credible? You want a clear thesis: renovate X units, achieve Y rent premium, and exit at Z cap rate.
• Preferred return and waterfall structure: A preferred return (typically 6%–8%) means limited partners receive distributions before the sponsor takes their profit. Understand the full waterfall before you invest.
• Alignment of interests: Does the sponsor have their own capital in the deal? Skin in the game changes behavior.
• Transparency and communication: How often does the syndicator report to investors? How do they handle bad news?

The Tax Angle (It’s Better Than You Think)

One of the most compelling, underappreciated aspects of multifamily investing is the tax treatment.

Depreciation on commercial real estate can offset significant portions of the income generated by a property. With cost segregation studies, sponsors can accelerate that depreciation, front-loading the tax benefits in the earlier years of the hold.

For passive investors, this often means receiving distributions that come with paper losses that offset taxable income. Through strategies like cost segregation,  investors often receive distributions that are offset by depreciation, potentially reducing the immediate tax impact. However, tax benefits vary by individual and should be verified with a professional. 

This is a meaningful advantage over other income-generating investments—and one that single-family investors often underestimate when they first evaluate multifamily syndications.

As always, consult your CPA or tax advisor for guidance specific to your situation.

Is This the Right Move for You?

Multifamily syndication is available to accredited investors, who are generally defined as individuals with a net worth over $1  million (excluding primary residence), income over $200,000 ($300,000 with a spouse),  individuals holding certain professional certifications (e.g., Series 7, 65, or 82), or entities with assets exceeding $5 million. 

Beyond qualification, it suits a specific type of investor: someone who has already proven they can build wealth through real estate, understands the fundamentals, and is ready to grow without growing their personal workload.

If you’ve spent years building a single-family portfolio and you’re starting to feel the ceiling—the management complexity, the financing constraints, the time trade-offs—multifamily syndication is worth a serious look.

A Note on Finding the Right Operator

The quality of your returns in passive investing comes down to one thing above all else: the operator you choose. The asset class and market can be right, and the deal can still underperform with the wrong team at the helm.

For investors exploring multifamily syndication for the first time, doing due diligence on the sponsor is the single most important step in the process.

BAM Capital is an operator that has gained attention among accredited investors seeking institutional-quality multifamily exposure. The firm focuses on Class A and B multifamily assets in the Midwest, with an emphasis on markets with strong employment fundamentals and long-term demand drivers. For investors who want to participate in multifamily without building an in-house team or sourcing deals themselves, firms like BAM Capital represent the kind of investment vehicle worth putting on your research list.

Whatever operator you ultimately choose, make sure they’ve been tested—not just in good markets but in difficult ones too.

Final Thoughts

Single-family real estate built your foundation. Multifamily can be what takes you to the next level without the operational complexity that comes with continuing to scale the old model.

The economics, scale, and tax treatment are all different. And crucially, the demand for your time is also different.

If you’ve been wondering whether there’s a smarter way to keep growing, there is. The investors who figure that out earliest tend to look back and wonder why they waited so long.

Disclaimer: This content is for informational purposes only and is not financial, tax, legal, or investment advice, nor an offer or solicitation to buy or sell securities. Investment opportunities offered by BAM Capital and its affiliates are made pursuant to Rule 506(c) of Regulation D, available exclusively to accredited investors, as defined by the Securities and Exchange Commission (SEC) and, if applicable, qualified purchasers, as defined by Section 2(a)(51) of the Investment Company Act of 1940. Verification of accredited investor status is required before participation in any investment.

Contact BAM Capital for details on current offerings. BAM Capital and its representatives are not fiduciaries or investment advisors. The information provided is general and may not reflect individual financial goals. Financial terms, projections, or forward-looking statements contained herein are hypothetical and should not be interpreted as guarantees of future performance or safety. Such statements reflect BAM Capital’s opinion and are subject to market fluctuations, economic conditions, and investment risks. Investing in private real estate securities involves significant risks, including, without limitation, illiquidity, economic downturns, and potential loss of invested funds or capital. Past performance does not predict or guarantee future results. Historical transaction figures represent past performance across multiple deals as of the date this information was published, not a single investment transaction. BAM Capital and its affiliates do not guarantee the accuracy or completeness of this information. Prospective investors are strongly encouraged to conduct independent due diligence and consult with legal, tax, and financial advisors before making any investment decisions.

© 2026 BAM Capital. All rights reserved.

A recent Wells Fargo survey shows that nearly all Americans want to save in 2026, but doing so is proving harder than ever.

Being able to save is one of the core pillars of real estate investing. Amid a cost-of-living crisis, more people are finding it harder to accomplish.

“The findings tell us that when people feel in control of their money, it has a positive association with self-care, happiness, and freedom for most people, even though about half are at odds with spending versus saving,” said Chris Starr, Wells Fargo’s head of deposits. “But life happens, and many adults can’t cover a financial surprise. A clear plan to manage spending and save where you can lowers stress and puts you in control of your money.”

Unrealistic Expectations

The problem many real estate investors face is that we are bombarded with hard-to-duplicate success stories—people who were working low-paying jobs who found a seller willing to hold the note and then found others, and before you know it, they were amassing doors and cash flow.

While that might be possible, many of these stories, in my opinion, set a dangerous precedent because they involve high risk and leverage, and for every such story, there are many more that end in financial disaster. What many of these stories fail to explain is that attaining the doors is one thing, but holding on to them when you are highly leveraged is another.

Far more common and realistic are stories of real estate investors who kept their steady, decent-paying full-time jobs, amassed some savings, and invested cautiously, with a buffer of cash on the side to help them overcome inevitable obstacles as they built their portfolios. Now that saving money is harder than ever, investing safely in real estate is becoming more difficult. However, that doesn’t mean it cannot be accomplished with discipline and sensible investing strategies.

A Reality Check

Before launching into saving strategies in today’s market, these are the realities that savers are currently facing.

The cost of living has increased in all areas

Bloomberg: Overall inflation has cooled, but Americans still pay about $126 today for what cost $100 before the pandemic, with the biggest jumps in costs of groceries, housing, utilities, and car insurance.

Renters are cost-burdened

Harvard University’s Joint Center for Housing Studies: For current renters looking to save for a down payment on a small multifamily dwelling, it often feels as if you are facing an endless uphill battle. In 2024, nearly 23 million renter households spent more than 30% of their income on rent and utilities—nearly half of all renters. Cost burdens have risen in 44 states and 88 of the 100 largest metro areas over the past five years.

Monthly mortgage payments have doubled

Yahoo! Finance: Citing analysis from Strategas, Yahoo! Finance reports that the average monthly mortgage obligation has “more than doubled” in just over five years as higher interest rates, with increased house prices (not to mention taxes and insurance), pushed typical payments over $2,600 by April 2025.

Greater amounts of money are needed for a down payment

Bloomberg: Goldman Sachs economist Elsie Peng estimated that a couple now needs about 70% of their annual household income to afford a standard (20%) down payment on a median-priced home, up from 58% in 2019.

Practical Ways to Save

As real estate investors, we have always prided ourselves on thinking creatively about financing, using techniques such as subject-to, seller financing, rent-to-own, private money, DSCR loans, etc. It’s easy to get caught up in the hype of these work-around solutions instead of having to dip into your pocket for a big down payment.

What is often overlooked is the fact that, as an investor, you still owe the monthly mortgage payment, and chances are it is a lot higher than if you financed conventionally (unless you inherited a low rate). In an age when everything else is going up, leaving yourself with small margins and little cash on the sidelines is not wise.

It’s fine when using OPM for the down payment, as it allows you to keep hold of your savings for emergencies. The problems arise when you are using OPM because you don’t have any savings to start with.

One way to save more money is to take a holistic view of your expenses. Here are some ways to do it.

Cancel subscriptions and memberships

Rather than waiting for costs to drop, a more practical solution is to carve out investable cash from your existing budget, which, admittedly, is easier said than done.

MarketWatch experts suggest taking a holistic look at all your expenses, including recurring costs such as streaming services, app fees, subscriptions, and unused memberships. If you have a specific target, look to eliminate or at least downgrade it. 

Individually, it might not sound like much in your quest for mortgage money, but collectively it can add up, especially if you have your eye on an FHA loan with a 3.5% down payment.

Save on healthcare

CNN reports that millions of Americans are facing higher premiums and out-of-pocket costs as the Affordable Care Act costs expire. Shopping around for plans, using employer benefits, and effectively avoiding medical expenses where possible can free cash for a down payment and reserves.

Pay down debt

Unless you have a firm handle on your debts, they have an annoying habit of increasing. Before investing, put your savings toward eradicating bad debt, such as credit card, student loan, and store card debts. By doing this, you have effectively kick-started your cash flow by boosting the amount of money left in your pocket at the end of the month.

Increase income

Here’s another heading that falls into the “easier said than done” category. However, there are practical ways to do this that don’t involve driving an Uber through the night or working side jobs at Starbucks and Home Depot—although these are excellent ways to get healthcare coverage plus extra income if you have the time.

Live somewhere cheaper

You don’t have to emigrate to Cambodia to accomplish this, though living and working remotely can certainly turbo-boost your ability to save. Other, less drastic measures include taking in roommates or short-term rental guests, or moving in with your parents or family members to help you save money. Alternatively, you could choose to become a short-term tenant in a room in someone’s house rather than renting an entire apartment.

Look for practical side hustles

Rarely does a day go by that I don’t see an influencer telling me how they made millions of dollars online by working five hours a week in their shorts and flip-flops by a beach.

As tempting as it is to try to go down that rabbit hole of easy cash, the safer bet is to do something where the money is more guaranteed. It might not be glamorous or very well paid, but it’s not forever, and when done alongside everything else, the goal is to get you to that first down payment faster. 

Nerdwallet breaks down some no-nonsense ways to get your money right.

Final Thoughts

The strategy of lowering expenses and increasing income is from the school they knocked down to build the new school. However, as vintage as it is, it still works. If you plan to invest in real estate in the current high-expense era, having sufficient cash is a must.

Put the blinkers on and don’t get sidetracked by the “I was delivering pizzas a year ago, and now I’m making $100K in cash flow a year” stories because you are setting yourself up for a big fall, even if you have lenders or private money willing to back you. You still owe the money, tenants are still liable to skip paying rent, and repairs will inevitably need to be done. 

So focus on the hard work of saving cash and explore the joys of eating beans and rice a few times a week. It’ll be worth it in the long run.

Dave:
15 years ago, Matt McCurdy had everything most people want, a fresh MBA, a stable corporate job, and a clear path to retirement in 30 years. There was just one problem. He didn’t want to wait 30 years. So he sat down, wrote a business plan for real estate investing and bought his first rental property. Then he bought a few more. When his stable job became not so stable and he had to leave his W-2 job a few years later, he didn’t panic. He already had a backup plan generating income for him. So he decided to go all in on real estate and continue to build an impressive rental property portfolio. Today, Matt owns more than 50 properties and has a cheap financial freedom decades earlier than he would have if he had stayed in that cubicle. Matt took his financial future into his own hands instead of relying on a corporation and you can do the same thing.
Keep watching to find out how.
Hey everyone. I’m Dave Meyer, Chief Investment Officer of BiggerPockets. Today’s show is an investor story with Matt McCurdy from Cedar Rapids, Iowa. Matt’s going to share his story of how he escaped the corporate treadmill by buying great cashflowing properties in Cedar Rapids, Iowa. In this show, we’ll talk about why he waited almost 18 months to buy his first property, how he navigated a crossroads of whether to stay small or keep scaling, and how he bought 20 homes in a single deal with only $30,000 in cash. That actually happened. It’s a great story and there are a lot of lessons that all of you can apply to your own investing careers. So let’s bring on Matt. Matt, welcome to the BiggerPockets Podcast. Thanks so much for being here.

Matt:
Yeah, thanks for having me.

Dave:
I’m excited for our conversation to learn a little bit about your real estate investing journey. Let’s start from the beginning. Tell us a little bit about where you were in life when you decided you wanted to get into real estate investing and what brought that on?

Matt:
Well, I was in the typical role that a lot of people are in. In corporate America, grinding away, in a desk job, didn’t really see a way out of that. I saw a corporate ladder that I was trying to climb, but didn’t see it happening as fast as I wanted it to. So read the book that everyone typically has read. Robert Kiyosaki’s book, Rich Dad, Poor Dad, and then it kind of took off from there.

Dave:
That is a common angle, people reading Rich

Matt:
Dad

Dave:
Poor Dad. How old were you at the time when you were thinking about this?

Matt:
I think I was 27 when I read that book.

Dave:
And what was your career like? You said it was a desk job. Were you making decent money, just not fulfilling?

Matt:
Yeah, decent job. Call myself middle class. Did a four-year degree from the University of Iowa and moved through two different corporate positions in the supplier management role. So got to manage a lot of suppliers through project schedules, budgets. And from there, just didn’t see a way to transition to executive level to make the money I wanted to without going through the mundane manager roles that just grind people out.

Dave:
So where’d you go from there, Matt?

Matt:
Well, I started with a simple business plan. Speaking of my educational experience, they harped on creating a business plan. And I also saw that through my corporate America experience. So I said, “Well, if it’s working for Fortune 500 companies, it probably would work for me. ” So that’s what I first started with was a simple business plan. I knew I was going to be wrong from the get- go. It took me a year and a half to actually buying my first rental property, but after that it was plug and play and rent and repeat and try to go as fast as I could.

Dave:
I love that. So tell me a little bit why you wrote a business plan. It’s not something we hear a lot about in real estate investing. What was in it and what was the point? If you knew you wanted to do real estate, why go through the exercise?

Matt:
It helped me clear up everything that was in my brain and what I was hearing, what I was reading, what I was learning to put it onto paper. And once you put that onto paper, there’s something that happens between your brain, your nervous system, everything where you are actually committing to this and you’re really thinking through it. You can have ideas all day long, but it’s one thing to be very strategic with what you’re trying to do in your business. And now you’re trying to articulate it on the computer or writing it down on paper. Nowadays, it’s through AI. Why not? It’s very simple now. So there’s really no reason not to do it.

Dave:
It’s a differentiator, right? Absolutely. So few people do it. Whatever format you want to put that in, that doesn’t really matter. I think it’s the exercise of thinking through all the variables and what you’re good at. I love that. I think it’s really good advice that people should be following. So once you did that, Matt, what was your first deal? How’d you go about actually getting in the game?

Matt:
Yeah. So the first one was a prototypical single family house that was three bedrooms, one and a half bath house in Cedar Rapids, Iowa, not too far from a local elementary and high school. Just location-wise, it made a ton of sense. I wanted to position myself to rent to as many people as I possibly could.

Dave:
No, I mean, I think especially for your first deal, just trying to get that mass appeal kind of rental where you’re not going to have a lot of vacancies, you’re going to find a high quality tenant. It just makes a lot of sense. What was it like though? How mu did you buy it for? How’d you finance that?

Matt:
Yeah, I bought it for $92,000, which sounds ridiculous nowadays. It does. It does. Which still, this kind of shows you where I was at in Cedar Rapids in particular. We’re right around probably 225 to 250 for that house nowadays. I was always looking to force appreciation and really through that was just buying a house that needed some work. So this house needed about $15,000 worth of work. Some of it was sweat equity. My fiance and I did at the time, but that was a three bed, one and a half bath that we made a four bed, two bath.

Dave:
Okay. So you were doing real value add. This wasn’t just cosmetic. You was doing some structural stuff. And you did all the work yourself?

Matt:
No. So I would say half and half. I had a contractor. My actual father-in-law helped me on some stuff too. Nice. Because my wife and I, or my fiance at the time, both of us had W2 jobs. So we were very busy, but we were burning the candle at both ends, going over there after work, working on weekends, just doing anything and everything, kind of clawing to scratch and claw to get that put together.

Dave:
How long did that take? Well,

Matt:
We closed December 13th and we had a tenant in there January 1st. Oh,

Dave:
Okay. Oh

Matt:
My gosh. We were messing around and that’s-

Dave:
Yeah, we’re in celebrating the holidays that year.

Matt:
No, we did. We bought this house in December of 13th of 2013. We got married January 11th of 2014. So roughly a month later, we went from renovating this house to getting married. I can remember many, many nights. It’d be midnight, one o’clock, and we were just going after it. But we’re young and stupid.

Dave:
Yeah. I mean, it helps sometimes to be young and stupid, at least in my case. Yeah. Well, good for you. I mean, that’s kind of the hustle that it takes, man. This is a lot of times when you’re just getting started. You just got to do what it takes. It’s going to be different for everyone, but recruiting your father-in-law, doing the work yourself, figuring out a way to get it funded, that’s usually what a first deal looks like. I know a lot of people want to raise private capital or do something advanced to start, but I think the hustle approach is not only the most common way, but often the best way you learn a lot, you learn what you like, what you don’t like, what to avoid in the future. And whether or not, honestly, if you’re going to like this business, but I assume since we’re talking here today, Matt, that you liked it, even though it sounds like a stressful couple of weeks and a very big push to get this thing open, sounds like it worked out well for you.

Matt:
I had my idea and I went with it. I’m too stubborn to stop. I learned, speaking of learning some things, I did not scope the sewer line. And that house unfortunately had Orangeburg sewer lines, which people don’t know what Orangeburg was. It was this magnificent revolutionary product back in the ’60s that they put in a lot of houses for sewer lines. And it was wrapped with some kind of cardboard paper type exterior, which go figure in the ground. It’s eventually going to rot and fall apart. So on our honeymoon, I was getting phone calls and I was actually dealing with a collapsed sewer line and tenants that were fortunately patient with me and were able to get some people to help while I was out of state.

Dave:
Yeah. These are the things you learned, right? Now, I’m sure you get a sewer scope on every deal you do. So sounds like a great first deal, Matt. I want to hear about what you did next, but we got to take a quick break. We’ll be right back. As a host, the last thing I want to do or have time for is to play accountant and banker, but that’s what I was doing every weekend, flipping between a bunch of apps, bank statements, and receipts, trying to sort it all by property and figure out if I was actually making any money. Then I found Baselane and it takes all of that off my plate. It’s BiggerPockets official banking platform that automatically sorts my transactions, matches receipts, and shows me my cashflow for every property. My tax prep is done and my weekends are mine again. Plus, I’m saving a ton of money on banking fees and apps that I just don’t need anymore.
Get a $100 bonus when you sign up today at baselane.com/bp. BiggerPockets Pro members also get a free upgrade to Baselane Smart that’s packed with advanced automations and features to save you even more time.
Welcome back to the BiggerPockets Podcast. I’m here with investor Matt McCurdy, talking about his first deal, how he hustled into a single family home in Cedar Rapids, Iowa. Matt, after that first deal, you had a couple hiccups, but it sounds like overall it went well for you. What’d you go on and do after that?

Matt:
Unfortunately, I didn’t have a bank role. I didn’t have the idea of syndications back then. So I really just used my W2. I did the old fashioned way, saved a lot more than I spent. We were living pretty broke just to try to save every dollar because every dollar and cent got me closer to my end goal, which was ultimately to leave corporate America. So the faster I did that, the quicker I could get to it. So short-term sacrifice equals long-term gain, and that’s the way I look at it. So 2014, we just bought a couple properties, two single family houses, and then in 2015, we really scaled up a lot quicker with four duplexes and then I want to say three additional single family houses.

Dave:
And you were doing that just still with your W2?

Matt:
So that is part of it. The other part is, unfortunately, my wife, her mom passed away in November of 2013. I’m sorry. We had that on the front end, bought that first house and then got married. So we had a- Wow. Like I said, a busy couple months.
But we used some of that life insurance money to help pay for the down payment on those four duplexes. We still have those four duplexes. We still talk about how those are Karen’s duplexes. It’s just a great way to remember through that. But what we also did was find a different financing, basically a local credit union, and that loan officer was a lot more aggressive than what I was used to dealing with with the first few properties. And that’s something I’ll always advocate to do. I’m doing it right now. I’m actually trying to shop around different insurance companies, always trying to shop around, not necessarily rub it in the current people’s face that you’re doing it, just do it kind of behind the scenes and see if there’s other better options out there. And luckily we’re able to find a different loan officer that took a little bigger of a chance with it, did some bridge loan stuff with us and made it work so we could tackle those four.
It was a bigger bite than I was used to taking buying four duplexes all at the same time, but they’re all on the same block. Tons of synergies there. And then really once you hit five or more, it starts snowballing where it becomes- I agree. Instead of hundreds of dollars, it becomes thousands of dollars. And now thousands of dollars just sounds better.

Dave:
Yeah. It also buys more.

Matt:
Yeah, it does. It really does. And then every dollar that you’re taking from that, especially if you have a W2 job like I did, it was just compounding so much faster for me.

Dave:
It really does. Between the equity you’re building, the cashflow you’re getting, you’re saving more money, it really does have a exponential effect. People call everything exponential growth, but it actually can be exponential growth if you’re reinvesting your profits in the way that you should. So it sounds like you grew fast, Matt, but you were working at the same time. Your goal though was to quit your job. So did you have a number in mind, like, if I can get to X cashflow a month, I can quit my job and I need Y number of properties to get that cash flow. Is that what you were working towards?

Matt:
Yeah. And I was just trying to keep it simplistic. I ended up leaving corporate America in 2017, or corporate America left me is how that went.

Dave:
Oh, you lost your job?

Matt:
Yeah. So they moved my job to corporate headquarters and I didn’t really want to move there. Oh, fair. It didn’t really make sense for me to move, number one. And number two, I was planning on leaving in April of 2017, but they actually gave me severance until about April of 2017.

Dave:
Is it funny how some things work out like that?

Matt:
Yeah.

Dave:
It’s like meant to be.

Matt:
It is. So what I was doing around that was like $500 a month per property.

Dave:
Wow. Okay.

Matt:
So that’s what I wanted. I think I had about 20 properties at that point. Oh,

Dave:
So you’re making like 10 grand a month in cashflow, which I mean, tax advantage cashflow too. It’s probably more like making 12 grand or 13 grand in W2 income.

Matt:
Yeah. And looking back on it, I was naive like, “Oh, is this enough?” Because as real estate investors, we know how much our P&I, principal and interest are, the insurance, the taxes, all those things weren’t as crazy as they are now.

Dave:
No, it

Matt:
Was much easier. They were more stable. Nowadays, it’s a little different, but the big variable was your maintenance and repairs. “What’s that going to cost? What if five furnaces go out this year? Oh, man. “But it still felt weird because I went through the American educational system. We are not taught to become entrepreneurs. We’re not taught to be out on our own. We’re taught to get good paying jobs and then go retire and then die. It still felt raw and weird, but- I

Dave:
Bet. It’s all

Matt:
Right.

Dave:
It’s also kind of addicting when you have the cash flow and the W2 income, it takes a little pressure off the real estate side, at least speaking from experience. You have all this income that I think for most people covers your living expenses and then everything else you could just keep reinvesting and reinvesting, but I’m sure you have to change your strategy a little bit because now you’re living off that cashflow and it’s not just pure reinvestment into your

Matt:
Portfolio. Absolutely. At first, I said I was retired and then I was like, ” Wait a minute, my friends are making fun of me. Call me the retired guy.

Dave:
“And

Matt:
I was like, ” No, I graduated from corporate America. “There you go. I graduated
Because flash forward to 2018, I was never busier. I couldn’t believe how I went from fishing and golfing and trying to fill my time in 2017, see where I would go to just putting on the full throttle in 2018 and acquiring as much as I did. But it was a good reset because I didn’t know where I was going to go. I wanted to make sure my numbers were right. I still couldn’t believe that I wasn’t going to get hammered with taxes. I was just used to that mindset of the W2 where you get hammered with taxes, you’re meant to kind of be average and work through whatever they tell you to do. Whatever HR tells you you can have for a raise, whatever they tell you, you can have for a bonus, you accept and you move on. And now I’ve entered a new space where it’s up to me what I make.
It truly is. And it’s-

Dave:
Yeah, it’s

Matt:
So

Dave:
Liberating.

Matt:
It really is. It’s very liberating, but also scary. Where are you going to come up with the money to grow at this point? Where are you going to come up with the money if some of these risks actually come to fruition?

Dave:
I think it’s cool, the idea of just taking a little bit of time off. It helps reinforce that you really want to do real estate because if you have enough money to go play golf and go fishing, and then you’re like, ” Actually, I like doing this. I want to keep growing. I enjoy this. “And I think that’s where it goes from exciting and motivating because there’s this financial element to being fun and fulfilling where it’s like, this is a business and it’s something that matters to me more than just the dollars and cents. So in 2018, when you dove back in, where did you apply your time and your energy?

Matt:
It was the first time I acquired a package of single family houses. And that’s a really good niche if you have the capital or you have the leverage to be able to do something like that. And this package was sitting on the MLS. Oh, wow. Really? It was just sitting there underrented and that’s what turned a lot of people off. They didn’t understand what the market rent was for this portfolio. To give you an idea, those were $114,000 houses times 10, so 1.14 million. And I was able to cross collateralize some stuff. And I was a real estate agent, used my commission for some of the down payment, representing myself as a buyer. So I only brought, I think, maybe $100,000 to the 20% down.

Dave:
Oh my God, that’s amazing.

Matt:
So fast forward roughly eight years. Some of those properties are pushing 200, some of them are 250, $250,000.

Dave:
On average, double basically.

Matt:
In 2018, some people were talking about, well, maybe we’re overpriced at that point. But going back to my business plan, I would’ve shied away from that because I wasn’t making $500 a month in cashflow before repairs and maintenance. I was only going to make about 350 to 400 there. But the way I justified it is, do I want to grow? Number one, the answer was yes. Number two is, okay, what have I been doing in the past to make that 500? And it was to renovate a lot of these houses. And there were only about one or two of them that truly needed renovated. The rest of them were just plug and play and we were able to keep a lot of those tenants in place even after major rental increases.

Dave:
I mean, I think this is part of the trade-off that you have to make. It’s like you make more if you dive deep into one property, if you’re going to do value add. But sometimes when you want to scale, like Matt’s talking about, you have to give up some of the immediate upside. It’s not giving up the long-term upside, but you can’t renovate 10 properties all at once. I would imagine in your position, you’re buying 10 and you say, “This is more of a turnkey kind of thing. I might make a little bit less per unit on this, but I’m getting 10 all good deals at once, even if they’re not all home runs.” That’s just part of the trade-off as you scale, is just figuring it out. You want to do one great deal at a time or a couple pretty good deals at a time.
I think when you’re at the point Matt was at a couple pretty good deals makes a lot of sense. So Matt, I want to hear more about how you took this over because I do think people are sleeping on this idea of acquiring portfolios as they scale. You were able to not put that much down. It might be more accessible than people think. We’re going to dig into that, but we got to take one more quick break. We’ll be right back.
Welcome back to the BiggerPockets podcast. Matt McCurdy and I are here talking about his journey from buying a single, single family home in Cedar Rapids, Iowa to buying a package of 10 properties in 2018. Let’s talk a little bit about these 10 properties because it sounds great. You only put a hundred grand to buy $1.1 million of properties, but I would imagine taking over these properties all at once is kind of like an operational challenge. What was that like?

Matt:
It is. And then the part I didn’t tell you, we actually were expecting our son, he’s now seven, but he was born in mid-November of 2018. We closed on those right around Halloween of 2018. Oh my

Dave:
Gosh. So everything all at once.

Matt:
Yep, of course. That’s the way I roll. But at that point, my wife had a little bit of feedback for me. The question was, how are you going to manage all these? Because at that point I was self-managing everything and I started my path of hiring a property manager. And what I did was I still self-managed most of my portfolio, but everything I was acquiring moving forward, I was giving to a property manager because I was still being cheap and scarcity mindset of just not wanting to give over everything because I didn’t value my time as much as I probably should have.

Dave:
Did you hire a firm or were you trying to hire a person who actually worked for you and just managed your rentals?

Matt:
He was more of a mom and pop property manager versus ABC property management company kind of thing.

Dave:
Personally, I find those people to be more effective.

Matt:
This one wasn’t.

Dave:
Oh, no. Uh-oh.

Matt:
Yeah. I went through two, one every year and then finally ended up hiring someone in- house and to this day he’s still my property manager.

Dave:
Yeah. I mean, that’s kind of the dream, right? The

Matt:
In- house property

Dave:
Manager.

Matt:
That’s the ideal world.

Dave:
Did it at least give you confidence that you could keep scaling from that point? Having hired a property manager, did that mean you could go out and buy more units? Did you want to go buy more packages? What did that open up for you, if anything?

Matt:
It helped me to really develop that team that Robert Kiyosaki talks about, develop that team. You got to have a team and maintenance and repair contractor type workers are just, they’re tough. They’re really tough to find because all those property management firms have those contractors and you pay for them sometimes dearly, but getting some of that control back was definitely a blessing for the portfolio.

Dave:
So Matt, after you did this, 2018 still, you started to systemize this business, you’re now not working in corporate. Catch us up to what you’ve done between 2018 and today. I

Matt:
Started looking at mobile home parks and I acquired a couple of those, one in 2020 and one in 2021, but I still didn’t take my eyes off of the single family duplex area that really has been my bread and butter. And I ended up acquiring another package in 2023 back again, prices are white hot, shouldn’t be able to get anything. And I ended up buying a package of 22 houses.

Dave:
Oh, whoa. In Cedar Rapids still? All the same?

Matt:
Yeah. Yeah. Yeah. And again, that was another thing where I lowered my cashflow expectations, but I ended up buying in for the equity.

Dave:
Because you got such a good price?

Matt:
Yeah, it really made a ton of sense. I’ve combed through those numbers so many times I couldn’t believe what I was actually buying. I’m pretty sure from purchase price to appraisal value, it was roughly a million dollars difference. And that was me not turning a wrench on anything.

Dave:
How would you not do that, right?

Matt:
Yeah.

Dave:
How did that come about? Were you looking for a package or did it just kind of fall into your

Matt:
Lap? That’s a funny story. I’m a real estate broker in Cedar Rapids, and I actually helped this client for the first property he ended up selling, but he just kind of started going with another agent and I guess she convinced him to put him into a package or maybe he got tired of dealing with the onesie-twosie sales that I told him to do and he just wanted to be done and out and just the timing was right. There was a little bit of a lull in Iowa in the fall of 2022 and early 2023 where things were just kind of sitting a little bit longer than they had in the past. And everybody was thinking, “Oh, I’m going to have my house listed, have 10 offers in the first 10 hours kind of situation.” And then when that didn’t happen, people kind of panicked. So I actually told the agent, I said, “I don’t know how he’s going to react to me even offering on these.
He has my phone number. He could have totally just reached out to me and saved himself all his commission.” But again, I was representing myself as the buyer and got commission to buy my own properties. And that one, I didn’t bring much to the closing table either because I was able to cross collateralize one of my mobile home parks and use my commission. I think I brought like $35,000 in cash to closing for- Wow.

Dave:
That’s unbelievable.

Matt:
$2.2 million purchase.

Dave:
Unbelievable. Yeah.

Matt:
It’s all about getting creative.

Dave:
So Matt, we got to get out of here, but maybe just tell us before, what does your portfolio look like today and what are your plans for the future?

Matt:
Yeah, so my portfolio, I have roughly 50 buildings. So between single families, duplexes, 60 front doors, and then I have about 90 mobile home lots that are filled with about a hundred additional lots that I need to infill for mobile home park stuff. And then just recently wrote a book, got it published right before Thanksgiving.

Dave:
Congrats. What’s it on real estate?

Matt:
Yeah. Yeah. Awesome. I call it the guide to buying one to four unit real estate. And just kind of really the idea was to write something. I never wanted to be an author, but I have a son that’s seven and I’m not sure if he wants to be in real estate or not. But if I got hit by a bus, I have all this knowledge that I haven’t shared with him, nor could he comprehend right now just at his age. So I just wrote 15 chapters in this book of things that I really think are critical for investors to understand. And it’s certainly only, I think, 160 pages long. So it’s not terribly in depth to the point where you have all these strategies, but at least it gives you an idea of understanding things. And I try to put in stories and humor to make it fun and real life concepts kind of like what I’ve shared today in that.
So yeah, the book’s called Corn Fed Millionaire Playing upon all these farmers in Iowa.

Dave:
That’s awesome.

Matt:
I’m not a farmer if you’re wondering. Is it

Dave:
Out yet?

Matt:
Yeah. Yeah. We published it right before Thanksgiving of 2025.

Dave:
Awesome. Well, check it out. Corn Fed Millionaire. I love the title.

Matt:
Yeah. Yeah. And you can check me out. I have a real estate brokerage firm and anybody that’s looking at Cedar Rapids market, you can go to investoredgere.com/biggerpockets and you can get a free Cedar Rapids market report, kind of tell you what’s been going on. We’re like every other metro in the country. We have a couple data centers that are They’re coming online and just a ton of rental demand that we’re seeing from that.

Dave:
Well, Matt, thank you so much. Congrats on your success and thanks for sharing your insights with us. I know probably buying packages of houses sounds difficult, but if you look at the way Matt sort of methodically went from hustling his first deal to getting a little bigger to getting a little bigger, that’s how you scale. You have to put in that effort upfront and then these opportunities, it does start to snowball, whether from your financing or your deal flow. This is how you build a successful real estate investing career. It takes 10 years. It takes 15 years, but you can absolutely do it. And Matt, congrats on all your success. It sounds like you’ve really done it all the right way and happy to hear that this has worked out for you in the way you were hoping.

Matt:
Yeah. Thanks a lot. Thanks for having me.

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

Indianapolis and the state in which it sits, Indiana, couldn’t be further apart when it comes to their real estate fortunes. For mom-and-pop landlords eyeing Indiana for future investments, the sharp divide between parts of the city and state is indicative of the modern-day market realities that need to be considered when underwriting deals.

Indianapolis: Zillow’s Top Buyer-Friendly Market

Indianapolis has been on investors’ radars for some time, culminating in Zillow ranking it as the most buyer-friendly market among the 50 largest U.S. metros for 2026. The listings giant cited a perfect storm of buyer favorability.

Orphe Divounguy, senior economist at Zillow, said of the list, which featured mainly Midwestern and Southern cities:

“Home shoppers have room to breathe in these buyer-friendly markets. Lower competition gives buyers more time to decide and wiggle room to negotiate, adding up to a less stressful shopping experience. Cooling prices today, paired with expected growth ahead, make for a good entry point for those who have been waiting for the right moment. For sellers, pricing strategically from the start becomes that much more important when buyers hold the power.”

Affordability Is a Key Driver

“People are gravitating toward this area due to the market affordability,” Laura Turner, a broker and owner of F.C. Tucker Laura Turner Realty Group, told local news outlet WRTV. ”Nationally, they may be spending 50% to 60% of their income [on their mortgage]; here, it’s 30% or less of their income.”

“Companies are going to be looking at this area to say we want to locate headquarters to Indianapolis,” Turner continued. “Because of the affordable housing, because this is a destination that people are wanting to raise their families in.”

For smaller investors looking to augment their incomes with additional cash flow, Indianapolis works because entry-level prices and cap rates make turning a profit or at least breaking even a real possibility, even as interest rates flutter around 6%. However, Indianapolis also serves as a cautionary tale for what investors need to watch for when scouting markets.

Regional Indianapolis: A Tale of Two—or More—Cities

Metro Indianapolis, like Pittsburgh and Detroit and other older Midwestern cities, functions as a regional system rather than a single city. Commuting patterns and housing patterns mean that neighboring regions are often influenced by one another.

Stats show that growth across all regional areas does not happen at the same pace, and generally, regional growth, where residents can live and work, has grown much faster than city growth in the downtown areas. 

The same is true of Indiana as a whole. Recent metro growth in suburban neighborhoods in central Indiana has not been matched by growth in the denser city centers, which have suffered. 

According to Indianahub.org, the state’s growth has spread out into:

• Logistics corridors
• Suburban office nodes
• Life sciences clusters
• Industrial parks

However, in the city center, signs of urban decline are evident. According to Axios, the Indianapolis metro area grew by 2.2% between 2020 and 2023, making up half of the gains in Indiana’s population.

Indiana’s Foreclosure Problem Uncovered

According to real estate analytics and data platform ATTOM, Indianapolis ranked near the top of national foreclosure rates with roughly one filing for every 1,249 housing units in February. Another Indiana city, Evansville, recorded one for every 1,316 units, giving it a top-five foreclosure berth alongside the state’s capital.

Indiana’s dive into foreclosure despair hasn’t been sudden. Last year’s ATTOM foreclosure reports showed one filing for every 302 housing units, signaling a multiyear blip, comprising homeowners who, amid job losses, inflation, and rising interest rates, simply don’t have the money to pay their mortgages.

How Exactly Can Indianapolis Be the “Best” and “Worst” at the Same Time?

If Indianapolis were a comic book character, it would be the Joker, wearing two expressions at the same time. But how does a mild-mannered Midwestern city manage to have such an extreme split personality? 

It’s because we are not comparing apples with apples. The Zillow report focuses on conditions facing would-be buyers today—mortgage affordability, competition levels from other buyers, and expected appreciation. ATTOM, on the other hand, focuses on borrower distress among existing owners. Also, ATTOM’s figures account for households that fell behind on payments months or even years earlier, reflecting economic conditions over a long period, some stemming from the forbearance conditions put in place after the pandemic.

The Idiosyncrasies of the Indianapolis Market

Indianapolis is a unique market in many ways because it is many things at once. Regarding its foreclosure ranking, the city had a high number of “zombie foreclosures,” according to ATTOM data: 6.5% of foreclosures stemming from financial mishaps years earlier, often in the form of vacant or distressed houses.

“ATTOM’s data doesn’t pinpoint the local nuances behind why certain metros stand out, but in parts of the Midwest, it likely reflects a mix of older housing stock, slower demand in some neighborhoods, and ownership or equity situations that make distressed owners more likely to walk away early,” Rob Barber, CEO of ATTOM, told Realtor.com. “Those conditions can increase the chances that a foreclosure becomes a zombie, even though overall zombie rates remain low nationally.”

Investors Are Flipping Foreclosures Into Rentals

Additionally, because of Indianapolis’s unique regional layout, many disparate areas—some thriving, others struggling—are included in its overall reported numbers, creating a somewhat confusing picture.

While the investor heat has been turned up on Indianapolis for a while, with out-of-towners rushing in to rehab and rent, many locals feel this has only contributed to the real instability, taking homes away from local owner-occupants.

“Far too often, when these homes end up going into foreclosure, they end up being purchased by out-of-state investors, who then flip them into expensive rentals,” Amy Nelson, executive director of the Fair Housing Center of Central Indiana, told Indiana Public Media (IPM).

Final Thoughts: How Out-of-Town Investors Should View Indiana

Overall, Indiana’s foreclosure numbers are not off the scale and reflect normalization after years of housing instability rather than a crash. In ATTOM’s national release, CEO Barber emphasized that even with year-over-year increases, “overall foreclosure levels remain well below historic norms.”

Realtor.com noted that foreclosures in Indianapolis and other Midwestern towns actually represent an opportunity for new investors. However, as with any investment, due diligence is required, especially with an out-of-state investment where you cannot just jump in your car to check on your rental. That means meticulous tenant screening, hiring the right property manager, and doing your homework on which neighborhood you are investing in.

In Rust Belt Midwestern cities like Indianapolis and Pittsburgh, neighborhoods can change not only from region to region but also from block to block. FHCCI’s review of Marion County pinpointed specific neighborhoods such as Crown Hill, Near Northwest-Riverside, Maywood, Near Southside, and Martindale Brightwood as having the highest foreclosure rates, with the far Eastside also flagged for heavy out-of-state investor activity. Homes in these neighborhoods will need to be examined block by block. It’s also probably best to examine alternative neighborhoods to stave off competition.

It’s important not to believe all the investor hype about Indianapolis, which would have you think that, amid the deluge of new residents, jobs, and affordable housing, you can throw a dart anywhere on the city map and make money. Mortgage rates, employment, and tenants’ profiles are only part of the picture.

“It is rising escrow costs, for instance,” FHCCI’s Amy Nelson told WBOI News. “Although your mortgage payment very often hasn’t changed much, it’s the other costs that have, and that can be home insurance rates, which have been escalating, and utility costs and property taxes, all of which can have a significant impact.” 

Talk of lower interest rates has sparked hope that house flipping could make a comeback. Guess what? It never left. 

According to a new report from New Western, a marketplace for off-market properties for investors, local flippers supplied 217% more starter homes to the market in 2025 than homebuilders did, reshaping the narrative of how first-time buyers find affordable houses.

Why It No Longer Makes Sense for Builders to Construct Smaller Homes

Like the dinosaur, starter homes once roamed across the length and breadth of America until a cataclysmic event—the COVID-19 pandemic and rising interest rates—made them an endangered species. In particular, the new construction of starter homes dwindled. 

The New York Times, citing data from the Federal Reserve Bank of St. Louis, recently reported that builders broke ground on 1.36 million homes in 2025, slightly down from 2024. Given the 4 million-home supply gap reported by Realtor.com, there is still a significant void to fill.

“It has become more expensive, almost financially not viable, to build what we thought was a starter home: a 1,000-square-foot home,” Christian Kosko, a D.C. mortgage lender who often works with younger buyers, told the Washington Post. “They’re now incentivized to build million, million-and-a-half, $2 million homes. That’s where the profit is for those builders. The ramp-up in interest rates has made numbers for building smaller homes no longer work, even when they are mass-produced.”

Zillow senior economist Orphe Divounguy told the Post:

“In 2022, when mortgage rates more than doubled, the builders started to build smaller. They tried to make the math work for potential homebuyers. But prices have increased so much, it’s still very difficult to afford a home, especially in markets that don’t allow for building on small lots.… When a builder goes in there and tries to actually build something that would sell in today’s market, they just can’t.”

Flippers Have Flooded In to Fill The Void

The potential for a starter home comeback was always there. Entry-level homes have been the hardest-hit segment of the building drop-off, falling from 40% in the 1980s to just 7% today, according to the Home Buying Institute. 

The supply of older homes, ripe for renovation, remained, waiting for investors with cash and contractors to turn things around. New Western’s Flip Side Report, based on dozens of major U.S. markets, found that local independent investors delivered 120,193 entry-level homes to the market in 2025, compared to 37,923 starter homes delivered by builders, marking the previously mentioned 216.9% edge for flippers.

In a recent press statement about the report, New Western cofounder and president Kurt Carlton said: “What if the real housing crisis isn’t that we haven’t built enough homes, but that we’re letting millions of starter homes disappear? Fixing today’s housing challenge isn’t just about building more homes. It’s about whether attainable housing actually exists at the entry point.”

Carlton added that in 2025, “small, local independent investors quietly became the largest supplier of starter homes in America,” not by building subdivisions but by “revitalizing existing homes that would otherwise remain underutilized and returning them to productive use.”

Amid Rising Construction and Labor Costs, Fully Finished Homes Carry Increased Appeal

In a 2026 prediction article, Forbes outlined the appeal of renovated and furnished homes to prospective homeowners over fixer-uppers. Shaun Pappas, partner at Starr Associates, said in the article:

“We also anticipate continued bidding wars for properties that are ready to move into. The continued rise in construction costs, including labor and materials, has made it more difficult for home purchasers to buy and perform renovations. Therefore, we see a potential decrease in the housing prices for homes that need renovation work, and an increase in housing prices for homes that are ready to be occupied.”

Starter Homes: A Close Relationship With Cash Flow Investors

Whether you’re a flipper or small landlord, starter homes are likely at the center of your investing equation. For flippers, the relationship is obvious: demand. Given the affordability crisis, smaller homes are not only an entry point for many but also a longer-term option, doubling as empty-nest residences for older homeowners.

New Western’s analysis shows that renovated homes are usually priced well below new construction and often below the median price of homes on the market, making them an attractive proposition for small investors looking for long-term holds and cash flow. A previous report from New Western showed that revitalized homes are 35% to 80% more affordable than new construction in most markets, and 17% more affordable than the market median existing-home sales.

The vast pool of older housing means there is also a large potential for BRRRR flippers once interest rates drop, or for those who have the cash on hand to undertake a rehab project for rent and refinance at a later date.

Small Multifamily Homes are the New Starter Home

According to Realtor.com, based on data from the National Association of Home Builders, small multifamily homes of two to four units are filling the new-construction starter home gap. Financing is easier for these builders as they are larger and make financial sense for homeowners because the rental income offsets the mortgage payment.

Investors could look into buying these too, especially newer investors looking to kick-start their landlording journey, because they qualify for FHA loans that require a 3.5% down payment. By rinsing and repeating, while refinancing the former personal residence into a conventional mortgage, investors can accrue a sizable portfolio in a short period of time.

In many cases, the urban infill lots accommodating small multifamily properties have replaced older single-family housing stock as zoning laws have changed to allow more housing. In newer developments, outside city centers and established suburbs, two-to-four-unit homes sit alongside townhouses and single-family homes.

“In both cases, the appeal is affordability and access to a neighborhood that can’t always be attained through the traditional single-family home path,” Realtor.com senior economist Joel Berner said in a press release. “These townhomes or duplexes offer entry-level buyers the opportunity to own a home in a neighborhood they like without spending more than they can afford.”

Final Thoughts: Best Cities for Investing in Starter Homes

The scope for generating cash flow from starter homes is only going to increase as a slate of zoning reforms moves through the legal system to increase housing across the country. Often, that means building small multifamily units in place of older single-family homes. In others, it means constructing ADUs where lot size allows, while also renovating the existing single-family structure. In all instances, opportunities for flippers and landlord investors in the starter-home space are considerable.  

Some cities are more favorable to investors seeking starter homes than others. Most tend to be smaller metro areas in the Northeast, Midwest, and South, as this Realtor.com report shows. Cross-referencing that report with this comprehensive analysis from Construction Coverage using data from the U.S. Census Bureau, Zillow, Redfin, and Freddie Mac will give you an accurate reading as to where to begin your starter home investing career.

Ashley Kehr:
What if the biggest mistakes in real estate don’t happen at the closing table? They happen in the three decisions you make before you even write up an offer.

Tony Robinson:
Today we’re answering three questions straight from the BiggerPockets forums that every rookie has to work through before deal one. How to pick a market when your own backyard does a pencil, whether to buy a rental or a primary residence first when you’re just starting out, and what you actually need to know about short-term rental regulations before you bet your strategy on Airbnb.

Ashley Kehr:
This says the Real Estate Rookie Podcast. I’m Ashley Kerr.

Tony Robinson:
And I am at Tony J. Robinson. And with that, let’s get into our first question, which comes from the BiggerPockets Forums. Now, this is a longer question, so I’m going to paraphrase a bit here, but the question that basically says, “I’m an aspiring investor living in Los Angeles and investing locally is basically out of the question. Even a house hack in this city is tough right now. Anything with an ADU or multiple units in a decent area is well above the $1 million mark. So I’m stuck at the stage of choosing a market. I’m looking for out- of-state opportunities where I can actually cash flow. What criteria should I be using and how do I narrow down from the entire country to one place that I can actually commit to? ” It’s a great question, and it’s one that a lot of rookies honestly get stuck on initially is where do I invest?
Now, I’m just going to talk strategically here for a moment because I think it’s an important foundation to lay. There are over 20,000 cities in the United States, 20,000. So the chances of you finding the Goldilocks city that is the absolute perfect match for you, or like the Cinderella slipper, where it is the absolute perfect city for you. It’s going to be tough. With 20,000 cities, there are probably hundreds, if not thousands of cities that you can invest in that would make sense to help you achieve your goals. So the thing that you should be focused on is not what is the absolute best city for me to invest into. The thing you should do first is ask yourself, what do I want out of a city? What are my investment goals? What boxes does a city need to check to give me confidence to invest into it?
Because when we then start with ourselves and we have a clear set of criteria, all we then have to do is compare our criteria to the cities that we’ve come across. And if they match, well, then we simply add them to our list of places to invest. And if it doesn’t match, we set them to the side and we can do so confidently, and then we move on to the next. So just from a strategic standpoint, I want you to rewire how you think about market selection. Once you’ve got that set aside and you’re okay with the fact that we’re not looking for the Cinderella city, we’re just looking for the cities that match, then there are some basic data points that we can look at. Now, you didn’t mention what strategy you’re focused on, but let’s just assume you’re focused on things like traditional long-term rentals.
And if that’s the case, some of the basic things we’re looking at are population and job growth. Is that happening in the cities that you’re considering? Is it a city where there’s a lot of people leaving or is it a city where there’s a lot of people coming in? Landlord friendliness, right? How easy is it be to actually be a landlord in that specific city? Are you in a place like where me and Ashley live, California, New York, which are some of the toughest states to do that? Or are you somewhere like Texas where maybe there’s a little bit more flexibility or favor towards the landlords? Price to rent ratio, right? The price of the home compared to the rent, is it a healthy ratio? Is it 0.25%, which would be pretty low? Or is it a market where maybe you can still hit the 2% rule, which maybe doesn’t happen as much these days.
But those are the big things we want to look at. What are the data points within that market that suggests if it actually supports the strategy that I’m looking to go after?

Ashley Kehr:
You can also go to biggerpockets.com/markets, and this will actually take you to a market finder that will help you analyze a market based upon your goals and what you’re trying to achieve and basically everything Tony just said. So you can find that at biggerpockets.com/markets. Okay. Coming up, you’ve identified a market. Now the question is, what you actually buy first? Is it a rental or maybe your primary residence? For investors in their 20s with limited capital, this one decision could shape the next decade. We’ll be right back after a word from a show sponsor. Okay, welcome back. So let’s say you’ve done the work, you’ve got a market in mind, you’ve been saving up and you’re ready to make a move. But now comes to a question that trips almost every early 20s investor up. Do you buy rental first and keep renting yourself or do you buy a primary and start building equity in the place that you live?
So this question comes from the BiggerPockets Forums and it says, “My husband and I are in our early 20s and we want to buy a house, but we’re trying to decide if it would be better to buy a rental property instead.” We’re okay with house hacking if there’s a separate kitchen and living space. We want to be financially independent by our early 40s. Should we use a 3% down payment on a rental or buy a house to live in for our first property? For reference, we make about 85K combined pre-tax. Okay. So everyone’s sick of house hacking, I know, but they did ask about it, okay? They’re okay with it. That would be my number one choice, house hacking definitely would be. But it also depends on what markets you’re in. So first, what I want you to do is to look at the purchase price, okay?
What type of property would you be able to buy? So maybe go and get pre-approved and see what your actual spending limit is. Can you even get a duplex for the amount that you want to buy? Could you get a single family home that doesn’t need tons of rehab, it’s completely dilapidated for your price point. So I think right there is a great starting point. Compare your two options. If you took the money that you had and you did a 3% down payment on your primary residence, what would that get you for a single family home? Then I would also take and look and most likely, unless you found some lender I don’t know about, you’re not going to be able to do a 3% down payment on an investment property. It’s probably going to be more like 20 at 25%. And that property, if you’re just renting it out and you’re going to keep renting yourself, what would that money get you and would you be able to save up that type of capital?
So really that’s why I love house hacking is because you’re allowed to use that low primary residence loan with a low down payment to get into a property and to have it as an investment as a rental. So I think that’s a really good starting point. And I want you to think about how much money you’re saving that you would be paying in rent. If you were to live somewhere else, then I also want you to look at appreciation. When you’re comparing doing these different strategies, what house will also give you a lot of appreciation? When I started buying investment properties, they were small, little rinky dang, duplexes that had cosmetic updates, but still were like troublesome properties and they have no appreciation. I sold them for two, three times what I bought them for because I bought them so below market value and because I sold them in 2021 at the height of the real estate market since I’ve been alive probably.
And so that is literally the only reason I made money on them. So look at that too. You don’t want to give yourself a headache. You don’t want to problem property either and get into too much then you can actually take on.

Tony Robinson:
I think they’re in an incredible position, right? To be in their early 20s and they say that they want to retire, be financially independent in their early 40s. Talking two decades of time to work this plan toward financial independence. Actually, I couldn’t agree with you more on leveraging a house hack as their kind of primary vehicle here because it allows them to A, to your point, get into a property with low money out of pocket, but then B, gives them the ability to reduce their living expenses. So I’m just going to give you maybe a sample roadmap of what the next 20 years could look like. Without even being too overly aggressive, let’s say that you buy a property today, small multifamily where you live in one unit and you rent out the other units and through that, you’re able to live not even necessarily making cash flow in this deal, but you’re able to live rent free.
You have no living expenses because the other units are fully covering the mortgages, principal interest, taxes, and insurance, which is pretty reasonable today in a lot of different markets. You do that for two years. So you get to save up, let’s say that maybe you would be paying 2,000 bucks in rent, but instead you get to pocket that $2,000 every month for two years. $2,000 a month over 12 months is $24,000. That over two years is $48,000. So every two years, you get to save up $48,000. If you’re buying a primary residence, and let’s just assume for simple numbers sake that maybe you can put 5% down. You’re not even doing an FHG at 3.5%, but I’ll round up to 50 grand. Let’s say that’s a 5% down payment. At 5%, that’s a massive down payment. Let me even go a little bit smaller. Let’s say 50,000 over maybe like a, let’s go like 20%.
That’s 250,000. I don’t know what market you’re in, but let’s say every year you’re able to buy a house that’s maybe like 400,000 bucks, right? 50 grand, depending on what kind of down payment you can use, that’s pretty reasonable. So every year for two years, you’re buying a property, putting down 50 grand in another primary residence, and then you look up in 10 years and you’ve got five properties that you’ve done that with. Now you’ve had to house hack over that timeframe, but you’ve accumulated five properties. Now maybe you’re at the point where instead of house hacking, you’re just buying single family homes where you go in, you live there yourself, but now you’ve got all this cashflow coming from your first five properties that still every two years you can buy another single family home. So you have five or 10 years of buying multifamily properties, you were house hacking.
Then you had another 10 years of buying single family homes, you lived there for two years, you move out, turn it into a rental, buy another property. At the end of that timeframe, you now have the portfolios of single family homes plus a portfolio of small multifamily homes. And for a lot of people, that could get them to the point of being financially independent. So simple roadmap, but that’s my challenge to you is to work that plan. All right guys, we’re going to take a quick break. While we’re going, be sure to subscribe to the Real Estate Rookie YouTube channel. You can find us @realestaterookie and we’ll be back with more right after this. All right guys, welcome back to our last and final question. This one also comes from the BiggerPockets Forms. And it says, “I’m just starting out and I’m looking at short-term rentals through Airbnb and Vrbo, but I read that Airbnb places a maximum of 90 days that you can rent out your property as a short-term rental and will disable your listing once you hit that cap.
Is this true? I understand each city or county may have their own permitting requirements, but how are people making any return on their investment if it maxes out at 90 days?” This wouldn’t even cover expenses. Do people have to keep switching between short-term and mid-term and long-term rentals to make this work? It’s a great question. And I think that’s why it’s so important for us to do these reply episodes because we can maybe put aside some of the misinformation that’s out there about real estate investing. Airbnb as a platform does not have any cap on usage. There’s nothing on the Airbnb platform that says that there’s any sort of cap on how many nights you can rent out your property. Now, there are certain cities, counties, municipalities that do put limits on usage. For example, I was just looking at a city in Wisconsin, I think it was Wisconsin Dells, that says you can only rent your property out for 50% of the year.
So your maximum occupancy on your short-term rental in the city of Wisconsin Dells is 50%, but that is a city-based ordinance. Airbnb is a platform, does not have any sort of restriction on usage. Now, my strong recommendation to you is to, for whatever city it is that you’re thinking about, instead of guessing or taking kind of secondhand knowledge on what that ordinance says, do the research yourself. If you just type in whatever city you’re thinking about and then you follow that with the word short-term rental ordinance, typically that’ll pull up whatever information you need about that city, that county, and how they regulate short-term rentals. And even better is if you can pick up the phone and call, even better is if you can walk into the office and talk to them in person. And the things you’re trying to understand is, are there any restrictions on usage and occupancy?
Are there any restrictions on zoning? Are there any restrictions on maybe proximity to other short-term rentals? Are there any restrictions on the actual number of people that I can put into my short-term rental? Ask all the questions you have about what do I need to know to legally operate a short-term rental in this market? Some cities have a long laundry list of things you need to do. Some cities say you don’t even need anything. It’s your property, do what you want. So all that to say, there’s no cap on the platform. It’s a city by city, county by county difference.

Ashley Kehr:
Tony, didn’t you once fly to Texas to actually walk into the office to discuss short-term rental regulations?

Tony Robinson:
I did. Now we were already planning the trip. We wanted to go out there to look at these properties, but while we were there, we went into city hall. And quick backstory, we were opening up our first arbitrage units, and this was in Dallas. And literally, I think two weeks before we were supposed to fly out there, Dallas came in the news for effectively banning short-term rentals. And we’re like, “Man, that’s not great.” So we went into City Hall and come to find out, City Hall did pass this ordinance, but they had no set plans yet for enforcement because they were basically preparing for a legal battle in court. And that was, I think, maybe three years ago at this point. And that legal battle is still going on today. So there’s still tons of Airbnbs in Dallas because they haven’t sorted out what that’s actually going to look like.
So yeah, walking in and being able to talk to someone, I’ll never forget, I asked them like, “Hey guys, I saw that you guys, here’s what’s going on. ” And they kind of chuckled because they’re like, “Man, we don’t even know why this is happening and we don’t think this is going to stand.” And that gave me a certain degree of confidence that I could probably sign a one-year lease for the short-term rental and still be okay.

Ashley Kehr:
We have this ski resort town near us where they’ve changed the laws and well, they’ve changed the zoning. And so people who bought houses in 2021 by 2023, they couldn’t do short-term rentals anymore. And so it has really actually crushed the market. There are so many houses for sale because a lot of people bought short-term rentals the height of the market in 2021, and then they went and changed all the zoning. And basically it was something along the lines of like, it has to be your primary residence to be in the village. And then they changed the zoning even. So it included more properties than it originally did and things like that. So it’s really hurt a lot of investors that had short-term rentals in the area. Now the market is just saturated with houses for sale and people trying to sell them because they can’t rent them out.
And also they have less of a buyer’s market because it’s only people that can afford to have a second home in these areas and nobody that actually lives in these towns can afford these houses. So the buyer pool is very, very slim compared to if they would allow you to have short-term rentals. Well, thank you guys so much for joining us today. I’m Ashley. He’s Tony. And we’ll see you guys on the next episode of Real Estate, Ricky.

Dave:
The great stall is here, and the housing market in 2026 is shaping up mostly the way we expected, at least so far. Things are changing. There’s a war in Iran. Gas prices are rising. The labor market is weakening, and the housing market will react to all of this in ways that can introduce new risks, but can also create new opportunities for real estate investors. In today’s March housing market update, we’re going to dig into the most recent housing market news and help distill it down from overwhelming to digestible things you can actually do to grow as an investor. In this episode, we’re going to cover home prices, affordability, and inventory. We’ll also talk about how you can potentially save money on property insurance, new risks that have been introduced into the market, and the best opportunities where investors should be focused in March 2026.
Hey, everyone. Welcome to the BiggerPockets Podcast. I’m Dave Meyer, investor, chief investment officer of BiggerPockets and Housing Market Analyst. Today, we’re doing our monthly housing market update because you probably already know this, but things in the economy are changing rapidly. We’re seeing bigger regional variances. The economy is sending mixed, and I’ll be honest, sometimes scary signals. It could be a lot to take in, but don’t worry. I got you covered. I’ve read all the news. I’ve analyzed all the data. Today I’m going to help you focus on what’s important and ignore what’s just noise. First, we’re going to talk about the state of the market. We’ll look at prices, inventory, affordability, and transaction volume, so you know exactly where things stand today. Then we’ll do a deep dive into insurance prices. I’m going to share an update on my risk report to help you understand what risks exist in this market.
And then we’ll end with the fun stuff. Opportunities that are emerging in today’s market. Let’s do it. First up, we’re talking about home prices, and really not much has changed here in the last month with prices. We’re still in our weird flatish, slow correction. It’s what I’ve been calling the great stall, and that has been coming true. Prices are up nationally, somewhere between a half a percent, one and a half percent, really depending on who you ask. So they’re up nominally. That means not inflation adjusted like the price you see on Zillow is going up a little bit, but they’re actually coming down in what I think is the more important number, the inflation adjusted number. This matters for investors in terms of your return, but it also matters for overall housing market affordability, which we’re going to dig into next. Hint, basically, prices are going up slower.
Then incomes are rising, which makes affordability a little bit better. But of course, regional differences are huge right now. We’re seeing total differences between markets in the West and the Southeast than what we’re seeing in the Midwest and in the Northeast. As of right now, 40% of markets are now seeing declines. I’m guessing you can guess where those are. It’s mostly on the West Coast and in the Southeast states like Florida and Texas, Louisiana, California, all seeing declines. Some huge in Florida and Texas, but elsewhere, the declines are mostly modest in those 40% of markets. And then there are still markets in the Northeast and the Northwest that are going up. But I think the key thing to call out here is that even in those markets that are growing, the rate of growth is decelerating. It is slowing down from where they’ve been over the last couple years.
Everything in terms of prices is really starting to slow down. And that’s one of the key takeaways from the report that we have for you here today, is that if you’re underwriting deals, if you’re analyzing your portfolio, I would discount appreciation in almost every market from where it’s been over the last couple of years. I think we are going to see continuing slowing for the foreseeable future. So that means if you were seeing 5% growth, it might go down to two or three this year. It might be flat this year. If you saw flat last year, I would count on declining prices in those markets. Now it doesn’t mean you can’t invest as we’re going to talk about later. That means opportunities. You can buy at a discount. There’s going to be more deals on the market, but you got to do your underwriting and anticipate that lower appreciation.
I think that’s the main key from our pricing update here today. Moving on to our sales volume update, because in any market, we need to look at prices and volume, the total amount of things being sold. That’s how you get to a healthy market. A healthy market for housing is where appreciation is a little bit above the pace of inflation. Let’s call it 3.5%. That would be great in my mind. And where you’d see five, five and a half million home sales per year, that’s probably what a good number would be. And the good news for February, that’s the last month we have data for, is that home sales went up a tiny little bit. So that’s good. I want to be encouraged where we can, but it is up from one of the worst numbers we’ve seen in a really long time. In January, it was actually down to 3.9 million.
So way off from that five, five and a half million that we want to be at. I said this last month, but I thought the January numbers were a bit deceiving. They’re kind of a blip because they had all those crazy blizzards. And so things just slowed down a little bit. So we did see bounce back to what we’ve been seeing for basically the last four years. We’ve been at four to 4.1 million. That’s an annualized rate for home sales for the whole year. And we’ve basically been there since 2022. And I’m glad to see it bounce back because I know a lot of people were concerned in January, is it going down? It was at 3.9? Is it going to keep going down? We’re back to where we were for the last four years. And unfortunately, I kind of think it’s going to stay this way.
I think even though affordability is getting a little bit better with the labor market is where it is, people are nervous that I don’t think we’re seeing a lot of buyers coming off the sidelines. That is true. Even though mortgage rates dropped from 7.1% a year ago to about 6% right now, even with that improved affordability, that hasn’t changed. People are wary of the housing market right now. So I think, yeah, it’s going to stay slow. But there is good news in the housing market, and that is around affordability. I am stoked about this because if you listen to the show, you know I’m all about affordability. I think that’s what drives the housing market, especially in these kinds of times. And those are the markets I think that are going to perform better. And that has largely been true since I’ve been saying this for the last three or four years.
And the good news is that affordability continues to improve. This has been going on for months and it keeps getting better little bit by little bit. Now, there are different ways to measure affordability. I kind of think there are three different variables that you need to think about. One, of course, is home prices. That’s the big one, but mortgage rates matter and incomes matter. You have to look at all three of those things in some relation to each other to measure affordability. And affordability basically means how easily can the average person buy the average priced home. And to talk about that today, I’m going to focus in on one metric. It’s one that I like. It’s a good metric for affordability. It’s basically, it’s called the payment to income ratio. This is basically your monthly payment on your mortgage, your principal, and your interest. And you compare that to the average income from the average American.
It has been getting better and it’s been consistently falling for a couple of years now, actually, when you look at it that way. It is now about 27%. The average person’s mortgage payment, it’s about 27% of their household income. That’s not the best it’s ever been. It’s certainly not where it was during COVID or the 2010s, but it’s not bad. Considering the fact that most budgeting experts recommend 30% of your budget should go to housing. And so we’re at 27%. That’s pretty good, right? That’s better than where we’ve been over the last couple of years. It’s basically where we were in a lot of the 2000s. Yes, much higher than it was in 2010, but that was unusually low. So even though we’re not yet at “normal affordability” yet, it’s still good news. Now, if you’re wondering what’s driving it, is it a crash? No, we just said home prices are actually up nominally 1% year.
So it’s definitely not a crash even though for years people have said affordability is so bad that there’s going to be a crash. Well, the first part of that sentence is true. Affordability is really bad, but there is another way that affordability can get better. It’s the great stall. It’s what we’ve been talking about. Affordability can improve by some combination of wages going up, stagnating home prices and falling rates. And that, my friends, is exactly what has been happening. Home prices, maybe they’re going up a little bit on paper, but like I said, they’re not going up as fast as inflation, nor are they going up as fast as wages are going up, meaning that relatively people are gaining more income faster than home prices are going up. That improves affordability. I just said earlier that mortgage rates have gone down 1%. That improves affordability.
It’s not as dramatic as a crash, but these little changes sustained over time can improve to affordability and that’s what we’re getting. In just the last year, the average mortgage payment has fallen nearly $200 a month. That’s great, right? If you’re talking about buying a rental property, that’s $2,400 more per year in cashflow if you are going out to buy the exact same property. We’re going to talk in a little bit about how you can save even more money if you do the right things with insurance, but that is an improvement in affordability that can meaningfully change which deals actually work for you when you’re going out and buying. So although the housing market is far from perfect, this is a real improvement. In fact, about one in six markets now are at historical affordability levels. As crazy as that sounds, that’s actually pretty good compared to where we were the last couple years.
We were at zero basically a couple years ago. Zero of metro markets were near their affordability ranges, historical affordability. Now we’re at one in six. It’s better and it’s trending in the right direction, even though we do admittedly have a long way to go nationally. So that’s where we stand, affordability. But next, let’s talk about where we’re going because we’ve talked about where prices were, but I think most people listening right now want to understand what’s going on in their market, where prices might be heading. And for that, we’re going to look at inventory. We’ll do that right after this quick break, stick with us. As a host, the last thing I want to do or have time for is to play accountant and banker. But that’s what I was doing every weekend, flipping between a bunch of apps, bank statements, and receipts, trying to sort it all by property and figure out if I was actually making any money.
Then I found Baselane and it takes all of that off my plate. It’s BiggerPocket’s official banking platform that automatically sorts my transactions, matches receipts, and shows me my cashflow for every property. My tax prep is done and my weekends are mine again. Plus, I’m saving a ton of money on banking fees and apps that I just don’t need anymore. Get a $100 bonus when you sign up today at baselane.com/bp. BiggerPockets Pro members also get a free upgrade to Baseline Smart that’s packed with advanced automations and features to save you even more time.
Welcome back to the BiggerPockets Podcast. I’m Dave Meyer giving our March 2026 housing market update. Before the break, we shared that housing prices have been largely flat over the last couple of months. We are seeing affordability improvements, which is great news, even though the market is still really slow. But that’s sort of where we are today. That’s a snapshot in time and kind of looking backwards. But if we want to understand where things are going, that’s when we look at inventory. It’s something that allows us to look forward a couple of months and predict where prices are going to be. Now it doesn’t predict a year in the future, two years in the future or anything like that, but we’re heading into the busy spring buying season and I think it’s useful to start looking at inventory to understand in your market what prices are likely to do.
Now, when I looked at inventory data this month, it’s kind of interesting because different sources are saying different things. Just for an example, we’re looking at realtor.com, and I’m not saying either is better than the other. Realtor delivers good information. They’re saying that inventory is still rising, but it’s sort of plateauing. We’ve been, for the last couple years, in really, really low historical levels of inventory, and although it’s been rising rapidly and some people say that’s signs of a crash, I think most housing market analysts would say that’s just a recovery from where we were at artificially low inventory levels during COVID back to normal levels. What realtor is saying is that even though active listings, it’s a measure of inventory climbed 8% over the last year, growth is slowing. It used to be 15% year over year, 20%, and that rate of growth has slowed nine consecutive months.
And actually, if you’re worried about a crash or you’re worried about some 2008 thing unfolding, just want to remind people that even though realtors says inventory is up, they’re saying that we are still 17% below pre-pandemic levels. So keep that in mind. That doesn’t mean that prices can’t go down at these inventory levels. They absolutely can, and we’ll talk about that in a minute, but it does mean that inventory is not spiraling out of control, which is good. That provides a stability to the housing market. Now, where inventory is growing the most really depends on where you are regionally, and it also depends what price tier you are in, in the market. So most of these inventory gains, as you probably can guess, are in the south and the west. That’s why we’ve seen housing prices come down there. Again, inventory is a great predictor.
When you see inventory go up, usually means the market is going to soften. And so we’ve seen concentrations of supply going in the south and west. That’s why we see markets going down in those areas. That’s something we’ve talked about a bit, but the thing I want to call out here is that we’re actually starting to see inventory really go up below $500,000. So that’s a little bit above the median, but I would say the lower half of the market is starting to see inventory go up, whereas the higher end of the market is still holding relatively strong. So that’s where we’re staying with active inventory according to realtor. They’re also saying that new listings, which is a measure of how many people are listing their properties for sale, grew 2.4% year over year, and that’s pretty low. I think that’s pretty good sign if you’re worried about a crash.
I mean, if you want a lot of more inventory, if you want more deals to find, it’s not the best, but 2.4% is a reasonable growth rate. And so what we can see when we look at these things combined, if you say, “Hey, inventory is up almost 10%, but new listings are up 2.4%,” you could sort of deduce what’s going on here. The reason there’s more inventory is not because more people are selling, it’s because less people are buying. So you could just basically say that demand has declined a little bit over the last couple of years based on those two numbers. Now, when we look at Redfin, another great source of data, they’re actually saying something a little different. This is sort of like what’s representative of going on in the market. One day you’re here like, “Inventory’s up.” The next day you hear inventory’s down and it’s kind of hard to distill what’s actually going on.
And even on a national level with two large reputable companies, the same thing is going on. We saw that realtors said that inventory was actually up 8% year over year. Well, Redfin is saying that inventory is actually down 2% year over year. It’s a pretty big difference. Realtors said that new listings were up 2.5%. Redfin is saying that new listings are down 1%. So what do you make of this kind of thing? I think as an analyst, what you do in these kinds of situation is try to get the general vibe of both datasets, see what they’re saying and see what commonalities you can find. I know that doesn’t sound scientific, but this is actually what you do. You want to try and look for something that would be called like a directional trend, meaning it is hard to determine the exact number because both of these companies are going to have different methodologies for doing it.
So we don’t know which one’s right. We don’t know if inventory is down 2% or up 8%. But what we can see among all of the data is that inventory growth is slowing. That recovery in inventory that I was talking about, it’s losing steam. Even if it’s up a little bit, and it will again depend largely on regions, it is losing steam. And we’ll talk about that a little bit more in the risk report, but to me, that is a sign that we are in a normal correction. When prices start to flatten, when they start to go down, you would expect fewer people to want to sell. You would expect lower demand. That’s exactly what we’re seeing. If a crash was starting to unfold, you would see inventory going up and up and up. The pace of inventory growth would probably be going up. And so that is not what we’re seeing.
And that’s the major thing that you should know if you’re worried about risk. But I think the other thing that you should know is that if you’re looking to buy right now, you should expect a relatively soft market, and that means you’re going to be able to negotiate. In a climate where things are sitting on the market, and that’s happening right now, days on market are up about a week over last year. They’re way up from where they were in COVID. Sellers are going to be more willing to negotiate in these markets where inventory is up and going up more. So that is something everyone should be doing is looking at new listings, looking at inventory for your market and figuring out how aggressive you have to bid. If you’re in a market in Connecticut where inventory is 50% below where it was in 2019 and days or market are still 10 days, you’re going to have to be aggressive.
But if you’re in Florida and your inventory is going up, this is an opportunity for you to negotiate and to be really picky. And so inventory is the number one thing. If you want to be active in the spring market, go do some research. Go pull these numbers from Redfin or from realtor, go on ChatGPT, ask them to pull inventory numbers for you and see what’s going on in your market. That’s what’s going to help you actually set your tactics and your strategy for the next few months. So all in all, as we look at the housing market as it stands today, we’re in the Great Stall. I am not taking any victory laps yet, but so far the market is doing pretty much what I said it would do when I made predictions back in October or November last year. It’s pretty flat. It’s pretty slow, but there is more inventory and better deals are hitting the market.
Next, we’re going to move on to our deep dive for the month, which is about insurance prices. It’s something that we get to a little bit here and there on the show, but this month it’s something I want to dig into the data on because I think it’s more important than ever that investors understand what’s going on with insurance so they can properly underwrite, so they can properly assess the performance of their deals because premiums have been going crazy. And this is sort of new for investors in the last couple of years. It used to be so boring to talk about insurance. I honestly never used to even think about it. Now it is a real variable you need to consider. The big picture here is insurance rates are still going up, unfortunately. I wish I had better news there, but I don’t. Over the last year, insurance premiums have gone up 6%, so that’s like double the pace of inflation, but there is a little bit of a silver lining here.
It’s the slowest growth rate since 2020. So the onslaught that we have been facing for five or six straight years now is at least slowing down. I know that’s probably not a lot of solace to people who are paying more and more for insurance, but at least there are signs that we are out of this era where we were seeing literally 15, 20% insurance jumps in a single year. Now it’s down to six. We can swallow that, but it’s still not the best. So why is this happening? Why is insurance going up? Well, first there’s a big thing, and this is sort of unfortunate because it means that prices aren’t going backwards, but it’s because of home values. This is sort of one of the downsides to appreciation and equity growth. I think it’s a small downside considering how much wealth has been created and equity has been built in real estate over the last couple of years, but when a property is worth more, it just costs more to insure, right?
This makes sense. A $200,000 home is going to be cheaper to insure than a $300,000 home. So the average price is bound to go up during a time of massive appreciation. Now, I know this hurts cash flow a lot, but when you weigh the benefits of massive appreciation versus increases in insurance premiums, I’m sure most people who have hoped properties for the last five years would take it, but it does matter going forward if you want to hold onto these properties or what you’re going to do with these properties. So home price is going up. That is increasing the cost of insurance. But it’s also, let’s just be honest, insurance companies are just charging more. There’s actually a metric. They basically track how much it costs to insure $1,000 of home value, and that’s now up to $6.21 per year. That is only up 2% this year.
So that is relatively good because previously the two years before combined, it went up 30%, which is a lot. So if you put these things together, the average insurance premium is now basically double what it was in 2017. Used to be $107 a month on average. Now it’s $201 a month. Yikes, that is brutal. It is basically double. And I know a lot of things have gone up like crazy over the last couple of years, but if you break it down, you actually see that insurance costs have gone up the most proportionally of all expenses basically for real estate investors. Because if you look since COVID started, basically since December 2019, it’s up 72%, right? Even with home prices skyrocketing, the average interest that you pay is only up 35%. The principle you pay is 22%, taxes are up 31%, but insurance 72%. So insurance is the most relatively speaking.
Now, the good news here is that I think it’s probably going to slow down. Like I said, it’s slowed down a bit. And the fact that insurance carriers are not really jacking up their rates per $1,000 of insured, it’s only up 2%. And because I think home prices are slowing regionally, from the research I’ve done, it does look like we’re going to get back towards more normal paces of insurance growth over the next couple of years. So for investors who are doing their underwriting, I get this question a lot. Should we expect insurance to keep going up 10% a year? It is regional, and I’ll get to that in a second. But I think generally speaking, that like three to 5% range around inflation is probably what we’re going to get over the next couple of years. That doesn’t help the increases we’ve seen over the last couple of years, but it does make it more predictable, which is super important for investors.
And I think that’s good news. Now quickly, I want to just talk about the regional changes. I mean, California just getting absolutely hammered over the last couple of years, double digit increases still. We see this in parts of Washington, Georgia, parts of North Carolina, parts of the Northeast, but there’s good news here too. This is going to be surprising to some people, but after years of just relentless increases, Florida and Texas actually saw decreases in insurance costs for the first time in years. Some markets seeing as big as 6% declines, which is a welcome relief to investors and homeowners alike in those areas. So that’s what’s going on with insurance, hopefully slowing appreciation, but you’re probably wondering, what do I do about this? And for that, there’s basically one simple, totally underutilized strategy. Change providers shop around for insurance premiums. I know this sounds absolutely stupidly simple and it kind of is, but actually when I was digging into this, I saw that on average, people who own homes, only about 11% of them change providers each year.
That means 90% are just sticking with whatever premium increases their insurance brokers send to them. They’re just sticking with it. And maybe that’s fine. Maybe it is the best thing for you, but I am betting for the vast majority of you out there, if you’re looking for a simple way to improve your cashflow, switching insurance providers is a no brainer. And that maybe you don’t even need to switch, but at least shopping around absolutely works. There is some data from the ICE Mortgage Monitor. It’s something that we look at every single month and that they show that for people who switch, they on average save money and sometimes they save a lot. On average, they’re saying it’s at least a five to 10% savings, and some markets, it’s even more. Just as an example, if you look at Orlando and Houston, they sort of dug into these two markets.
They showed that about 20% switched in those markets that’s higher than average, and their average savings was four to $500 per year in premiums. That’s really meaningful. That is a great way to improve your cashflow each and every year. And I should mention that those markets, Houston, Orlando, those are relatively affordable markets and those are for single family homes. So if you extrapolate that out to a duplex or a four unit even in those markets, or you extrapolate it to a more expensive place where you’re buying a duplex for 400, 500, $600,000, those savings on insurance could be upwards of $1,500 per year. That’s over a hundred bucks a month in cash flow, just doing a little bit of shopping. Now, if you look at the big picture here, I told you that mortgage payments are down $200 per month. Now, if you shop around for insurance premiums, now we’re talking maybe three, $400 a month in improved cash flow over last year.
That doesn’t even mean buying a different kind of deal. That just means by the fact that affordability is improving. By the fact that you can shop around for insurance, you can get significantly better cash flow each and every month. This is why I’m saying even though prices are flat right now, there is opportunity to generate better cash flow than we have seen in a while and insurance is a big part of that. And I know insurance may not be the sexiest part of investing, but if you want to maximize cashflow in your next deal, shop around for insurance. It’s the same thing as getting multiple quotes from contractors. You don’t just go out there and accept the first bid, find the best deal for the coverage you need. And I should mention, if you want to shop around and you’re BiggerPockets Pro member, you can actually get 5% off immediately just by being a BiggerPockets Pro member with steadily.
They’re a great landlord-focused insurance company. Definitely check that out. But just to summarize this deep dive into insurance, costs are still going up, but I think underwriting for three to 5% premium increases in the coming years makes sense. Make sure you don’t get caught, but hopefully it’s going to come back down to earth closer to the rate of inflation, and that’s going to be welcome news to most investors. But in the meantime, shop around. We still got more in our March housing market update. After this quick break, I’ll share my risk report and the opportunities I’m seeing in the market. Stick with us, we’ll be right back.
Welcome back to the BiggerPockets Podcast. I’m Dave Meyer. This is our March 2026 housing market report. Now we’re going to turn our attention to the risk report, something I do every month because there’s a lot of news out there. There’s a lot of scary headlines. There’s a lot of people saying stuff on social media. That’s not always true, but there is real risk in real estate investing. There always is. There’s risk in any type of investment. And I just want to share with you what I’m seeing in the market and where I think the risks are. Big picture though, things are fine, right? Things really are fine in the housing market. If you listen to this show, you know that I think the big canary in the coal mine for a housing market crash is delinquency rates. If people stop paying their mortgages or cannot pay their mortgages, that’s a big red flag that would really increase what I think is a 20, 25% chance of a crash in the coming years to something much higher than that.
But as of right now, that’s not really happening. Delinquencies actually went down for the second month in a row. Now that was mostly led by early stage delinquencies. It’s measured in different stages, how many people are 30 days late or 90 days late, or actually in pre-foreclosure or foreclosure, all these different things. The early stage stuff is getting better actually. Fewer people are going into those early stages of delinquency and foreclosure. That’s good news. The later stuff is actually getting a little bit worse. So it’s a little bit of a mixed bag. Foreclosure starts are up six and a half percent And over last year, but I should mention still 20% below pre-pandemic levels. So when you see those headlines that say foreclosure starts are up over last year, that’s true. Still below 2019 levels when no one was worried about foreclosure crisis. So keep that in mind.
90 day delinquencies, more serious delinquencies are going up and are rising. And so that is a real risk. These are things that we need to keep an eye on. But again, they are rising but not to any sort of concerning level. Nothing like we saw during 2008. If they keep rising, that is something we’re going to have to talk about. But right now it’s relatively stable. And personally, I think the fact that more serious sort of later stage delinquency stuff is getting worse actually makes sense to me because we’re still working our way through a lot of the post-forbearance program issues in the housing market. A lot of people who couldn’t pay their mortgages during COVID basically got a break for a couple of years. And then when those programs stopped, they started making their way from 30 days to 90 days into pre-foreclosure, into regular foreclosure.
And so the later stage stuff that is working its way through, but I am at least encouraged right now to see that the beginning stages, the early stage delinquencies are going in the right direction. They’re actually going down. So overall, fine in terms of delinquencies, but that’s something we are absolutely keeping an eye on every single month because again, it’s the earliest indicator we’re going to get for severe market risk. Right now, we don’t have that severe market risk, at least in any of the data. There’s no evidence of it right now. But that said, I do want to just call attention to the fact that I do see more risks coming into the market right now. Things like the war in Iran. We don’t know what this is going to mean. We hear conflicting information every day. We’re going to be there for a long time.
It’s going to be quick. We don’t know. Oil prices went from $65 a barrel, up to $100 a barrel. Now they’re down to $80 a barrel. We don’t know. But when things like this happen, when there’s more geopolitical uncertainty in a very interconnected global economy, it just raises risk. I don’t even know specifically what those risks are, but as an investor, you just want to say things aren’t as stable as they were a couple of weeks ago because oil prices could lead to higher inflation. And if inflation goes up, mortgage rates go up. So these things can trickle into the housing market for sure. I’m hopeful oil prices will go back down. I’m hopeful inflation doesn’t get worse, but I think there’s risk of inflation and mortgage rates going up now that didn’t really exist in the last couple of weeks. And I also just think it’s going to slow down the market more.
I already said we are at 4.1 million home sales. The market is slow, but people don’t make decisions in uncertain times. They try not to. And so I think this is going to weigh on transaction volumes. I think it’s going to weigh on demand in the housing market because people are uncertain about the war, but also about the bad jobs data. That’s the other thing that got announced this month. January is actually surprisingly good jobs data, but if you look at the overall trend and you look at February specifically, the most recent month that we have data for, it’s not looking particularly good. We are seeing that the US lost 92,000 jobs, and I think a lot of that is concentrated in higher income areas. I do think there is a high risk of a white collar recession, and that could weigh on overall housing demand.
And that could be for both rentals. So in terms of vacancies could go up and for housing prices. Now, I’m not saying we’re going to get to 10% unemployment, but I’m just saying these are things that weigh on the market. It’s things that could take us from a flat market to a slightly declining market. I said at the beginning of the year, I think we’re going to be in a slightly declining market. So I think things are progressing largely in the way that I imagined in terms of the labor market. But when you introduce these new variables like the war, it does put more downward pressure on potential pricing and demand than we had just a couple months ago. Now, none of this, I just want to be clear. It means that I am predicting a crash. I don’t want anyone to think that. It is always possible.
I always say that on the show, is it crash possible? Yes, it absolutely is. I made my predictions back in November. I said there’s about a 15% chance of a crash. Right now, I’d say it’s a little bit higher. By crash, I mean more than 10% declines this year. Are we going to see 10% declines in housing prices in 2026? I don’t think so. Is that chance bigger than 15%? Yeah, I think it’s gone up a little bit. Maybe it’s 20%, maybe it’s 25%, but I still do not believe that it is the most likely scenario. We are not in 2008. Homeowners have a lot of equity. Like I said, forced selling is still unlikely. We see people paying their mortgages. The real risk here, I think that the only chance we get a full-blown crash is if we see a massive increase in unemployment.
If the AI fears really start to come true and unemployment goes from four and a half to seven or 8%, people start freaking out. We see a lot more new supply coming on the market. We see way less demand, then a crash could happen. Can that happen? Sure. Yeah. I can imagine a scenario where that unfolds, but again, the evidence, the data as of today, doesn’t support that. We’re seeing slowing inventory growth. We are seeing delinquencies relatively stable. Unemployment did tick up a little bit, but the worst AI fears have not yet come to fruition. So I think like most things in the housing market, the big dramatic thing is not going to happen. What’s probably going to happen is some combination of these things in little bits where we just see a week slow market. So I’m not really changing my overall prediction about what’s going to happen in housing.
I just want to raise the reality that the risks are going up. And I’m not telling you that to scare you. I just want to be honest about where I think things are heading and where the potential risks are. And I’m also mostly telling you to help you focus on opportunities and where they’re going to be, because there are going to be more and more deals in the coming months. If inventory is going up, if people are scared, those are often the best times to buy. I started in 2010. People love talking about how easy it must have been. Everyone was so scared to buy real estate in 2010, but if you bought right, it was one of the best times to buy. And although this is a very different situation in 2008 and 2009 and 2010, generally speaking, when people are fearful, when inventory starts to go up, that means there is going to be better deal flow.
I really believe in the coming months we’re going to see more and more motivated sellers, which means that you’re going to have the opportunity to pick up good assets at a discount. If you are a buy and hold investor, this is what many of you have been waiting for. People have been saying, “I’m going to buy when prices are going down.” Well, relative to inflation, prices are going down. The averages I’ve been giving you of 1% growth, that’s for home buyers. As an investor, you might have an opportunity if you buy right, if you bid right, if you find the right deals to buy five or 10 or 20% under current market comps, these are the opportunities that you should be focusing on. Now, yes, you need to be patient and specific about what you buy, but there are good things out there. And you couldn’t buy under market value in 22 and 23, maybe even in 24, but now you can, and that’s what you should be focusing on.
I know it’s scary to see some headlines where people are freaking out, but as an investor, you should be thinking about, now I can get value. Where do I find value in the market? Because there’s better opportunity for value than you’ve been able to find in, I think, like five years. Now personally, I think the good value is going to be in the B and C class buy and hold assets. Again, I think there is pain coming. It is not reflected in data. This is just an opinion. I’m just going to share with you, my opinion is that the pain in the housing market that’s coming is mostly going to be concentrated at the top end of the spectrum. We see the biggest risks to the labor market and wages and layoffs with white collar workers. That is where AI is coming for a lot of jobs.
We haven’t seen that fully impacted in the market yet, but I do think it’s going to happen more and more. I think if consumer spending starts to slow down, companies are going to look for any excuse to not hire expensive people and maybe they start laying off. And I think we’re going to see the high end of the market be kind of weak. It’s not in every market, but I think generally speaking, I like the idea of focusing on workforce housing, starter home kind of assets make a lot of sense to me because if you look at the employment trends in the trades or in healthcare or sort of blue collar jobs, employment’s great. It’s doing really well there. And I think that’s going to lead to solid demand for both rental properties, meaning low vacancies. And if you’re a flipper and you’re selling homes, there’s going to be opportunity there as well.
That’s basically what I’m trying to do. And these are the basics of the upside error.This is what we’ve been talking about for years. Good investors are going to see the current market and say, “Yeah, there’s going to be slower appreciation. There is some risk of price decline, but I’m in this for the long run and I am going to be active and selective and opportunistic and find great assets that I couldn’t afford or couldn’t compete for in previous years.” That’s what the market is giving us right now. And that’s where I’m going to be focusing my attention for the foreseeable future, buying good value and positioning myself for long-term upside. That’s our housing market update for today. I’m Dave Meyer. Thank you so much for listening. We’ll see you next time.

This article is presented by Cost Segregation Guys.

Ask 10 real estate investors to explain depreciation, and you will get 10 different answers. Some will get it mostly right, while others will confuse it with something else entirely. A few will admit they just let their CPA handle it and have never really dug into how it works.

That is more common than you might think, and it’s also a real missed opportunity. Depreciation is one of the most significant tax advantages available to real estate investors, and understanding it at a basic level makes you a sharper investor, regardless of how many units you own.

What Depreciation Actually Means

In plain English, depreciation is the IRS’s acknowledgment that physical assets wear out over time. 

A building is not going to last forever. The roof will eventually need replacing. The plumbing ages. The structure itself has a finite useful life. Because of this, the tax code allows property owners to deduct a portion of their property’s value each year to account for gradual wear and tear.

Think of it like this. If you buy a piece of equipment for your business that has a 10-year lifespan, you can deduct one-tenth of its cost each year rather than writing off the whole thing up front. Real estate works the same way, just on a longer timeline. You paid a certain amount for the property, and the IRS lets you spread that cost out as a deduction over the course of several decades.

One important note: Land does not depreciate. You can only depreciate the structure itself, not the dirt under it. When calculating depreciation, the land value gets separated from the building value, and only the building portion counts.

Residential vs. Commercial Timelines

The IRS assigns different depreciation timelines depending on the type of property. For residential rental properties, that timeline is 27.5 years. For commercial properties, it is 39 years. 

These numbers are not arbitrary. They reflect the IRS’s general assumption about how long each type of structure has a useful life.

What this means practically is that each year, you can deduct 1/27.5 of your residential building’s value, or roughly 3.6%, as a depreciation expense on your taxes. For a commercial property, that works out to about 2.6% per year over 39 years.

These are the standard timelines. There are strategies, like cost segregation, that allow certain components of a property to be depreciated on much shorter schedules. But as a baseline, 27.5 and 39 years are the numbers most investors start with.

Why Depreciation Does Not Mean Your Property Is Losing Value

This is one of the most common points of confusion, and it is worth addressing directly. Depreciation for tax purposes has nothing to do with what your property is actually worth in the market. A building can be depreciating on paper while simultaneously appreciating in value. These are two separate things.

Tax depreciation is an accounting concept. It exists to reflect the theoretical wear and tear on a structure over time, not to track market conditions. Your property’s actual value is determined by what buyers are willing to pay for it, which is influenced by the market, location, condition, rental income, and dozens of other factors that have nothing to do with the IRS’s depreciation schedule.

Many investors have owned properties for 20 or 30 years that have tripled in value while being fully depreciated on paper. The two things simply live in different worlds.

How Depreciation Reduces Taxable Income

Here is where depreciation becomes genuinely powerful. When you own a rental property, the income you collect from tenants is taxable. But you are also allowed to deduct legitimate expenses against that income—like mortgage interest, property taxes, insurance, repairs, and property management fees.

Depreciation is another deduction you can stack on top of those. And unlike most deductions, it does not require you to spend any money in the year you claim it. It is what accountants call a noncash deduction. The wear and tear on your building is assumed to be happening whether or not you wrote a check for it.

The result is that many rental property owners show a loss on paper even when they are cash flow positive. Rent comes in, expenses and depreciation are deducted, and the taxable income left over is often significantly lower than the actual cash in their pocket. Depending on your situation, that paper loss can also potentially offset other income, though the rules around this involve income limits and passive activity rules that are worth discussing with a tax professional.

Where Most Investors Get This Wrong

The most common misunderstanding is not about the mechanics of depreciation itself. It is about what happens when you sell.

When you sell a property, the IRS requires you to pay back a portion of the depreciation you claimed over the years. This is called depreciation recapture, and it is taxed at a rate of up to 25%. 

A lot of investors are surprised by this at the time of sale because they either forgot they were taking depreciation deductions or did not fully understand that those deductions were not free. They were more like a deferral.

The second most common misunderstanding is simply not claiming depreciation at all. Some investors, particularly those who are newer or working with generalist CPAs, end up not taking the deduction they are entitled to. The IRS still counts it as if you did, which means you could end up paying recapture taxes on depreciation you never actually benefited from.

Final Thoughts

Depreciation is not complicated once you understand the basics, but it does reward investors who pay attention to it. Knowing how it works, what it affects, and what it eventually costs you gives you a clearer picture of the real financial performance of your properties.

If you’re ready to go beyond the standard 27.5- and 39-year schedules and uncover faster write-offs hiding inside your property, Cost Segregation Guys can help you do it the right way. Their team makes the process simple, identifies the components that qualify for accelerated depreciation, and helps you maximize deductions while staying aligned with IRS rules. You can reach out to Cost Segregation Guys to see how much you could potentially accelerate, and start keeping more of what your properties earn.

Traditionally, townhomes were often starter homes for singles and young couples, becoming rentals by default when the owners decided to upgrade to a single-family home. That is changing.

Previously, the additional cash from a townhouse starter pad-turned-rental and its tax benefits were crucial first steps toward building wealth. Now, however, amid the affordability crisis, Realtor.com reports that they have played an increasingly important role in homebuying, serving as both starter homes and long-term residences for owners due to their lower price points.

With a greater number of townhouses on the market and those looking to live with lower housing costs, such as the 55+ community and singles, increasing in number as well, townhomes’ role as investment vehicles could also take on greater significance.

“Townhomes now make up the largest share of the for-sale homes on the market in our data history,” explained Realtor.com senior economist Joel Berner. “And they appear to be picking up steam as builders push forward with smaller and more affordable projects to meet the demand of buyers who are struggling to make a purchase in the detached home (single-family) space.”

Townhomes Are Being Built at a High Rate

New Census construction data showed townhouses are being built fast and steady, up 3.8% year over year, offering investors the chance to buy new homes that require less maintenance at far lower price points than single-family homes.

From a wide lens, townhome starts were up 37% from the second quarter of 2019 to August 2024, according to homebuilding research and data platform Zonda.

“In today’s challenging housing market, consumers’ growing interest in townhomes is a direct response to two primary pressures: affordability and lifestyle preference,” said Ali Wolf, chief economist at NewHomeSource, which is owned by Zonda.

Realtor.com’s Berner explained:

“Townhomes are generally lower-priced than single-family homes and sometimes offer community services and amenities that single-family homes (especially those outside HOAs) may not. They also tend to be concentrated in more urban areas and closer to city centers. The drawbacks are that they are generally smaller and, by definition, share walls with other homes.”

The low cost of construction has made townhouses a winner with builders. According to the National Association of Home Builders, after the second quarter of 2025, the previous four quarters saw 179,000 homes built. The four-quarter moving average market share is the highest on record for data going back to 1985.

The Appeal of Townhomes to Buyers and Renters

Townhomes work as rentals for the same reason that they work as owner-occupied homes. Affordability and low maintenance make them appealing to a wide demographic. They also have some advantages over single-family homes. 

Here are some of the demographics who are looking at townhomes and why.

Single women

According to NewHomeSource, single women often prefer the sense of community and safety that a townhome offers, with shared walls and neighbors close at hand. Data from the American Enterprise Institute’s Survey Center on American Life shows more Americans, particularly young women, are single.

Single-parent families

Single-parent families are on the rise in the U.S. According to U.S. Centers for Disease Control and Prevention data, as cited by NPR, 40% of all babies in the U.S. were born to single mothers raising children on their own, often without partners. Increasingly, these women are over 30, can afford to buy or rent on their own, and are opting for townhouses.

Millennial appeal

Millennials enjoy living in walkable communities with access to amenities.

55+ buyers

Empty nesters enjoy the low-maintenance lifestyle that living in a townhome offers, especially those that appeal to their aesthetic values with high-end design, while also being a part of a community.

Townhomes as an Investment

Not every townhome community is a great investment. One downside of living in an older townhome community with poor management is that, as an owner, you are clustered with other homes. So, even if your rental is in great shape, if the surrounding homes are beat up, it’s not a good look for potential tenants.

On the upside, townhomes generally have lower property taxes than single-family homes, but they usually have HOA fees, so you’ll have to weigh the two against each other, along with additional expenses, to work out your final cash flow numbers.

Pre-Construction Pricing, Multiple Homes

For investors looking to build a manageable portfolio of doors near one another, approaching a building to negotiate a pre-construction price for multiple units might be a viable opportunity. You’ll own brand-new rentals next to one another, requiring minimal maintenance. 

There might be some caveats to this approach, however, if the HOA laws state that investors can only own a certain percentage of homes in the development.

Low Maintenance

While dealing with HOA fees eats into your cash flow, it also means that owning a townhome is great for passive investors who don’t want to be bothered with day-to-day upkeep issues like lawn mowing, roof cleaning, landscaping, pest control, HVAC inspections, trash collection, and snow removal.

Townhomes as Short-Term Rentals

According to AirDNA, the platform that analyzes the short-term rental market, some townhome markets offer homes costing less than a single-family property and—for STR purposes—earn more. 

It might sound too good to be true, but AirDNA whittled down the list to the following:

• Savannah, Georgia
• Seattle, Washington
• Key West, Florida
• Philadelphia, Pennsylvania
• Denver, Colorado
• Pensacola, Florida

For purely short-term rental purposes, townhomes located in popular vacation spots can be high earners. AirDNA did the number crunching to analyze the top townhome STR markets in the U.S in terms of annual revenue. In May 2024, when the survey was compiled, they were:

• Vail/Avalon, Colorado: $125,872 annual revenue potential (ARP)
• Park City, Utah: $111,874
• Key West, Florida: $100,094
• Steamboat Springs, Colorado: $97,399
• Savannah, Georgia: $94,715
• San Diego, California: $83,449
• Breckenridge, Colorado: $75,443
• Santa Rosa/Rosemary Beach, Florida: $68,554
• Nashville, Tennessee: $66,898
• Sarasota, Florida: $64,631

Final Thoughts

Like any investment, townhomes as rentals are highly dependent on location. Being near universities, hospitals, and other employment hubs means you’ll have a steady supply of tenants. This is where the advantage of owning a townhome kicks in—they are about 10% less expensive than single-family homes, require less maintenance, and can earn decent rental income.

If you own a townhome in a popular tourist area, you might be able to purchase it as a second home and deduct some or all of the mortgage interest, under the limits that apply to your main home, providing you live in it for more than 14 days of the year or 10% of the days you rent it out, whichever is greater. That means you can benefit from rental income and depreciation of the rental portion, even if it is classified as a second home, provided you meet specific conditions. 

For hands-off investors or those considering a short-term rental, townhomes offer a wide range of opportunities.