Dave:
Four rentals by 40 years old. That’s all you need to cement a comfortable retirement or even retire early. If you can achieve this, you’ll be significantly wealthier, and I’m talking millions of dollars wealthier than the average American. Plus, you’ll have passive income to support yourself in retirement instead of just a social security check. Getting to four rentals is a huge deal, and today I’m going to share the four-step plan anyone can use to build a small but powerful rental portfolio that accelerates their timeline to retirement, or at least makes them a heck of a lot richer. In the example I’m sharing today, buying only four rental properties, even if you stop there and do nothing else, would increase your net worth by $3.3 million by the time you’re ready to retire. And if you’re already 40 or you’re over 40, don’t worry, you can follow the same steps and map out your own retirement timeline using the walkthrough I’m going to share with you today.
So you don’t need a dozen properties. All you need is four. This is how you get there.
What’s up everyone? I’m Dave Meyer, Chief Investment Officer at BiggerPockets. Today on the show, I’m showing you how acquiring only four rental properties by age 40 can completely transform your financial trajectory. We’re going to dive right in with an example of how this works step by step. And this is a plan almost anyone can follow. And actually, it’s pretty similar to the types of properties and the timeline I personally followed on my own journey to financial freedom. And I’m sure there are some people out there listening to this who want to scale all the way up to dozens or even hundreds of properties, which is cool if you want to do that. But I think four properties gets most people where they want to go by retirement. So we’re just going to talk through the first four steps. And if you want to keep growing from there, great.
But these four steps will set you up for a successful career whether you want to go big or not. All right, let’s jump into our first property. My recommendation for almost everyone out there is to buy an owner-occupied property for your first deal. The idea behind this first deal is not to hit a home run or to get a huge amount of cash flow. The idea here is to set yourself up so that you’re saving additional money and you’re starting to build equity in your home. And you’re going to use those two things, your increased savings and the equity that you build in this first deal to go buy your second deal, your third deal, and your fourth deal. So don’t think that you’re going to have to save up a new down payment for each of these four properties. Each deal that you do should help your next deal become easier.
So again, for this first deal, you’re going to want to do owner occupied. This is going to give you access to better financing. Loans where you can put as little as 3.5% down, you’re going to get better interest rates, and it’s just the easiest way to get into the game. Now, there are generally two different types of owner-occupied deals that you can consider. The first and largely the most popular is known as house hacking. This is where you buy either a single family home, live in one bedroom and rent out the other bedrooms to roommates. That’s an option for people. Some people don’t want to live with roommates. So the other option is to buy a small multifamily. This is either a two unit, a three unit, or a four unit property. You live in one, and then you rent out the others. And the key is here, you got to stop at four because if you buy something bigger than four, you lose that owner-occupied financing, which is what you really need on this first deal.
So I recommend to most people if you can find them and if they’re available in your area, look for a duplex or a triplex and invest in that, live in one unit and then rent out the others. The benefit of doing this, again, is that you don’t necessarily need to cash flow. If you can find a cash flowing house hack, that’s great. But your key here is to save money. If you buy a house hack, you live in it, and for example, you spend $500 less per month on housing, that’s a win. Even if you’re coming out of pocket a couple hundred bucks a month for your housing, as long as it’s less and significantly less than what you were paying in rent, that’s still a win. You’re going to use that saved up money for your next property. It also is going to help you learn the business of being a landlord and a real estate investor.
And if you’re doing it right and you’re buying the right kind of deals, you’ll be building equity as the value of your property increases over time. That equity is something you can tap for your second, your third, or your fourth deals. So those are the basics of house hacking, but I also want you to remember, a house hack doesn’t have to be this two to four unit. It doesn’t even have to be a single family home. With roommates, you can do it by adding an ADU or a mother-in-law suite. Where I live, a really popular thing to do is people buy split level homes. They do a lockoff into the basement and they turn their single family into two units. That’s not available to everyone, but the point here is get creative. There are ways to make house hacking work that might not appear immediately obvious on Zillow, and often those are the best deals.
So that’s it for step one. Save up your money, invest in an owner-occupied strategy so you get that owner-occupied financing. Find a deal that’s going to allow you to save money and build equity that you can invest in your next deal. And being on site is a great opportunity to get good at being a real estate investor. Get good at working with tenants, get good at property management. Those are the three goals of step one. So let’s walk through an example here. Let’s just imagine that you’re 30 years old, you’re going to do this house hacking strategy, and you find a home for $400,000. In some markets, it’ll be cheaper, some will be more, but that’s the median price home in the US today. Now, if you get this owner-occupied financing that I’ve been talking about using 3.5% down, your down payment is only going to be $14,000.
That is enough. Like I said, if you save $20,000 up for this first deal, you’ll still have some money for closing costs and for cash reserve. So this is a realistic deal. Now, I look at deals all the time, and for deals like this, depending on the market you’re in, it is realistic to believe that you could save $500, maybe more, $700, $800 in some examples, off of what you would be paying in rent. So now, as opposed to renting, you are saving $500 per month in cash. On top of that, you’re also getting amortization, you’re getting tax benefits, you’re getting appreciation, but just the cash savings alone is $6,000 per year. So if you save that after three years, you’re going to have close to $20,000 saved. That’s enough to just do this deal again. So as you can see, buying the first deal and doing that right leads to the second deal.
And the second deal will lead to the third and the third will lead to the fourth. But the key is to find a good deal that’s going to build you that equity and help you save that money. So that’s the first deal. But the second property is where things really start to ramp up and take you from a homeowner to a real investor, which has huge impacts on your net worth and retirement timeline. We’re going to talk about the second deal that you should be looking for and how that’s different from your first one, but we do have to take a quick break. We’ll be right back.
Welcome back to the BiggerPockets Podcast. I’m Dave Meyer giving you my step-by-step plan for getting four rentals by 40 years old. Before the break, we talked about your first deal being an owner-occupied house hack that allows you to save money and build equity so that you have enough money to go out and do this again. Now, property two is going to be a little bit different. Now that you have some experience and hopefully some money from house hacking, we’re going to look for a deal that has a little bit more meat on the bones, got a little bit more juice because we want to build equity. That’s the thing that’s going to build our net worth and really secure our retirement in the long run. Now, the way you do this is by finding what is known as a value add property. So this is finding a property that’s not in the best condition and doing some sort of renovation.
It doesn’t need to be a full burr. You don’t need to tear out all of the walls. This could be anything from a light cosmetic deal, or if you want to, you can do one of my personal favorite strategies. I call the slow burr. You could do a full gut rehab. That’s where there’s a lot of equity to be gained. But the point here is property two is going to be a value add project where you actually do a renovation on a property to build lots of equity. Now, depending on who you are, you should decide how intense of a renovation that you want. So if you don’t have any experience with renovations, I would look for something that’s more of a light cosmetic or a light rehab that’s something like renovating kitchens, painting, putting in new floors, but you’re not doing anything structural. You’re not moving walls, you’re not popping the top, you’re not doing anything like that.
Unless you have experience with renovations. If you have experience or work in construction or know someone who could help you with that process, you could do a bigger project. But for deal two, I would recommend most people stay on the lighter side of the renovation. It will reduce your risk and there’s still significant upside in these kinds of deals. The next thing that you need to look for in your deals are, one, in today’s market, you should be looking for deals that have been sitting on the market for 60 days or more. We are in a buyer’s market right now, which means that buyers have leverage. And if any seller has a property that’s been sitting on the market for 60 days or more, they’re going to probably be pretty motivated to negotiate with you. So look for those deals because that’s where you’re going to be able to buy below current comps and that’s going to give you even more equity throughout the course of your deal.
On top of just looking for things sitting on the market 60 days, I think two key things that you want to look for in your deals are areas where you think there is going to be rent growth, so where there’s going to be a lot of demand for renters, that is always helpful as a real estate investor. And the second is a place that’s in the path of progress. You don’t want to invest in a place where properties aren’t going to appreciate or there’s not going to be demand if you want to sell it. So look for places where people want to live, where the government is investing. Those are great ways to take your deals from a single or a double to a home run over the lifetime of your investment. So those are the things to look for in the deal. And just as a reminder, the goal of this deal is to build equity as much as you can and to get a cash flowing rental.
All right, so let me just give you an example of how this works. You go out and buy a property worth $300,000, then you’re going to need to put money into it. Let’s say you have a rehab budget of 50 grand, which is a generous budget, right? That’s enough to make significant improvements to a property. So your total all- in costs are going to be 350,000 for this deal. And what a lot of people do for a Bird property is take out what’s known as a hard money loan. These are loans that are designed specifically for these types of projects where you don’t just borrow the money to buy the property. You also borrow the money that you need to do the renovation. And oftentimes with a hard money loan, you can put as little as 10% down. So because your total costs are 350,000, you’re going to need $35,000 to get into this deal, which after a couple years of saving up your money from your first deal plus building equity, you should be able to do this within two, three, or maybe four years, you should have that much capital.
Now, you go into this deal, you buy it for 300 grand, you add value to it. After putting in 50 grand, hopefully this property is now worth, let’s just call it 450,000. So you put in 350, now it’s worth 450,000. And then know that might sound like magic, but it’s not. You can absolutely put 50 grand in and build $100,000 of equity. That happens all the time. That is a relatively normal type of return that you can expect on a good Bird deal. So you build that equity, which is great. Obviously, your net worth just went up, but the real magic of the Burr property is that you can take some of the equity that you built out and apply it to property number three. So you’re going to take out a new mortgage. You’re going to have to put 25% down, which is about $112,000.
You’re going to need to pay off your old mortgage, right? You still owe the hard money lender $315,000, but after those two things, you can take $20,000 out of this deal. So you only put 35 in, right? Remember? And now you’re pulling $20,000 out of this deal for your next deal. Now, some people want to do a perfect Burr where they can pull out 35,000. That might be possible. But even in this example, you’re pulling out 20,000 that you can go use for your next deal. You’re more than halfway to your next deal. That’s what’s so powerful about the Burr strategy. And on top of that, you should also have a cash flowing rental property at this time, right? Because the key is even after that refinance, you need to make sure that this deal is going to cashflow at least modestly. Doesn’t need to be tons of cashflow.
It doesn’t have to be the highest cash on cash return. Remember, the main goal of this deal was to build equity, which you have done, and to get at least breakeven, I would recommend three, 4% cash on cash return minimum for this kind of deal. Now, once you’ve done that, you have 20 grand already. You’re saving six grand a year from your house hack. Now you’re making, let’s call it $3,000 a year in cash flow from deal number two. And so in two years, you should be able to get deal number three, right? You have 20 grand in equity, plus you’re saving nine grand a year in cash flow. That will get you $38,000 in just two years. And this deal we just did only cost us $35,000. So in two years, you can get to deal number three. So that brings us to property number three.
And the goal of this property is to generate as much cash flow as you can. You still want to buy a great property. You don’t want to be buying something that’s never going to grow, but you want to prioritize cash flow and cash on cash return here over equity appreciation. So we’re not necessarily doing a Burr or a house hack here. We are trying to find a cash cow. So the way that we’re going to finance this is through the equity from our first two deals. Presuming both of those properties continue to appreciate at a modest rate of 3% per year, that’s about average, and you add that to the equity that you built in the Bird deal, that was a significant amount of money, plus you’re saving $800 a month. If you waited, let’s just say two years between your second deal and your third deal, you’re now 35 years old in our example, you should have, just from doing those first two deals, another $60 to $70,000 to invest, which is more than enough to invest in this third property.
Now, I know for some people, or if you watch a lot of social media, real estate content, you might think waiting two years for your next deal is a long time or waiting five years from your first to your third deal. I don’t actually think so. It took me six years to get to my third deal and three properties. I had eight units at that point, but it took me three years, and that has been totally fine. By 15 years of doing this, I have become financially independent. And so I promise you, you can follow this timeline. It can absolutely work. Your goal, remember, is to get to four properties by 40, and you’re already at three by 35 on this timeline. Now, there’s sometimes a trade-off between cashflow and appreciation, not always, and you honestly want to find a little bit with both. I personally never look for deals that just maximize cashflow.
You can buy something, maybe it’s in a D class neighborhood or a market that’s never going to grow. Maybe you can get a 12 or 15% cash on cash return in those markets. I don’t personally like those kind of deals. For me, I need to at least be able to believe that these deals are going to grow at least on average appreciation and that there’s still going to be good assets sometime in the future. They’re still in a desirable place where there’s going to be demand, but I am willing to give up buying in the best possible neighborhood in order to get my cash on cash return up to eight, ideally closer to 10% on this kind of deal. Now, if you have 70 grand to invest, which you should by this point of your investing journey, you should be able to buy something for about 300 grand.
Now, that’s not going to buy cash flow in every single market in the United States, but I think this deal is an example of a good time to go out of your current market unless you live in Western New York or the Northeast, parts of the Northeast or in the Midwest. If you live in some of those areas or even Tennessee, some areas in the South, you can buy a cashflowing duplex for like 250 grand or 300 grand. But if you don’t live in these markets, you can just invest in those markets. I know it sounds intimidating to invest long distance, but if you’ve done two deals at this point, you’ve already done a BER, you’ve already done a house hack. I promise you, you can invest long distance. I have done it. It is not that much harder. And in a lot of ways, it forces you to develop some of the skills and systems that are going to make you a better investor over the long run.
So I would personally not shy away from that. Once you’ve found a market where you can actually do this realistically, again, lots of places in the Midwest and the Southeast, some places in New York or in New Hampshire, places like that, this is definitely possible. The things I would personally target on this deal is an 8% cash on cash return or better after stabilization. Now, we’re not going to prioritize a big equity bump on this. We’re not going to do a big Burr project, but sometimes, and honestly, oftentimes in today’s day and age, you got to fix up the house a little bit. You got to throw some paint on there, put in some new floors, make a couple of improvements, and then once you have gotten rents up to fair market value, that’s when you need the 8% cash on cash return. So even if the rents today and the Zillow price don’t give you that 8% cash on cash return, that’s actually fine.
That’s quite normal. What you need to do, the job you have as an investor is to project out, what’s my cash on cash return going to be when I’m done fixing up this property? And if it’s 8% or better, that’s what I’d look for. Then I would look for at least two to three upsides on these deal because 8% cashflow is great, but you obviously want the deal to perform better and better over time. And so I like looking for areas where there’s likely to be rent growth if it’s in the path of progress or I also love places with zoning upside. Now, I just want to say one more thing before we go back to our example that there are a lot of markets in the Midwest that you can buy these kinds of deals, but I recommend looking for ones that still have good appreciation.
I said it before, but I want to reiterate here that as a real estate investor, you do not want to see your property values going down. So look for places like Milwaukee or Indianapolis or Grand Rapids or even Detroit over the last couple of years. These are markets that are growing and they have good, strong fundamentals, but they’re still really inexpensive. That’s what you want to look for. You don’t just want to find deals that are cheap because they’re cheap. A lot of times if they’re in a mediocre market and they’re cheap, it means that they’re probably not going to appreciate you’re going to miss out on a lot of the benefits that you should be getting from holding onto this property long term. So presuming that you find this, you get a $300,000 deal with an 8% cash on cash return. If we return back to our example, now we’re getting 750 a month from property number one because rents have been growing at 3% a year, 350 a month from property number two and 420 per month from property number three.
That is over $1,500 a month in tax advantage cashflow, which is closer to earning $2,000 per month like in a job that’s going to get fully taxed. Now you’re only five years into this, but hopefully you’re starting to see that these things start to compound. What is not a lot of cashflow in the beginning gets a little bit more and a little bit more and a little bit more. And it’s not just when you acquire new deals. Just by owning these properties, you’ve already gone from modest cash flow and deal number one to 750 a month on property number one. Now you’re up to 350 a month on a BER deal that was prioritizing equity growth over cashflow, but you’re still getting cashflow. And as you’ll see in our next property, the longer you hold this, every deal continues to get better. It’s not just about acquiring new properties, it’s about allowing every deal that you own to mature over time.
And just like wine or many other things, most deals continue to get better and better the longer you hold them. So now that we’ve done property number three, let’s move on to our fourth property that you should be targeting before the time you turn 40. We’re going to get to that, but first we have to take one quick break. We’ll be right back.
Welcome back to the BiggerPockets Podcast. I’m Dave Meyer. We’re going through how to get four rental properties by the time you’re 40 years old. All right, so now that you’ve done your first three properties, you’ve done your owner occupant, you’ve done the Burr, you’ve tried a cashflow play. Step four is to pick your fourth property. And for your fourth property, you can honestly just decide which of these things that you like doing. If you want to do another owner-occupied strategy, moving from house hack to house hack is a super powerful strategy. If you were comfortable doing a BER and like doing a value add, you can absolutely do that again. Or if you’re progressing through your investing career and kind of want to be hands off and want to buy in more turnkey kind of rental property that’s more focused on cash flow, you can absolutely do that too.
The great thing about building a portfolio over the course of six, eight years like this plan has you doing is that you have options now. You’ve built up enough equity. You have cash flow coming in that it’s easy to get more loans. You can repurpose equity from one of these first three deals into your next one, and that allows you to expand and build your portfolio in the way that you want. The key things to know though are that if you want to grow the most net worth, you got to focus on equity. So I would say either doing a house hack or more likely a BER, if you want to build that net worth as quickly as possible, if you want to do as little work as possible, which is a totally worthwhile goal, I would focus more on the sort of cash flowing deals.
And if you want to take the least amount of risk as possible, I would do another house hack. You refinance that first one into being a regular rental property, then do another house hack. Now for me, personally, if I was making this choice, I like the BER because I think it gives you a little bit of both, right? It allows you to build equity at the same time as you’re building cashflow. So to continue our example, let’s just assume I’m going to go out and do a BER again. This time I’m going to take a little bit of a bigger swing. I’m going to buy a property that needs renovation that’s $400,000. Remember, the first Burr we did was about 300 grand. We put 50K in. I’m buying something this time, 400K, taking a bigger swing by doing an $80,000 renovation. If I do a hard money loan at 10%, that means I’m going to have to put about $48,000 of equity into this deal, and we should have that two or three years after doing deal number three.
So again, you’re not necessarily having to put much more money into this. From the cash flow you’re building through deals one through three, plus the equity you’re building, you should be able to afford this deal about eight years after starting. So in our example, you’re about 38 years old at this point. So on this deal, you buy for 400, you put in 80, the ARV is going to be about 650, which is totally reasonable here. I think a lot of times a good rule of thumb is your equity growth should be about double your renovation costs. That’s an efficient deal when you’re doing a kind of Burr. So this is realistic that you can get your ARV up that high. And that means that even if you don’t refi any money out, like if you do four deals in stock, which is the plan that we are giving you here today.
So even if you don’t take money out to do another deal and you factor in your holding costs and the debt costs that you’re going to have to pay while you’re doing the renovation, you’re going to build about $120,000 in equity just from this deal alone. And hopefully by renovating your properties, you can drive up your rents and get an 8% cash on cash return, which I think is totally reasonable. That’s not like the highest end. I think that’s a realistic return you can generate. So from this fourth deal alone, you’re getting 120K in equity and an 8% cash on cash return, which means over $10,000 a year in cash flow. So those are the four steps. Those are the four deals that I would recommend anyone do if you want to get to four rental properties by 40 years old. Now, I understand that just doing these four deals and the numbers that I’ve been using so far may not seem like the most exciting thing in the world.
It may not sound like those people who are buying thousands of units on Instagram, but let me just take a minute here and explain how just these four deals will help you stack up against the average American. At age 30, when you start this, you’re saving $500 a month, you’re going to have a $400,000 home that’s appreciating rapidly. You’re getting amortization and you are getting huge tax benefits that will help you save more money to grow. By age 33, you now have your second property. You’re generating more than $10,000 a year in cashflow, and you have $119,000 of equity just from these two properties. Now, might take you two or three years to get to that next deal, but by the time you’re at age 35, your cash flow is now up to $16,000 a year and your equity value is 214,000. Then by the time you’re 40, you bought your fourth deal.
You’ve been holding onto it for two years. You have $30,000 in tax advantage cashflow. That’s more like earning $40,000 a year in your career. And your net worth just from these properties is up to a whopping $490,000. Your equity after 10 years, $490,000. Compare that to the median 40-year-old in the United States whose net worth is $76,000. So by buying these four properties alone in just 10 years, your net worth will be five times the median 40-year-old. And from there, the benefits only start to compound. By the time you reach a more traditional retirement age of 60, actually 65 in the United States here, but just by 60, now you’ll start paying off the mortgages. You’ll be done with property number one. Your cash flow is going to skyrocket at that point to $75,000 a year. Again, because of the tax advantages, that’s more like making $100,000 a year, and your net worth at 60 years old just from these properties will be $3.3 million.
This is the power of real estate. You don’t need to buy a lot of units. You need to buy them and hold on. As you can see, the benefits just continue to compound more and more and more. Like I said, you have a little over six grand in cashflow at age 60, but once you start paying these things off, it gets even better. At 63, it’s 8K a month. At 65, it’s 10K a month. At 69, it’s 13K a month in tax advantaged cashflow. Now, I know that seems like a long way away, but this is a much better recipe for retirement than anything else out there. I don’t know anything, including a 401k that could come even close to touching this in terms of how much passive income it generates and the net worth that you generate. So if you’re out there looking for a way to build wealth, to pursue financial freedom, this is the exact plan I would follow.
It’s very similar to the plan I did for the first eight years. Now, of course, this is just an example. I don’t know if it’s going to take you two years between deals or three years between deals, but this rough outline can get you to a successful retirement. And of course, I did all this in this example, four properties in just eight years. If you want to keep going after that, by all means, you should. You have 20 years of working potentially to keep building that portfolio, build more cash flow, build more net worth, but for the average American, just four deals can be completely life changing. As you can see, building more, more and more units, it can help, but it’s not necessarily. Personally, I like to keep my portfolio relatively small because it’s enough for me to comfortably retire without having to add any additional work or stress to my life.
To me, that’s the beauty of real estate investing, that there’s disproportionate benefits for the amount of work that you have to put in, especially over the long term. And it’s also something that so many Americans can do. They just haven’t taken the steps to try. But as we’ve shown you in today’s episode, you can start with as little as $20,000 and build a massive portfolio worth millions of dollars starting in your 30s or your 40s. Hopefully, this gives you a game plan that you can follow in pursuing financial freedom. If you want to learn more about any of these topics, dive deep into how to be a great house hacker, how to pull off a great Burr, make sure to subscribe to the BiggerPockets YouTube channel. Thank you all so much for watching. We’ll see you next time.

This article is presented by Dominion Financial.

Here’s something most real estate investors figure out the hard way: The best deals don’t go to the highest bidder. They go to the fastest closer.

You’ve probably seen it happen. A solid rental property hits the market. You run the numbers, they work, and you put in a strong offer. And then a cash buyer swoops in, not necessarily higher, just faster, and the seller takes it without blinking.

It’s frustrating. And it feels unfair. But once you understand why sellers behave this way, you can start using that knowledge to your advantage, even if you’re financing every deal.

Because here’s the thing most investors don’t know: Financing has finally caught up to cash. There are lenders (like Dominion Financial) who can close a DSCR rental loan in 10 days. Not 30. Not 45. Ten.

So the question isn’t whether you can compete with cash buyers anymore. It’s whether you know how.

Why Cash Wins (and It’s Not What You Think)

Most investors assume sellers prefer cash because of the money itself. No appraisal contingency or bank to deal with—just a clean, straightforward transaction. But that’s only part of it.

What sellers are really buying when they accept a cash offer is certainty. They’re buying the confidence that the deal will actually close, on time, without drama. 

According to the National Association of Realtors, a significant portion of sellers rank the reliability of closing as a top priority, often above the final sale price. Think about that for a second: Sellers will take less money for more certainty. That’s the dynamic you’re up against every time you submit a financed offer with a 30- or 45-day closing timeline.

And the longer your financing takes, the more uncertainty you’re injecting into the deal. Every extra week is another week the seller is wondering if you’ll come back with a price reduction after the inspection, your lender will ask for more documentation, or if the deal will fall apart entirely.

Extended timelines aren’t just inconvenient. They are a negotiating disadvantage built into the financing itself.

So when investors ask why they keep losing to cash buyers, the honest answer usually isn’t price. It’s time.

The DSCR Advantage Most Investors Are Leaving on the Table

DSCR loans were supposed to solve this problem.

If you’re not familiar, DSCR stands for Debt Service Coverage Ratio. It’s a loan structure designed specifically for rental properties that qualifies you based on the property’s income, not your personal tax returns or W-2s. 

The property pays for itself, so the underwriting process should be simpler, faster, and less invasive than a conventional loan. And in theory, it is.

But in practice? Most lenders are still running DSCR loans through the same slow, manual processes they use for everything else. You still end up waiting 30 days or more and find yourself chasing down documents, waiting on appraisals, and hoping your loan officer actually returns your calls.

The structure of the loan is fast. The lender’s process is not.

This is the gap that’s costing investors deals every single day. DSCR was built to give rental investors an edge: flexible qualification, property-focused underwriting, and the ability to scale without getting strangled by your debt-to-income ratio. But if the execution is slow, you’re still showing up to a knife fight with a loan estimate and a prayer.

The investors who understand this are doing something different. They’re not just shopping for the best DSCR rate. They’re shopping for the best DSCR process.

What Competing With Cash Actually Looks Like in Practice

Imagine two buyers walking into the same deal: A rental duplex, priced fairly, with solid cash flow in a market with strong fundamentals. The seller wants to close quickly and move on.

• Buyer A is a cash buyer. They can close in 14 days.
• Buyer B is financing, but their lender can close in 10 days.

Who wins? Buyer B. And the seller probably never even asks about financing because the timeline speaks for itself.

That’s the conversation that’s starting to happen in markets where investors have figured out how to weaponize their closing speed. When you can close faster than a cash buyer, you stop being “the financing offer” and start being the sure thing.

And the advantages compound from there. Faster closings mean faster rent collection. Your capital isn’t sitting in escrow for six weeks while the property generates nothing. You close, you tenant, you move. And then you start looking for the next deal, while slower investors are still waiting to get their keys.

For anyone trying to scale a rental portfolio, this matters enormously. The bottleneck isn’t usually deal flow. It’s execution speed. Every week you’re waiting to close is a week you’re not deploying capital, earning rent, or building toward your next acquisition.

Speed isn’t just a competitive advantage at the offer stage. It’s a portfolio growth strategy.

What to Look for in a Lender If Speed Is Your Strategy

Not all fast lenders are created equal, and this part matters.

Some lenders will promise you a quick close and then deliver the same slow process with a more optimistic timeline attached to it. Speed without process discipline is just a sales pitch.

When you’re evaluating lenders on execution speed, here’s what to actually look for.

1. Process-driven timelines, not just promises

Ask the lender specifically what happens between application and closing. Where do deals typically get stuck? What have they built to prevent that? Vague answers are a red flag.

2. Pricing transparency

A faster close should not mean a worse rate. If a lender is charging a premium for speed, that’s worth knowing upfront so you can run the actual math. The best fast lenders don’t treat speed as a luxury feature. It’s just how they operate.

3. Track record with rental investors

A lender who primarily works with owner-occupants is going to approach a DSCR rental loan with an owner-occupant mindset. You want someone who does this every day and has built their systems around it.

4. Straightforward documentation requirements

One of the biggest sources of delay in any loan is back-and-forth on documentation. Lenders who know exactly what they need and ask for it once, cleanly, close faster than those who drip requests over weeks.

Get clear answers on all four of those before you commit. Because the lender you choose is either an asset or a liability in every deal you make.

How Dominion Financial Is Closing DSCR Loans in 10 Days

So what does this actually look like in practice?

Dominion Financial built its Express DSCR Rental Loan around a simple premise: Investors shouldn’t have to choose between financing speed and pricing discipline. You should be able to get both.

Their Express program closes in 10 days, not as a rush service or with a premium tacked on. That’s just the timeline they’ve engineered their process to deliver.

Dominion Financial streamlined its documentation review, underwriting, and closing coordination into a single, friction-reduced workflow. They’re not a legacy lender with a stack of manual processes bolted together. They designed this program specifically for rental investors who need to move at market speed.

And they back it up with a DSCR price-beat guarantee. If you find a better rate on a comparable DSCR loan, they’ll beat it. So you’re not trading a good rate for speed. You’re getting both.

For investors who’ve been frustrated watching cash buyers walk away with deals that should have been theirs, this changes the math completely. You don’t need an all-cash portfolio to compete like one. You need a lender whose process works as fast as the market does.

The practical impact is real. You can submit stronger offers with shorter closing windows. You can tell sellers with confidence that you’ll be done in 10 days. And in a market where that’s faster than most cash buyers, your financed offer stops being a liability and starts being a weapon.

Who this is built for: Active rental investors, buy-and-hold operators, and portfolio builders who are tired of losing deals to slow financing and want a DSCR process that matches how they actually invest. 

If that’s you, it’s worth a look. Click here to learn more about the Express DSCR Rental Loan from Dominion Financial and find out how fast you can actually close your next deal.

This article is presented by Proper Insurance.

As a real estate investor, you likely already know quite a bit about the importance of landlord insurance for your rental properties. You also probably know that landlord policies are separate and different from regular home insurance.

But what about when you decide to branch out into short-term rentals? You might be comparing policies and wondering if Airbnb rentals will be covered if you decide to go down that route in the future, or only occasionally, or you may be considering a complete business strategy switch to short-term rentals.

Regardless of the exact circumstance, there’s one point that will apply to you in most cases: You will need to dig deeper into your current policy specs rather than assuming your short-term rental will be adequately covered by your current policy. Many investors only discover coverage gaps after a denied claim, which is why providers that specialize specifically in short-term rental insurance, like Proper Insurance, emphasize reviewing your policy before you ever host your first guest.

If you haven’t bought your policy yet but are thinking about going into short-term rentals, here are the things you need to think twice about when buying insurance.

Can My Landlord Policy Cover Short-Term Rentals?

The short answer is: it depends — and that uncertainty alone is worth investigating. Landlord/Dwelling insurance is not designed to cover the vast risks of short-term rentals, but that’s not always obvious. Some insurers market DP-3 policies as short-term rental products, but underneath, they remain standard landlord policies with the same limitations.

The most significant of those limitations is liability and guest-caused damage.

If you’re renting your investment property as a short-term rental, a Commercial Homeowners policy is the appropriate product. Unlike Landlord insurance, a Commercial policy is a business policy built to cover business operations, with Commercial General Liability that extends beyond your property line, and without the exclusions that can leave property owners and investors exposed.

Equally, if you’re completely switching over your rentals to STRs, you can’t just keep your current landlord policy and hope for the best. There is a mechanism for writing the occasional short-term stay into the homeowner’s insurance for your primary residence. In this case, the insurer can simply add on what’s known as a “rider” to your existing policy. But an investment property that has been rented out on a long-term basis (12+ months is the standard lease term for LTR) will not be covered. 

What a Landlord Policy Will Not Cover When It Comes to Short-Term Rentals

Let’s take a more in-depth look at what won’t be covered and why relying on a landlord policy for a short-term rental can lead to unexpected costs when something goes wrong.

For an insurer, deciding how to structure an insurance policy and how much coverage to offer boils down to the specific risks associated with the activity that’s being insured. And while to a beginner investor, STRs and LTRs seem like similar activities, they are actually subject to very different risks—hence the different coverage types required.

The most significant coverage gap is in liability. Landlord insurance protects investors by covering lawsuits for tenants’ personal injuries while occupying the property. But what if it turns out that the “tenants” suing for personal injury were only staying for the weekend and are not the tenants named on the long-term lease? The insurer most likely will deny coverage. Most Landlord policies include a “business pursuits” exclusion. Your insurer has the authority to determine that short-term renting is a business pursuit; your liability coverage could be voided entirely, even for incidents that do occur on the premises.

The same goes for if a guest slipped and fell in front of an outdoor hot tub or got injured while kayaking in a nearby river in a kayak you provided as a host. Certain activities, amenities, or off-premises exposures may require separate coverage or specific endorsements and are often excluded unless explicitly insured. Without appropriate coverage, even a single accident involving a hot tub, pool, or recreational equipment can quickly escalate into a six-figure liability exposure.

Next, if a guest steals something of yours during a weekend stay, landlord coverage will not be of help here because landlord policies assume that nothing in a rental property is your own personal property, with most LTR properties offered on an unfurnished/partially furnished basis. Theft is especially problematic if you offer an STR that is elaborately furnished or “themed” with knick-knacks and unique decor. 

Be careful with this, though: Even short-term insurance plans often won’t cover the cost of expensive items like artwork or jewelry; if you really feel like leaving these in a property you’ll be using as an STR, you’ll need to add a special add-on plan for valuable personal property.

Hot water heater, air conditioner, refrigerator, circuit panels, heating, or smart home system stops working? If an appliance breaks due to mechanical failure, landlord insurance generally does not cover replacement unless a specific equipment breakdown endorsement is in place. Landlord insurance typically responds only to damage caused by a covered peril such as fire or storm. And if you are forced to cancel a booking due to the equipment that broke down, without this coverage, you’ll have to shoulder the loss of income from that booking and any other impacted booking as well. 

What if one of your guests accidentally brings in bedbugs via their bags? A pest infestation can make an STR uninhabitable for weeks while pest control deals with the issue. 

Landlord insurance does not cover pest infestations because they’re considered preventable with proper maintenance. Some short-term rental policies, on the other hand, will cover this problem due to high guest turnover, which can make such infestations impossible to prevent in short-term properties. 

When bedbugs or similar infestations occur under a landlord policy, the financial impact is twofold: the owner is responsible for extermination and remediation costs and must cancel upcoming reservations while the property is out of service. Because landlord policies do not include loss-of-revenue protection, the lost booking revenue during this downtime is typically uninsured.               

All these exclusions amount to a fundamental assumption about the key differences between STRs and LTRs: Long-term renters, as a rule, tend to take better care of the properties they occupy than short-term renters. They are also less likely to sue their landlords because they want to stay in their home, so you have less of a risk of someone filing a claim opportunistically. Long-term rentals are just subject to fewer unpredictabilities. 

For all these reasons, short-term rentals require their own kind of insurance with higher liability limits, broader property protection, and business income considerations, coverage structures that contemplate hospitality-style operations rather than long-term tenancy.

When a Rental Becomes a Business

There’s one more important thing investors need to know about switching to short-term rental insurance: What you’ll be switching to is actually a form of commercial insurance, combined with elements of home insurance. 

In the eyes of an insurer, a short-term rental stay is considered a “business activity.” In this, the insurers follow IRS guidance that deems active hospitality, where cleaning, concierge services, and amenities are offered as part of the stay, a business activity rather than passive income, as in the case of traditional real estate investing. 

This is important not just because this designation as a business activity may automatically exclude you from LTR landlord policies, most of which come with a “business pursuit exclusion” clause, but also because you may need a lot more than you think as an STR landlord, including a business permit, a local STR registration, and any other licensing required specifically of short-term rentals in your local area. 

The precise guidelines vary, and you’ll need to do your own research, but, as a rule of thumb, if you’re planning on using your investment property for stays that will be, on average, seven days or fewer, you almost certainly will fall into the category of a short-term rental “business,” with all the legal implications. 

Final Thoughts

For a short-term rental landlord, there’s far more to think about due to the higher-risk and more unpredictable nature of this rental strategy.

If you’re planning on renting through Airbnb or Vrbo, it can be tempting to rely solely on the OTA guarantees these companies advertise.

Resist the temptation to skip the fine print. Standard platform protections come with significant limitations. For example, Airbnb’s host coverage is not a policy with your name on it, meaning you forfeit all policy rights. They are in complete control of the process, how long it takes, if you get paid, and how much for any experienced loss. 

The strongest protection strategy is a policy designed specifically for short-term rentals and customized to your property’s risk profile. Working with a provider that specializes exclusively in STR coverage, such as Proper Insurance, ensures your policy reflects the realities of operating a hospitality business, not just owning a rental property.

Dave:
There is a ticking time bomb in the US housing market that no one seems to be talking about and this isn’t clickbait. I genuinely believe this is one of the biggest risks to real estate investors and one of the biggest questions about the future of our entire industry. So what is it? Population decline, population and household growth drives demand for housing and rentals, but our population is not going to be growing much longer with lower immigration and quickly falling birth rates. Is housing demand at risk of drawing up in the future? Could we go from an undersupplied market to an oversupplied market in just the next couple of years? The answers to these questions are massively important to real estate investors and in today’s episode of On the Market, we’re digging into this question about population growth, how it’s going to impact real estate values. We’ll learn lessons from other countries in similar situations, and of course we’re going to talk about how you should position your own portfolio. I promise you this is an episode you do not want to miss. This is on the market. Let’s get to it.
Hey everyone, it’s Dave. Welcome to On the Market. We have a great episode for you today. It’s actually one that I’ve been wanting to make for a while. It’s definitely one that I’ve been researching for a while. We are talking about a potential declining population in the United States and what it means for real estate investors. And to be honest, this is an uncomfortable topic. I was a little nervous actually to dig into this topic because I think there is a bit or maybe more than a bit of an existential threat here. For real estate investments to perform, you need demand and for as long as we have had a country, demand has always grown as the population has increased. But what if that stops? What happens then if population in the US stops growing? This isn’t some hypothetical question. The data actually suggests it is going to stop.
In fact, by 2031, only five years from now deaths in the United States are supposed to outpace births. That’s only five years from now. And of course immigration also plays a role. It’s not just birth rates, but as you probably know and we’ll discuss in more detail, immigration is also declining. So this question of where the population is going and what it means for real estate is a legit question and it is something we frankly just need to discuss as uncomfortable as it may be. So that’s what we’re going to do in today’s episode. We’re going to talk about first the current balance between supply and demand and where we’re starting from. Then we’ll talk about forecasts for population and housing demand into the future. Then I’m going to dig into how housing markets in other countries with declining populations have behaved. Because this is not just a US phenomenon, this is happening all over the world.
We’ll talk about when and where risks actually exist for real estate investors and we’ll finish up with just how I think you might want to position your portfolios given this information going forward. That’s the plan. Let’s get to it. So first up, let’s just start where we’re at. You all probably know this, but we need to do a little review to set the stage for this entire conversation. There are two sides to the housing market. There is supply number of homes that exist in the United States, number of homes that are for sale at any given time. That’s the supply side. And then there’s demand side. How many people want to buy a home or who need to rent an apartment? And generally speaking, when there is more demand, then supply prices tend to go up and that is where we are today. You’ve heard this, but we are in a supply deficit in the United States.
It really depends and varies widely how big that supply gap is, depending on who you ask. The National Association of Home Builders, they have the smallest estimate at 1.2 million units. Then we have NAR, the National Association of Realtors. They’re saying it’s all the way up to five and a half million units, different methodologies. I think for real estate investors, I kind of just average all of them and assume that we are probably three to 4 million units short in the us and this supply gap has existed basically since the great financial crisis. We talk about that on the show all the time. A lot of builders went out of business, they couldn’t get loans. We had underdevelopment for over a decade. That’s how we got in this situation. And the interesting thing here is that it is actually getting works even though a lot of attention has been called to this situation over the last couple of years.
If you just do some basic math, it looks like the gap is not closing and is probably getting a little bit bigger. As of right now, we’re on track for about 1.6 million new housing units added per year in the United States, which is decent. It’s not terrible, but it is not enough to cover the estimated 1 million new household formations that is new demand, new people who need housing, right? That’s 1 million. Then on top of that, there’s demand for about 200,000 secondary homes or investment homes who’re at 1.2 million. And then the thing that people often forget about is that about 400,000 homes per year just become obsolete and are demolished or they’re left vacant. And so that gets us to about 1.6 million. So either we’re slightly improved closing that gap or it’s getting slightly worse, but it’s about even right now, just as an example, in 2023, there was only 1.4 million homes added, but there is an estimated 1.8 million new households formed, meaning that in 20 23, 1 of the years we had a lot of deliveries relative to recent years.
We still went net negative by 400,000 housing units. So we won’t go into this in any more detail, but just remember that we are starting at a deficit. This is a really important part of the analysis of what’s going on with population because as we now start turning our conversation to birth rates, immigration, how this is changing in the future, we basically need to think through how these changes in birth rates in immigration will impact the current deficit that we are already in. We need to frame our conversation in terms of how demographic changes will impact current trajectories. So to do that, we got to look again at both the demand side and the supply side going forward, and let’s just start with the demand side because it’s the scary part and we need to get this part out of the way. There are basically two pieces to the demand picture, birth rates and immigration.
Let’s just start with birth rates. There is an acronym TFR, which stands for the total fertility rate that hit an all time low for the United States in 2024. The last year we have data for it was at just 1.6 children per couple. Now, something I’m going to mention a couple of times in this episode is something called the replacement rate, which just basically means that you need two adults to make a baby and in order for the population to grow, the average couple of two adults need to have 2.1 children to have the population grow, right? If it’s exactly two, then the population will stay flat, right? Two parents create two children, population stays flat. Now what falls is anytime that this total fertility rate or the birth rate falls below two, that means that population is probably going to decline at least domestic born population.
We will get to immigration in just a second. Now, the fertility rate in the US, like I said is 1.6, meaning that we are well below the replacement rate and that our population of domestic born citizens is going to decline. This trend of fertility rates falling is pretty dramatic Since 2007, the fertility rate has fallen 22% and this is happening with all sorts of people. Every age group under 35 is declining. We’re actually seeing a small increase actually in fertility rates for women over 40. People are generally just waiting longer to have kids, but it is down a lot and there are government organizations that study this and they’re projecting that it stabilizes around 1.67 to 1.7. So a little bit up from where we are, what they’re basing that on, I honestly don’t know. They seem to think that people are just waiting and that there’s some pent up demand for having kids.
I don’t really know. It’s been falling in the United States for decades. It’s actually been falling all over the world for decades. We’ll talk about that in a little bit, but they think it’s going to get better. Now, why are birth rates falling? Well, when people are asked, the government tracks this kind of stuff, all sorts of think tanks track this kind of stuff and what they’re seeing is number one, economic anxiety. It is really expensive to have children. There are also cultural shifts just generally speaking where people are having fewer children, but the mostly commonly cited thing is just it’s too damn expensive to raise kids. Now we’ll see if people stick with that or maybe it’s just delayed and we’ll see a birth boom in the next couple of years. But I think it is unlikely and I have not seen any studies that suggest that is likely we are going to get back to that replacement rate.
Even the more optimistic forecast, say we’re going to get back to 1.7, not to 2.1, which is where you need to get to have a growing population. Now, I just want to mention that there are pros and cons to a growing and shrinking population, but economically speaking, most economists believe that a falling population is a problem for the economy. Basically to figure out GDP, you take the total number of people in the workforce, you multiply it by productivity, generally speaking, that’s how much economic activity you have in a country. And so when you have a falling population, that means there are economic risks. Now, there are good chances that productivity gains like stuff from AI will offset a declining population. We don’t really know, but I just wanted to call out that a lot of economists believe that a falling population is an economic problem.
This is probably why you see a lot of business people calling attention to the falling birth rate. Now, I’m not suggesting that birth rates or people should make decisions about their own families based solely on economics. I’m not saying that at all. There are plenty of other variables here, but this is an economics podcast. So I am just trying to frame the conversation and make clear that I am talking about this in economic terms because this is a real estate investing podcast and my goal in this episode is to understand how a potentially falling population impacts real estate. Okay, so that being said, I just want to reiterate that this trend of falling birth rates is not an American phenomenon. It is happening all over the world. There are very, very few countries where birth rates are actually going up. Some of this is likely due to just a wealthier world.
Research shows that as countries become more wealthy, less children are born, but whatever the reason this is happening everywhere. The global birth rate has fallen 50% since 1950 and western countries are seeing real population declines. It’s happening in Japan, in Canada, in Germany and Spain and Italy. It’s happening everywhere. Birth rates are below replacement rates. So for our conversation, unless something changes radically, we are going to have far babies in the United States and maybe something will change, but this is a long developing trend and there is no evidence is going to turn around soon. So I am personally counting on this continuing at least for now. Now population wise though, birth rates are just one angle. We also have to talk about immigration because that is a big factor in the total population and total housing demand in the United States, and as you know, immigration policy has changed a lot in the last couple of years. We’re going to talk about how that impacts demand for housing, but first we have to take a quick break. We’ll be right back.
Welcome back to On the Market. Today we’re talking about a somewhat uncomfortable topic. What happens to real estate if the population in the United States starts to decline and before the break, we just talked about this through the lens of the fertility rate in the United States, which is declining, it is below the replacement rate and it is very likely that we’ll have fewer and fewer babies and smaller domestic born populations in the United States going forward. But as we mentioned before the break, there’s also immigration that is a major factor in population size in the United States, so we’re going to dig into that Now. We went through from 2020 to 2025, a really large surge in immigration. We actually had 11 million, over 11 million immigrants arriving from 2020 to 2025, 3 million alone in 2023, which I believe is the largest annual total ever. That is a combination of both legal and unauthorized immigrant populations.
We actually saw the unauthorized population hit a record in 2023 of 14 million. We’ll talk about this in a minute. Now the trend has completely reversed, but I just want to call out that we had a big surge in immigration over the last couple of years and that has actually been the primary driver of population and household growth in the economy and in the housing market. Like I said, we’ve been the below the replacement rate for births in the United States for quite some time, and so the main driver of our population growth has been immigration. You actually see this. It’s very regional, but I was just looking this up and you see in some of the fastest growing metros in the entire country, you look at Houston, you look at Miami, you look at Phoenix, you actually can see that over recent years, immigration has accounted for at least 50% of their population growth, if not more.
Now since January, 2025, there has been a really big reversal. January 20, 25, a little over a year ago, immigrant, total immigrant population in the US was 53.3 million. By June, 2025, it went down to 51.9 million, a decrease of 1.4 million in just six months. That is actually the first decline in US immigrant population since 1960s. And if you look at estimates for the total of 2025, and this is both, this is for both legal and unauthorized migration. There are studies that show that net migration last year in the United States was negative. It could have been negative by several hundred thousand. Now, I don’t want to get political with all this, but I did just sort of look into try to understand how this is happening and what I found is there was an estimate of 310 to 315,000 deportations in 2015. So that actually suggests that the bigger driver of lower net immigration is actually a slowdown in new arrivals.
So yeah, deportations are contributing to this, but also fewer immigrants are actually coming to the United States. Now the big picture here is that the CBO is actually just revised their population estimates for August, 2025 and they’re estimating that in the US in 2035. So they were looking 10 years out, they actually revised down their estimates for us population by 4.5 million. That’s a big difference. I mean it’s not crazy. It’s like one 2% of population, but that matters even on a national level and it’ll definitely matter on a regional level, which we’ll talk about in just a minute. So in aggregate, when we look at lower birth rate and we look at lower immigration, I think it’s hard to argue that demand is going to be sustained in the housing market. I think we have to accept the fact that demand is going to fall, and I know that can be scary.
It is a little scary. I will totally admit that, but there’s a lot of other variables that we need to account for. So let’s just go through those things. First things first though, let’s just remember from a birth rate perspective, babies born today, they don’t form households. They’re not going and renting apartments, so the stuff that’s going on with the birth rate is still probably 5/10/20 years out. We are actually still in peak millennial household formation. These are millennials right now are ages 26 to 42 depending on who you ask. Everyone has a different definition of everything that is the biggest cohort in history and the birth rate sort of falling off a cliff that is actually more likely to impact the housing market in sort of like the 2040 to 2050 kind of range. It’s kind of like a water pipe when you sort of turn off the faucet, but the water continues coming out for a while.
That’s kind what’s going on. The water pressure has been turned down, but we still have a lot of water coming through the pipes for the next couple of years at least. And so the way I have been thinking about this and I’ve been mapping this out and looking at demographic data and all that, basically from 2026 from where we’re today to 2030, I do not believe there is going to be an effect from birth rates on the housing demand. I just don’t think that’s going to impact us. Are still in peak home buying for a giant population bubble we have with millennials and older Gen Z. Then in 2030 to 2040, I do think demographics are going to start impacting real estate in a potentially negative way. We have the smaller Gen Z cohort starting to buy. They buy a lot of measures are not doing as well as millennials financially might not be able to afford to buy.
At the same time, I am not someone who believes in the silver tsunami that we’re all of a sudden going to see a ton of boomers selling their homes, but they are going to sell their homes. That transfer is already starting and is going to continue in the 2030. So I think in the 2030s to 2040, we’re going to start to see some demographic headwinds in the housing market and then what happens in 2040 to 20 beyond, I don’t really know. It’s really hard. I don’t really even pretend to be able to forecast 15 years from now, but that is when we will see the impacts of lower fertility rates. That is going to be a major variable in 2040 and beyond. But as you know, there are so many other things that will impact what’s going on 15 years from now. For example, immigration.
Immigration policy can change. We saw it change very dramatically from 2024 to 2025 and I don’t know what will happen in the future, but it is possible that it will swing back in the other direction and we don’t know what’s going to happen with supply, which we’re going to talk about in just a second. I just want to go back to that timeline though where I was saying twenty twenty six, twenty thirty, I don’t think birth rates are really going to be impacted. Immigration though is going to be impacted immediately. This is something that impacts the market right away. If there are fewer immigrants, we have fewer new renters, we have fewer owner households, and we are seeing this in a lot of areas. If you look at, I’m picking on Houston because there’s some studies about what’s going on in Houston, but Houston’s low rent apartments are seeing more vacancies, fewer applicants.
We see a 24% year over year drop in Houston home searches from international users. So we’re seeing that in Houston and if you look at these studies, Harvard put out a study, they are sort of modeling out what they call a low immigration scenario where we have 420,000 immigrants per year instead of 870,000 baseline. They’re just saying straight up that there’s going to be lower housing demand over the next decade. Now of course that is going to be regional. It is not national, but the market’s most exposed are ones with large immigrant populations, Houston, Miami, Phoenix, la, New York City, other immigrant dense metropolitan areas. So it reasons that we are going to have lower demand for housing because of lower immigration in the next couple of years. But there are two things that I think we need to remember here before people start freaking out.
Remember that we are starting from a deficit. I started this episode by framing that we are in a large deficit in the United States, and so having lower demand for housing overall does not mean we are going to see the market crash, but it is one of the many reasons I’ve been saying that I think we’re in for probably several years of a housing market correction because I think we’re going to get closer to balance between supply and demand. I think that the lower immigration will probably eat into that supply deficit that we have if construction keeps up, which is a big if because that brings us to the other thing I wanted to mention is that lower immigration is also going to negatively impact supply. We’ll talk about that in just a minute, but immigrants make up a quarter of construction workers so that mitigates some demand weakness and we could see lower construction rates because there just isn’t enough workforce or we are going to see rising cost of construction because that’s what happens when there is less labor, that labor demands more wages, that increases the cost of construction and that in itself could slow down the pace of construction.
Even though lower immigration we know will lower demand, it will probably also lower supply, not proportionally, I don’t think it’s, but that lower supply impact will mitigate some of the softer demand. Okay, what does this mean for your investing, right? We covered a lot of the demand side, but we need to also look at the supply side before we draw any conclusions and we’re going to do that right after this quick break. We’ll be right back.
Welcome back to On the Market. I’m Dave Meyer. We are now going to turn our discussion about potential population declines and what it means for real estate investors to the supply side because everyone always misses the supply side, right? Everyone always talks about demand, but they miss the supply side. Now remember, we’re in a shortage right now, but will the demand decline softening demand erase that? Could we go from a supply shortage to a supply glut? Let’s discuss. Well, first of all, like I said, we’re actually in the supply glut that actually might get worse before it gets better. I ran you through the numbers, but roughly we’re at 1.6 million units right now and that’s about what demand is and so depending on the year, we might actually get a little bit worse and at best it’s getting a tiny bit better. So even with lower immigration, I do not think that it’s likely that we’re going to see a shift from a shortage to a glut in the near future, but that’s really going to depend on immigration in the short run, if it really just gets huge net negatives that could change, but based on numbers that we saw from 2025, I don’t think in the next couple of years we’re likely to see that shortage get erased.
But what about in the long run with declining birth rates? Won’t we inevitably see a glut? This is the question people are always asking me when we talk about population is that if we have all of this housing and even though we have an oversupply right now, the population keeps declining and declining, won’t we eventually have too much housing for the amount of demand that we have? There could be. That is definitely risk. That is why we’re talking about this today. There is a risk to that, but I want to just remind everyone that there is sort of this hidden variable in supply that is often forgotten that is obsolescence, that is that every year obsolescence a demolition remove 400,000 units from housing supply and that happens regardless of population growth. Everyone always forgets that nearly half a million homes get destroyed each and every year, and we have a lot of old houses in the United States.
Actually nearly 50% of all of our housing stock is built in 1980 or earlier. The median age of owner occupied homes right now is over 40 years old. That’s up from 31 years old in 2025. So this trend is absolutely going to continue and it matters because it sort of creates this floor on the amount of construction that we need that doesn’t go away. Even if population growth slows as more and more housing stock ages replacement demand could actually go up from 400,000 to 500,000 and 600,000. So the inevitability of a supply GT is not really true, but it’s going to depend a lot on construction trends. If we have a declining population and construction keeps growing at 1.6 million units per year, yeah, we’re probably going to be in a supply glove, but I do think the construction industry is likely to adapt. They’re not dumb.
They know what’s going on. These are big sophisticated companies and so they will probably have to adjust maybe not in the next five years, but 10, 15 years from now, we will probably see big shifts in what is being built and where in the construction industry in this country. So I do think some of that obsolescence will and presumed adjustments on the construction side will offset some demand issues, but there are demand issues. I don’t know how else to say that. I just think that is going to happen, but this isn’t necessarily a disaster. It does not mean you can’t invest in real estate. We just kind of need to put this all together and figure out what this means for real estate investors and to do that, I’m going to sort of just break it down into three different segments. We’re going to talk about near term, which I’m going to just define as 2026 to 2030 just to the end of the decade kind of makes sense.
Then I’m going to do medium term, which is like 2030 to 2040, and then we’re going to do long-term, which is 2040 to 20 50, 60. I don’t know, long term longer than we can imagine right now. So let’s just start with that. Near term 2026 to 2030, what I think we’re going to see for the next couple of years, the most likely outcome is diverging markets and the great stall, this thing that I’ve been talking about for years, my opinion has not changed for the short term. We still have a national housing shortage that is very large and it is probably not going to get resolved even though we have lower immigration rates, we’re actually seeing construction capacity going down due to immigration enforcement, so that will probably slow construction. We also just have really undersupplied big markets, New York, Boston, dc, Seattle, undersupplied markets, and that is going to continue and so I think prices are going to be somewhat flat nationally.
This is what I’ve been saying for a while and I still think that is likely in the medium term. Now, I will say that for markets that are immigration heavy, I think we’re going to see demand moderate, right? We’re probably going to see some rental softness, especially at the lower end. These are in cities. I’ve called out a bunch of them in Texas, in Phoenix, in Miami. These are immigration dominant kinds of cities and we’re probably going to see lower prices. These are markets that are already seeing some of the biggest corrections in terms of home prices in the United States, and I think that is likely to continue, but I also think for any investors who operate in these kinds of markets, you probably want to count on lower rent growth or maybe negative rent growth because there’s going to be lower demand. That said, I’m not freaking out about the short term.
I still think there are great deals to be bought out there. I think rentals in any of these markets that are a bit supply constrained have strong economic growth. All the fundamentals that we talk about on the show all the time, those are still true and personally, I plan to keep doing what I was doing before I did all this research, so I’m not immediately worried. I did say at the beginning, I think this is a big question for real estate investors and there are risks in the housing market and that is true. I really do genuinely believe that, but I think they’re more medium term to long term. I don’t think they’re coming in the next couple of years, but that’s just my opinion after doing all of this research. So with that, let’s talk about the medium term. Again, this is kind of like 20, 30 ish, 2040.
These aren’t exact dates. Everyone, I hope you realize that I’m just kind of generally talking about the medium term. Let’s generally say it’s 2030 to 2040. Now, I think that’s when things, the question marks really start to come up because we basically have two different things. We’re probably going to work our way through this massive glut of millennial home buyers and start to get into the Gen Z peak home buying age, and they are a smaller generation and we don’t know what their financial picture is going to look like in five years. So I think that’s one thing that could create some headwinds for the housing market. The second thing is that the boomer transfer is going to continue, I think it is already started. I do not think it’s going to be some cliff that causes a crash, but I do think it could provide sustained downward pressure or moderating pressure on housing prices.
If there is more and more inventory on the market because this demographic group is selling, that will put down more pressure on pricing, right? If we have lower demand and higher supply, that is downward pressure on pricing, does that mean they’re going to be a crash? No. Does it mean prices are even going to fall? No. But when we talk about the direction of the housing market and where prices are going, we need to think about all the different things that impact prices, things like inflation, demographics, interest rates, all of these things. What I’m saying is that there will probably be demographic headwinds for the housing market, whereas over the last 10, 15 years we have had demographic tailwinds. The demographics in the US were helping us in the housing market in terms of appreciation from 2010 to now, and I think that will continue probably till 2030 after 2030.
I think that’s a much bigger question mark, and it’s something that we need to recognize as real estate investors. Now, this won’t actually hit in 2030 to 2040, but studies are projecting that in 2031 we will see deaths start to exceed births, which means that starting from that point going forward, we are very likely to see decreasing population unless there is some policy change in terms of immigration. Now, in terms of what markets actually become at risk for 2030, because I do not believe this will cause a national crash that is five years out, I make my predictions one year out, so I’m just saying right now from what I understand about the market, I don’t see anything that says, oh my god, now everything’s going to decline. But I do think certain markets will be more at risk during this demographic shift. I think instead of seeing immigration dependent markets suffering, I think the questions are going to be areas of the country where there’s just older people.
If you look at places in the northeast or the Midwest, they’re largely in the suburbs. A lot of them are coastal metros, just older populations. We are going to probably see more and more inventory, which could again lead to slower appreciation. It could also lead to slower rental demand. We just don’t know, but those are the kinds of things that I would start looking for is those kinds of demographic indicators as you look at and potentially select places to invest. That is of course, if you’re looking to hold onto them for 10, 20 years if you’re flipping, probably doesn’t matter right now, but if you’re looking at something to buy for five to 10 years from now, I would start looking at this. In fact, it’s something I wrote down after doing this research as one of the metrics I look at it, but to pay more attention to is the age of the average homeowner age of the average renter, because I think investing in places where there’s a younger population is probably going to be a good risk mitigation strategy going forward.
For example, some of the sunbelt metros that are struggling right now may seem really good recoveries because these are areas with strong employment, they are attracting a lot of domestic migration people moving within the us, a lot of them are moving to the sunbelt areas, and so that is going to matter, and I just want to say that in every market, some people see, hey, new inventory from boomers being an issue, it’s also probably going to be an opportunity, probably going to get a lot cheaper cash flowing kind of deals in this next era of real estate investing that will probably start somewhere around the 2030. So just remember this doesn’t not mean that you cannot invest, but it does probably mean there is going to be a shift in strategy that is necessary when these demographic trends make their big shift in the next couple of years.
Now, lastly, let’s just talk about long-term 2040 and beyond. I’m just going to be honest. I don’t know. I do not know, but I will just say if fertility stays where it was, we are going to have structurally lower immigration in the United States unless we really change policy on immigration and start having a lot of immigration. So we don’t know any of that’s going to happen. It is almost impossible to predict, but I did just want to call out that there are some lessons we can learn, or at least there are some indicators from other countries that are facing similar issues, right? In Japan, they have had a declining population for a while. There was not a national crash. One of the reasons I don’t think that there is a national crash, but what you saw is that a lot of rural and suburban property value did decline when the population started to decline.
There was not enough demand to sustain prices for every type of asset class in every market, but you saw prices go up in major economic hubs in major cities. I think that is a potential avenue that could happen in the United States. United States I actually think is even more insulated from a national crash than Japan because it just has a bigger deficit right now. US obviously is the biggest economy in the world. There’s a lot of economic dynamism and resilience in the United States, not that Japan isn’t resilient, but I think the US has that going for it as well. And so my guess just looking at this, I also looked at Germany. I looked at Italy too, and basically what you see is that economically powerful metro areas that attract talent and internal migration continue to win. It is probably suburban and urban areas in secondary and tertiary metro areas that will decline.
So let’s just talk about big picture Demic. Graphic declines in my opinion, are probably coming unless there’s a massive change in policy, which I can’t predict, right? I think demographic declines are probably coming and we are probably going to see a shift from demographic tailwinds that support appreciation and rent growth to demographic headwinds that put downward pressure on appreciation and rent growth. Now, I do not believe that is going to create a national crash, but I do think it will create more variance between markets. We are going to have more differences between how one market performs and the other. So to me, this is really a lot about what this show is about, which is market research. You need to be in the right places if you’re buying for the long term, you need to dig deep into population and demographics. If you’re a buy and hold investor, and I’ll just be honest, researching the show has made me think pretty hard about where I want to invest going forward.
I’m probably going to put a lot more waiting on population and age and birth rates in specific areas going forward because it’s going to be increasingly important. But remember, many, many markets will still prosper, but there are some that are going to stagnate or decline. I feel pretty strongly that that is going to happen if these trends continue. Now, of course, you can still invest even in declining markets. People do it all the time. It’s more of a cash flow play or a tax play, right? You’re probably not going to want to do a burr in that kind of market, but there are still ways to invest in those markets, but it’s just super important to recognize I’m investing in a growth market. I’m investing in a cashflow market. Here are the strategies that work in those markets that is going to be increasingly important, maybe not in the next year or two, but when we look 5, 10, 15 years out, it’s going to be more and more important.
Now, of course, I am saying this if current trends continue, and there are of course some questions about whether they will to me, I think there’s a couple big wild card questions that we need to keep an eye on and we will keep updating you on the show. Number one I’ve said a bunch of times is just immigration policy reversal. This is the biggest variable We’ve seen different presidents, different administrations have totally different immigration policies that could happen again in the future. The second possibility is potential fertility rebound. I don’t see that happening, but people are talking about baby bonuses or tax credits or helping Americans with IVF stuff like that to try and get the fertility rate back up, but personally I think it’s unlikely we get close to that replacement rate and it’s just really a question of how quickly our birth rate and domestic born population starts to decline.
Other options are more on the supply side. If we see much like a housing construction boom, well that will obviously impact things. I think that is unlikely. And then the last one, which we haven’t talked about at all is inflation, and I think this is a really important thing because this is one of the big things that could put upward pressure on pricing. We’ve talked mostly in this episode about things that will put downward pressure on pricing, but there are plenty of other variables and inflation if we choose to print our way out of our debt just as an example, I don’t know if that’s going to happen, but that is a potential. If that happens, that will probably put a lot of upward pressure on housing too, and there will be appreciation in almost every market if that happens. So there are more things than just population demand.
We have to look at the big picture, and although we’re focusing on population in this episode, we have to look at these other things like inflation. This is a big question in my opinion. So bottom line, next couple of years, shortage is real in the housing market. It’s massive and durable. I personally think the great stall is still likely, and I still think there are going to be good deals for people to buy who are looking for long-term upside in 2030 to 2040. I think we shift from demographic tailwinds to demographic headwinds, and it is going to be increasingly important for people to pick strategies that work in their kinds of markets. There are going to be cashflow markets that probably have declining appreciation, but probably have decent cashflow. Then there are going to be growth markets, and they’re probably not going to be markets that have really strong in both.
That’s what things used to be like, and I think that’s what they’re going to be. Again, 2040 plus, I don’t really know, but I do think we’re going to see lower demand, and so we’re just going to have to track supply and how fast demand is declining over the next 10 years before we could really realistically forecast what’s going to happen 2040 and out. So that’s how I see things overall. Doing research, doing the show, it’s given me a lot of things to think about, but overall, I still believe in real estate investing. I’m still going to keep looking for deals. I’m just going to think about hard about where I want to buy, the type of assets I want to buy and make sure my strategy is aligned with the type of markets that I’m investing in. I’m probably going to underwrite generally for low appreciation like I probably will underwrite for deals that I think work and are solid even without appreciation at all.
I think that makes a lot of sense. Still going to focus on value add. I think that’s going to work even if there are populations to decline. So just remember, even though this is a little bit scary, there are some big questions out there. There are absolutely still ways that you can invest in real estate. You just need to know this stuff is coming, so you pick the right tactics, the right markets, the right portfolio moves for yourself. Hopefully this episode has been helpful for you. This is something I’m going to keep thinking about and researching, and I will definitely provide updates whenever we get information. I think this is just a huge question we should all be talking about on the market community. If you think someone else would benefit from this research, please share with them and make sure to subscribe to on the market wherever you listen to this podcast so you don’t miss any updates that we have. Thank you all so much for listening. I’m Dave Meyer. I’ll see you next time.

Okay, so liar loans and the opportunity to buy a home in a deceased relative’s name might not be coming back anytime soon. However, the wild-and-windy lending days of the pre-2008 crash are moving a little closer to mainstream America as banks aim to make mortgage lending cheaper and easier.

The Dodd-Frank laws, put in place to prevent the kind of rampant fraud and bad lending practices documented in the movie The Big Short, are not going anywhere. That means qualified residential mortgages (QRMs) must still avoid risky features such as negative amortization, teaser rates, and most balloon payments. Full doc underwriting will also remain in place. 

However, recent comments from Federal Reserve officials and new regulatory reports point to a deliberate effort to put banks back at the center of the mortgage conversation after years on the back foot.

Look Forward to Getting a Loan

Federal Reserve Vice Chair Michelle Bowman said in a speech that the Fed is considering capital changes that would “encourage bank participation in mortgage servicing.” It plans to accomplish this by making it cheaper for banks to service mortgages in-house rather than outsourcing. In banking terminology, that means removing the requirement that banks deduct mortgage servicing assets from core regulatory capital while continuing to apply a 250% risk-weight loss to those assets. Bowman described it as a way to “better align capital requirements with actual risk.”

What that means for investors and flippers is that loan requirements could ease—lower LTV requirements and better underwriting—potentially improving pricing and availability for buyers who can bring more equity to the table, i.e., a higher down payment.

Why the sudden change? It appears that banks realized their bottom line had some wiggle room, as they made it too difficult for homebuyers and investors to get mortgages. In Bowman’s words, financial institutions’ hardline approach to mortgages “has been costly for banks, consumers, and the overall mortgage system.” The Fed’s vice chair added:

“Banks hold substantial numbers of mortgages with low loan-to-value ratios. By requiring disproportionately high capital, we reduce a bank’s ability to deploy capital to support the needs of their community. In light of these considerations, I am open to revisiting whether the capital treatment of MSRs and mortgages is appropriately calibrated and is commensurate with the risks.”

Community Banks Could Have Their Restrictions Eased

U.S. banking agencies have proposed easing the community bank leverage ratio from 9% to 8% and extending the time small banks have to return to compliance, which they say will keep capital strong while giving local lenders more room to operate. That’s vital for mom-and-pop investors who often rely on community and regional banks for small-balance investment loans that larger national lenders often ignore.

What This Means for Buy-and-Hold Investors and Flippers

The immediate benefit for small investors and flippers is likely to be greater access to capital. More lenders competing for your business puts you—the investor—in the driver’s seat regarding loans and terms. 

Industry groups such as the Mortgage Bankers Association (MBA) have said that the current capital framework has discouraged banks from competing aggressively in mortgage origination and servicing, particularly compared to nonbank lenders, including private and hard money operators. Responding to Bowman’s speech, an MBA spokesperson said, “A more appropriately calibrated approach, particularly with respect to mortgage servicing rights and mortgage loans, will strengthen banks’ ability to serve creditworthy borrowers while maintaining safety and soundness.”

Banks Can Afford More Risk

Banks are flush with cash and can afford to take some risks by lending money in situations they would have previously backed away from. U.S. banks generated about $300 billion in profits in 2025, a record level driven by higher interest margins and relatively low credit losses, according to the Financial Times. By loosening lending criteria while keeping Dodd-Frank protections in place, banks hope to thread the needle between viability and responsibility.

Why Community Banks Are Still the Go-To Source for Investors

If an investor prefers to partner with a bank rather than a hard money lender or private money lender, a community bank is still one of the best places to borrow money. These are bedrock investor loans, which tend to have lower rates than mainstream banks.

1. Conventional investment mortgages (one to four units)

For single-family rentals, duplexes, triplexes, and fourplexes, conventional lending requires a 20%-25% down payment, fixed 30-year terms, and is based on your credit score, income, and the subject property’s rents. Community banks are somewhat more flexible with investments than mainstream banks because they are in the market and might be more forgiving with a quirky property, especially if they keep the loan in-house.

2. Portfolio loans

Portfolio loans are usually kept on the bank’s books rather than sold to Freddie Mac and Fannie Mae, allowing the bank greater flexibility in property type, borrower profile, and structure. They are useful for buildings that need work and small multifamily properties with over four units, as well as mixed-use buildings, and for investors with multiple existing mortgages that do not fit strict agency limits.

3. Rental portfolio and “blanket” loans for multiple doors

Once you own multiple doors, doing one loan per property becomes cumbersome. A rental portfolio, or “blanket” loan, offered by a community or regional bank, is useful in these situations. Banks will usually finance $300,000 to over $6 million with 20% down on new purchases and 75% LTV. They allow an investor to free up equity for more deals while maintaining a single point of contact who understands your business strategy.

4. DSCR-style loan—where the property qualifies for the loan

Debt service coverage ratio (DSCR) loans have become an investor buzzword in recent years. Unlike conventional loans, it poses the question, “Does this property’s rent cover the mortgage and expenses?” 

A 2025 DSCR overview explains that lenders typically want a DSCR of about 1.1 to 1.2 or higher, meaning that the property’s net income is at least 10-20% of the total monthly debt payment, with down payments in the 20%-30% range.

5. Small-balance commercial real estate loans (five-plus units + mixed use)

These are go-to loans for small apartment buildings and mixed-use and business-purpose rentals, typically offering $2 million to $3 million with flexible terms and local underwriting, tailored to an investor’s needs.

Final Thoughts

Now that we’ve established that 2026 won’t turn into a banking bacchanalia, where part-time Uber delivery drivers suddenly start buying preconstruction luxury condos in Miami, sound financials still need to be in place to get a loan. That means good credit, proof of income, and cash reserves. 

However, with those in place, it’s likely you’ll be able to qualify for higher loan amounts than you would have previously, and with fewer hoops to jump through. If you plan to invest in 2026, shopping around with local lenders to gauge their changing loan qualification criteria is a good move while you get your finances together.

This article is presented by Avail.

Did you know that if you’re a landlord, February is life’s gift to you in terms of getting your business finances in order? 

Understandably, dealing with the intricacies of real estate tax prep and rental contracts in January is a superhuman ask. But February is your chance to really get on top of everything for the year ahead before ax prep starts, leases are mid-cycle, and peak turnover season (spring/summer) begins. 

These are the seven operational areas you should be zooming in on right now before Q2 begins. 

1. Audit Your True Cash Flow (Not Just Rent In vs. Mortgage Out)

Most landlords overestimate their rentals’ performance out of pure optimism. However, basing your cash flow numbers on a simple “rent in versus mortgage out” equation is like relying on a lab experiment performed under perfect conditions to gauge a real-life situation. 

In reality, every landlord has to factor multiple factors into their cash flow figure, like insurance costs and property taxes. Where many newbie investors go wrong is failing to factor in the more unpredictable, irregular expenses, such as maintenance, capital expenditures, potential vacancies, and other factors that can increase costs. According to a recent survey conducted by our partner, Avail.co, 74.4% of landlords saw property ownership costs rise this year, so if you’re in that midst, you’re not alone.

Another important point to consider is that no matter how great a tenant is, there is always a chance they will move out and leave a unit that requires costly repairs. For that reason, it’s always recommended to plan for the worst by building a rainy-day fund: You don’t know when you’ll need it, but at some point, you definitely will. Factoring in as many potential and ongoing expenses into your cash flow over time will mean you’re much better prepared for a financial challenge when it does come. 

2. Clean Up Tenant Payment Behavior

Understanding the psychology of tenant behavior is more art than science, but you must work out a system to deal with most situations you’ll face regarding late payments. 

Most late payment patterns can be prevented with automated rent reminders and late rent notices that send out at the appropriate time. Tenants really dislike being chased for payments and will avoid paying late again if they know you’re not going to let them off the hook. But what if you don’t remember when payments are due for different properties, since they all have different due dates? You likely will miss the crucial time window for enforcing prompt payments. 

So, now is the time to streamline and standardize all the rent payment processes. Just make all tenants pay on the first of the month, for example. And if they already have a history of paying late? You can have a “late rent notice” ready to send via email, including the grace periods they’re entitled to under local law and what happens if they don’t pay. Landlord-focused platforms like Avail can help you with all of that through automated rent collection, payment reminders, and customizable late fees that handle the follow-up for you.

Of course, as a landlord, you have to use your best judgment, especially when dealing with long-standing tenants. Someone who has always paid on time for years and slipped up once because of a family emergency is obviously not the same as someone who’s just moved in and is already late on their second month’s payment.  

3. Get Your Books “CPA-Ready” Now

If you’re a real estate investor just waiting until March to get your books in order for tax season, you are, unfortunately, a whole two months late. 

Why? Because most rental property expenses need to be paid by Dec. 31 during the year you’re filing for. Otherwise, the expense counts for the current year, and you won’t be able to write it off until you file your return in 2027. That can be a nasty surprise if you just paid a contractor for a rental reno in January and were hoping to write it off in March. 

Many landlords also routinely miss write-offs they’re entitled to, especially when they do maintenance on their rentals. For example, many are unaware of “partial asset disposition,” in which you take your rental and segregate expenses based on what was disposed of and what was added. 

Say you replaced the roof. Many investors know that the cost of the new roof can be written off through depreciation, but not that the cost of the old one they are replacing can also be written off as a partial asset disposition. Of course, you can only do that if the property was “in service” before you made the improvement.   

Another interesting write-off helpful to those who have already fully cashed in their depreciation is that if you convert your long-term rental into a short-term rental, you could then make the improvement and qualify for the QIP (Qualified Improvement Property) write-off (you don’t qualify if yours is a long-term rental).

Obviously, making all these changes and documenting them takes time; it’s not something you can suddenly put in place in March. You always need to plan well ahead for any deductions on your property; in most cases, you’ll need to have made any restructuring moves and paid the qualifying expenses before the end of the year you’re about to file for. Consider centralizing all rental expenses in one place, using platforms like Avail to track income and expenses.

4. Do a Lease Health Check

The more leases you have to manage, the more administrative and market research you have to do. Do as much of that work in advance as possible. If you’ve made updates to your standard template, you can clone it via a platform like Avail that can be adjusted per property and save you some work.

Do your leases comply with the latest local law updates? You should always be aware of any new requirements, like mandatory checks and improvements required by your city/county. These do change, and it is your responsibility to keep up to date with any new requirements. Again, Avail for the win with state-specific, lawyer-reviewed leases that are free to create, saving you hours of research.

5. Perform Maintenance Triage Before Spring Breaks Everything

Winter can feel like the most challenging time for property upkeep, but spring is actually far riskier. Snowmelt (basement flooding!), temperature fluctuations (surprise pipe freeze!), and, eventually, the new season’s storms can wreak havoc on your rental. While you can’t anticipate every adverse weather event, you can do a lot to ensure the rental will withstand most of them.

As a bare minimum, schedule a routine HVAC check and assess (or hire a professional to assess) any plumbing, drainage, and exterior issues with the property. Do this now and protect your profit margin for the year ahead. Leave it until March or later, and you may already be too late.  

6. Do a Vacancy Risk Scan

Another big known unknown every landlord faces is vacancy risk. Even tenants who seem low-risk for nonrenewal can sometimes surprise you by deciding to move midyear, or even worse, before the summer moving rush begins, which greatly increases the risk of the property standing empty. 

What can you do about this? First, if you have a long-standing, positive relationship with your tenants, it doesn’t hurt to ask about their plans. They might actually tell you, putting your mind at rest. In many cases, tenants themselves genuinely don’t know the exact time frame of their plans, but they could give you a valuable indicator of what’s to come, especially if they mention wanting to buy soon. The good news is that, according to the latest Avail.co survey, 36.1% of landlords report that their tenants are staying in their properties longer than in previous years.

Of course, tenants may not want to share their plans with you, especially if they’re navigating a difficult experience like a job loss or a potential move to be nearer a sick relative.

In these cases, it’s worth paying attention to less obvious signs that the tenant might be considering moving out. They might be spending increasing amounts of time away from the property (mail piling up is a good indicator of this), taking less care of the yard, or suddenly getting late with rent payments, even though they always used to be on time. Behavior changes often signal that a bigger change is coming. 

Finally, many tenants decide to move after a rent raise. Be sure to communicate the increase and be very transparent about how it aligns with current market-rate rents; tenants who are satisfied that a rent increase is reasonable are less likely to leave than those who feel it’s been sprung on them. 

And if you’re getting the sense that a tenant might not renew their lease, be proactive rather than reactive. Of course, you can’t start advertising a property before a tenant has communicated that they’re leaving, but you can make informal contact with people in your pool of current tenants. For example, you might know a couple who could be interested in a larger unit—why not have a conversation about whether they’d be interested? Sometimes, a tenant reshuffle is easier to navigate than looking for new tenants. And if you end up having to look for new renters, Avail can post your property to 24 top rental sites for free, speeding up the process.

7. Perform a System Stress Test

The ultimate stress test for an investor might not be only asking yourself: “Am I in a good spot with my rentals right now?” but asking, “Will I be okay if the HVAC in one of my units breaks, if my tenant leaves, or if I add a new unit to my portfolio soon?” Would you be able to cope with the additional expenses, administrative work, and responsibilities, or would your systems break down? 

The solution is always to streamline and standardize your processes as much as you can. 

Many landlords use February to centralize rent tracking, maintenance records, and lease documents in one place so they don’t have to scramble later. Tools like Avail can make that process much easier and more secure. Sign up for free today to check it out and start getting ahead of the peak season!

Dave:
These are the six numbers you need to know before buying a rental property. Too many investors are still buying properties based on vibes in 2026. They say stuff like It feels like a good deal or it’ll cashflow if mortgage rates come down. That is not investing. That’s speculation. Today we’re going to walk you through the six numbers you absolutely need to know before you buy any rental property, whether it’s your first deal or your 15th. These are the numbers we personally look at when analyzing properties so we can make sure we’re picking the properties that bring us closer to financial freedom and avoid the costly mistakes that slow you down. By the end of this episode, you’ll know which metrics to prioritize when running your numbers, exactly how to calculate each one and how all six fit together to tell you whether a deal is actually worth buying. What’s up everyone? I’m Dave Meyer, chief Investment Officer at BiggerPockets here with my co-host Henry Washington. Henry, how’s it going, man?

Henry:
It’s going well, bud. How are you?

Dave:
Good. I’m excited to talk about numbers. As I’m guessing you can tell you, you know this about me, that this is what gets me going in the morning is talking about numbers. Well, you all probably know that as well. I love numbers and between the two of us, between Henry and I, we have analyzed probably thousands of real estate deals, and I could tell you that the difference between investors who build wealth and investors who stall out usually comes down to understanding their numbers. Henry, we talk about this all the time. A good deal is just kind of a simple math problem at the end of the day.

Henry:
Yeah, if you’re buying a deal on today’s merits, then yeah, it’s a math problem. I think a lot of the times people get into like what’s the value of this going to be in the future? That’s speculation. We’re talking about what’s it worth

Dave:
Now and the assumptions that you make about each of these six numbers are really what’s important. So Henry, start us off. What’s number one?

Henry:
Well, number one is current value, sometimes referred to as is value. So what’s the current value of the property?

Dave:
Oh, you mean list price?

Henry:
Absolutely not list price. List price has nothing to do with what the value of the property actually is. Now, a good realtor should help you price your property appropriately for what the market is willing to pay for your property in its as is condition, but that’s not what always happens. What a property is listed for is just what someone thinks and or wants the property to sell for. It does not mean that that is the current value of the property.

Dave:
Why is this important?

Henry:
Well, it’s important for a couple of reasons. First and foremost is you don’t want to overpay for a property and as a real estate investor, our job is to invest and the golden rule of investing is to buy low and sell high. And so if you buy at the high point, it’s going to make it very for you to sell at a higher point. So you need to buy at current value so that you can add value to it and sell at what’s called the after a pair value, which hint hint we’ll talk about later.

Dave:
That’s exactly right. I think this is a super important concept that honestly people were overlooking for a lot of years because property values were going up so much it didn’t even really matter. You’re like, oh, if I overpay by 2%, who cares? It’s going to be worth 10% more next year. But right now in this kind of market, I think knowing the current value is probably the single best way to protect yourself against further declines. If you know property worth 200 grand, you’re getting it for one 90, you have a cushion there. Not only are you buying a good deal, you’re buying it undercurrent value, right? That’s a good way to protect yourself in this kind of market, but it’s hard to tell, right? So if you can’t rely on list price because you obviously someone’s advertising for property. As investors, we need to figure out our own value. How do you calculate it?

Henry:
I think an accurate way to get current value is an actual appraisal because an appraiser is going to come in and they’re going to value that property based on square footage and comps and finishes, finished quality. So an appraiser is one way, so you can pay for an appraisal that’s going to cost you some money, but could give you a good idea of current value or you can have a real estate agent comp it for you. You just need to make sure that your real estate agent knows we have to finishes. If your house or the house you’re trying to get a current value on is not in great shape, you’ve got to pull other comps in not as great shape and see what they sold for. So you can have some idea of what your current value might be.

Dave:
I was in the intro of the show, I was joking that people make decisions about properties on vibes, but there is a vibes element of current value. It’s true, true. I dunno how to explain it. This is why his estimate doesn’t work that well, right? It’s why all these iyer programs failed is because like Henry said, the Zillow picture can’t tell you the quality of the finish or the soft close on the cabinets or oftentimes layouts the height of a basement ceiling and whether that’s usable quality square footage or not, there is a vibes element to it, and I do think we make fun as estimates, but I do think algorithmic stuff is helpful. I think it’s directionally often accurate, but you got to get in there or you need an agent in there to actually tell you what the vibes are so that you can learn all the information Henry was saying.

Henry:
So yes, understanding current value is massively important. Having some sort of licensed professional, whether that is a real estate agent or whether it is an appraiser, can help you find an accurate number, but it is essential. You do not want to pay more than current value for a property if you want to protect yourself in any real estate market. And that brings us to our second must know must understand term and that is equity. What the heck is equity?

Dave:
Oh boy. Okay, I’ll spare you the accounting definition of equity is, but basically

Henry:
Why do I think the actual textbook definition?

Dave:
Of course, it’s in my book. I literally wrote the textbook that has it. Well, I’ll actually explain it because it’s actually just two numbers. It’s basically the value of your assets minus your liabilities. So in a real estate transaction, what’s your health worth? That’s your asset, right? So let’s just say it’s worth $400,000. Your liabilities are how much money you owe other people. So most of us take out loans when we buy properties, and so our biggest liability is our mortgage. So if you had a mortgage of 300,000, you would have equity of 100,000. That’s the simple definition of it. Of course, with more complicated deals, you may have some additional assets, you may have some additional liabilities, but that’s basically it. What’s the value of the thing you own minus the value of all the things you owe other people? That’s your equity.

Henry:
This is the one real estate metric that I must have on every real estate deal. This is

Dave:
The juice.

Henry:
This is the juice. I have bought deals that don’t cashflow on day one. I have bought deals that have some sort of not great value in other metrics, but I have never ever bought a deal that I didn’t walk into equity on day one. This is the most important real estate financial metric in my opinion.

Dave:
Equity is the nest egg. This is how you really build wealth in real estate, right? By buying a leveraged asset and having it appreciate over time you build equity and in every deal I do, I’m sure Henry is the same way. You need to have a plan for how you’re going to grow that equity because on day one, you go in and you buy something at current value, which is a totally fine way to do it. Your equity is just the money that you put into that deal, and so you need to think about ways that you are going to drive equity without putting more money into your deal. And so Henry, I think you mentioned earlier, walking into equity, which is a term that investors use. Maybe you can explain that to us one of or if not the best way to drive equity growth in your portfolio.

Henry:
Yes, and you’re exactly right. And so what I mean by walking into equity is any equity in the property that I didn’t have to pay for that I get on day one. In other words, if I’m going to buy a house and I put $50,000 down and I paid market value, that’s $50,000 of equity. I did not walk into equity. I walked into zero equity and then I paid for $50,000 of equity. But if I buy that house for $50,000 below market value, then I walk $50,000 of equity on day one, and then any money I put down to buy that property is additional on top of that equity. So if I pay $50,000 on top of the $50,000 discount, I, I now have a hundred thousand dollars of equity, but I walked into $50,000 of it

Dave:
And that’s just Henry hustling and finding great deals. So that’s a great way to build equity in your portfolio. The other way to do it is to renovate, right? Some people call this forced depreciation. We call it value add oftentimes, but this is buying a property under its highest and best use and renovating it and driving up the value of that property buy more than what it costs you to actually drive up that value, right? So you buy something for 200, you put in 50, hopefully it’s worth three 50, right? That’s a hundred grand in equity that you just built, and so that is a key strategy that most all real estate investors use at some time during their portfolio, so enabled to do that well though there’s another number that you need to know, which we’re going to cover right after this quick break.

Henry:
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Dave:
Welcome back to the BiggerPockets podcast. Henry and I are here breaking down the six numbers. Every real estate investor needs to know for every deal they do, whether it’s your first or your 10th. We’ve talked about current value, we’ve talked about equity. Next, let’s talk about after repair value because this is the other way other than walking into equity that you can drive up that equity in any deal you do. Henry, what is after repair value or RV

Henry:
Equity is the number that I want on my balance sheet. A RV is the number I need to know to make sure I don’t screw that up.
Okay. What is the property going to be worth after the repairs or after the renovation or after the value add? It is the key because it’s going to drive profitability for you and it’s going to drive your offer prices. As real estate investors, we make our offers based on what we think the after repair value is going to be, especially for a flipper, because a flipper wants to know, what can I sell this house for? That’s after repair value, and if you assume a property’s a RV is higher than it actually turns out to be, you can go from profitable to in the hole very fast.

Dave:
Real fast. Yeah,

Henry:
Real fast. Our protection in real estate investing is the cushion. The way that you get cushion is understanding what’s the property going to be worth after you fix it or add value and what’s the property currently worth. When you have those two numbers, you can make a more educated offer where you give yourself enough cushion not to lose your shirt

Dave:
If you’re doing the burr too. It’s equally important, right? Yes. You need to make sure that you are offering the right amount, that you have the right budget for your renovation so that you’re not spending more than, you’re increasing the value of your property, right?

Henry:
Yep.

Dave:
This is essential. And the calculating, it’s kind of the same that you set for number one, right? For as is value, basically just comping this out based on similar properties. You have to find the most comparable properties that you can, and Henry already gave some estimates for that, but do you have any other advice on how to calculate a RV? Well,

Henry:
The difference between a RV and current value is with a RV, we’re trying to predict the price in the future and with current value, we need to know what the price is right now, and so it’s easier, in my opinion to assess current value because no one knows what the market’s going to look like in six months. Should it look very similar to what it looks like now? Yeah, probably. But there’s seasonality, variation. Every market’s a little different. If there’s some sort of black swan or crazy event, it could drastically affect what that property value is actually going to end up being. Once that future value time point comes and you’re ready to sell and or refinance that property. So it is more of an art form. You do have to use factual current data, but none of it is a hundred percent foolproof because again, it is a future value. We’re trying to predict,

Dave:
And that’s why I always recommend being conservative. You shouldn’t pick the highest comp that you see and assume that you’re going to get it. If you do fantastic, but you do not want to rely on getting the best possible comp. You might have a weird week, there might be a bad month, there might be who knows what’s going to happen the day you list that property. Don’t assume you’re going to get the best. You’re better off being I think conservative with all these numbers. That’s a general advice. It’s just being conservative with all of it.

Henry:
Yep. Most real estate agents, if you ask them to comp a property for you, are going to give you a number that comes from a range. So they may tell you, Hey, I think a RV is 200,000, but they’re pulling that from a range because they pulled multiple comps and they have an idea of what’s on the low end of that range and what’s on the high end of that range. So when you’re talking to agents, make sure you tell them, I would like conservative ARVs. If I ask you for a comp, give me the middle to the low end a RV, not the tippity top, and that will help protect you.

Dave:
Great advice.

Henry:
Alright, this is an important metric for flippers, but as Dave said, it’s also an important metric for rental property owners because essentially every deal turns out to be some sort of a flip because you’re probably going to refinance at some point or you may sell that asset at some point. So this value is important, but there is another value that is far more important to rental property owners and that is rent comps.

Dave:
I love rent comps.
I think this might be my most important metric in today’s day and age. It’s basically the a RV for rent. If I’m going to do a bur project where I intend to hold onto this property, for me right now, the A RV, the value of the property is important. My guidelines to make sure I’m not overspending that you’re finding the right deal, but for immediate performance of the deal that rent comps matter more. I want to know, yeah, maybe I can rent out this unit for 1200 bucks. I put 30 grand into this property. Am I going to be able to rent it for 1300 bucks or 1800 bucks? Because that’s a pretty big difference. And to me, that’s super important. I think I’ve explained on the show my sort of formula for deals right now doesn’t need a cashflow day one, but after stabilization, after I do a renovation to it, it’s got to be seven, eight, hopefully percent cash on cash return, maybe even higher than that. And so yes, your repair budget is important to that, but knowing what I can realistically rent things out for is probably the most important number I spend the most time thinking about. I’d say underwriting a deal right

Henry:
Now. I think you said a word in there that was kind of important. You said realistically rent things out for, what do you mean by

Dave:
That? It means that I take whatever an agent or a property manager tells me and then I discount it by like 20%. That’s

Henry:
We’re joking, but we’re serious.

Dave:
I’m serious. I’m

Henry:
Actually serious. That’s what I do. You 100% should do

Dave:
That. It’s not even that. I think they’re lying. I just like to be conservative about it. This is how I underwrite deals. If you tell me you’re going to rent it for 1600, I’m going to be like, well, if there’s a bad month, I want to be able to make lent tip for 1400 and still be able to make money. And so I usually with rent comps, especially in this kind of market, I take the low end of the comps. To me, the most important thing is that I’m going to be able to lease it actually. So I look a lot at vacancy data too in my rent comping and sort of adjust for that. If I could rent it for 1600 bucks, but it’s going to take me two months, I don’t care. I am not doing that. If I can rent it immediately for 1400, I’m using the number 1400.

Henry:
This is a place where a lot of new real estate investors lose profitability because we get excited, we find a deal, we’re like, oh, it’s going to rent for 1800 bucks. It’s awesome. I’m getting it for this price. I’m going to fix it up. It’s going to be great. Then you stick it on the market and your property manager comes to you and says, Hey, we’re not getting any bites at 18, but I got a solid candidate at 1650. Great credit score, great job, great history. Can you get to 1650? To me, that’s music to my ears, great candidate with a little bit of a discount. I’m taking that all day

Speaker 3:
Fine. But

Henry:
If you underwrote it at top rents and now you’re losing money running to a great candidate at a little bit of a discount, that’s not a position you want to find yourself in.

Dave:
Alright, so that is rent comps. We got to take a quick break, but after that we’re getting to the numbers that really matter to most investors, which is how much cash you’re bringing home each and every month. Stick with us. We’ll be right back. Welcome back to the BiggerPockets podcast. Me and Henry are going through this six numbers you have to know you shouldn’t be buying deals until you know these six numbers. Just as a reminder, we’ve talked about current value or as is value equity after repair value. We’ve talked about rent comps, Henry, what’s number five?

Henry:
This is the one that gets people both in flipping and in rental properties. This cooks

Dave:
People, I don’t understand, how do people miss this? But please, let’s make sure no one else misses it ever again,

Henry:
We are talking about holding costs, guys, this is what it costs you

Dave:
To run a business,

Henry:
To run a business, and it can smack you upside the head both with flipping and with rental properties, but they’re a little different with the two different strategies. So let’s talk about flipping first. Holding costs as a flipper is your debt service. Most flippers are borrowing money to buy properties and renovate them, and a lot of flippers used high interest products like hard money or expensive private money. So we’re talking nine to 15% interest rates on some of this money, and a lot of these products are interest only, and so you have a hefty mortgage payment on a property that doesn’t produce any income because you’re renovating it. No one’s living there. And so these mortgage payments, it baffles me sometimes when I look at flipper’s numbers and they aren’t paying attention to paying how much money they’re going to spend over a six to eight month period in paying the debt service on this property.

Dave:
That’s crazy.

Henry:
It will eat your profits alive, and the other mistake they make is they don’t budget the holding costs for long enough. They say, oh, I’m going to buy it. I’ll renovate it in 60 days. It’ll take 30 days to sell. I’ve got four months of holding costs budgeted, and then it takes you eight to 10 months to get that property done and sold, and now your holding costs doubled, and if you’re paying something like between two and five grand a month, your profitability can go out of the window in a heartbeat if you go over like that. So you must prepare for holding costs and you must budget for at least two to three months longer than you think you need the money for, and that’s a semi experienced investor. If you have never done a flip, you need to double your timeframe, easy out of the gate, double your timeframe on your holding costs, but the holding cost most flippers forget about isn’t the debt service they know they got a mortgage to pay.
The holding cost they forget about is utilities. You got to have the power on, you got to have the water on, you got to have the gas on toward the end. Some of these things they creep up on you. It can be anywhere between 500 bucks a month to a grand or $1,500 a month that you weren’t planning on spending that. Now you realize, oh yeah, I’ve got that holding costs. Now where holding costs truly bites people in the butt is the landlords because a lot of people still tend to think they make money because their rents are higher than their mortgage payment.

Dave:
It drives me insane

Henry:
And that’s not true. There are so many more expenses or holding costs that you have to consider when you’re a landlord that you need to be underwriting into your deal because you do have maintenance that’s going to happen.
You’re going to get a phone call. It’s going to be annoying. I literally got one as we started this podcast, I have to replace part of my HVAC unit, and they were like, here’s the bid for eight grand. Enjoy. To me, that’s a capital expense and that should be part of your holding costs. Not only do you have maintenance, which is a normal wear and tear stuff breaks, you got to fix it, but you have capital expenses like your HVAC and your roof, these things that don’t last forever and they’re expensive. You need to be budgeting some money every single month out of the rent, setting it aside so that when these things come up, you’ve got some cash to be able to take care of those things. But I think the two that really bite people in the butt in holding costs are vacancy and property management, and I say property management for those people who want to self-manage. For people who are planning to operate with a property manager from day one, they typically

Dave:
Budget for, yeah, they usually underwrite it,

Henry:
But a lot of us investors just getting started are like, I’m just going to manage it myself, and you don’t add it into your underwriting, and then as you grow or you just get tired of managing properties, you need to outsource it and you lose your cashflow. Now you got to pay somebody 10% to manage it.

Dave:
Yeah, I definitely didn’t budget for it when I started,

Henry:
But vacancy to me is the killer because most people, if they do think about it, they don’t budget enough vacancy.

Dave:
What do you put in for vacancy at most places?

Henry:
Again, you need to understand what’s the average vacancy in your particular market. Every market is different, and so you need to ask property managers what they think the vacancy rate is in your market to understand. In my market, it’s about 5%, but I’m never just going to budget 5% for vacancy. I’m typically going to double that. I want to be able to cover at least one to two months rent. If somebody moves out and there’s a longer turnover

Dave:
For a single family, I do eight because that’s one month, basically 8%. But for multifamily, I usually do less because if you have a four unit, you’re not going to have three of them turnover in one year most of the time. But that is one thing also I want to add is turnover costs. Some people loop that in with repairs too, but a lot of times it’s just normal wear and tear. When someone moves out, you had a tenant there for five years, you’re going to have to put new carpet in, you’re going to have to throw in a coat of paint, you’re going to have to fix some holes that they’ve somehow ripped out of the wall. You are just going to have to do stuff like that, and it’s better to just budget that in right there. But this is the thing that separates people who succeed in rental property investing and don’t, because I see on Instagram every damn day someone’s like, oh, I thought I had all this cashflow until I had a turnover and then I had to pay two grand and all my cashflow’s gone. That wasn’t cashflow in the beginning. If it wasn’t budgeted in, it wasn’t cashflow. That was revenue that you had that you was coming into your business, but it wasn’t cashflow. Cashflow is profit and you don’t calculate profit without your expenses. That’s not how it works.

Henry:
Absolutely gross revenue, not cashflow, and you got to remember too, guys, you should have a framework for what you set aside for these expenses, but it can and should shift based on the property. If I’m buying a hundred year old house, I’m going to budget more maintenance and more CapEx than I would if I’m buying a brand new asset. You have to adjust the underwriting,

Dave:
And especially if you’re renovating, you can actually bring down your maintenance and CapEx expenses because you’re going to do it upfront.

Henry:
So if you do this properly, if you budget your holding costs appropriately, then when you do have a surplus of income coming in, you truly do have positive nuero. Six is cashflow. Dave, tell ’em about cashflow.

Dave:
Cashflow is actually quite easy, and we’re going to actually, I’m going to give you a bonus one. We’re going to talk about two numbers, cashflow and cash on cash return. We just basically gave you the definition of cashflow before. Basically your gross revenue, all the rents, pet rent, coin op, laundry machine in your rental units, all that stuff, minus all of your expenses, and we’re going to count all of your expenses. It’s not just taxes and insurance and mortgage. We’re talking vacancy, holding costs, CapEx, repairs, property management, all that stuff needs to go in and what you’re left over with, that’s actually your cashflow. That’s the profit that your business is generating. Now, it’s super important that you calculate this, right, but I actually think cashflow itself, the absolute number is not that important. People,

Henry:
Guys cooked in the comments, Dave,

Dave:
But okay. I think cashflow itself is important, but what I don’t like is people like, I want $200 a month per unit. What does that mean? Did you invest 10 million to make 200 bucks a month? That’s a terrible deal. Did you invest 10 grand to make $200 a month? That’s a great deal. That’s why I think cash on cash return or return on equity, those are the metrics that really matter because it measures efficiency, and that is what I care about as an investor is how efficiently is my capital and my time making me money? Because if I’m investing a ton of time and a ton of effort to make a 2% cash on cash return, I’ll just put it in a savings account. I can earn 4% right now, so you need to understand the rate of return. That measure of efficiency, that’s where cash on cash return comes in, and so the way you do that is you take your cashflow that we just talked about, your annual cashflow and divide it by the total amount of money that you’ve invested into that deal. So if you’re making eight grand a year in cashflow and you invested a hundred thousand dollars into that deal, that’s an 8% cash on cash return, which I think is a good cash on cash return. That’s a deal I would probably do, so that’s what I would recommend really focusing on. You need to know cashflow so that you can calculate cash on cash return.

Henry:
Cashflow is a measure of success. I want to buy a deal that cash flows because really that tells me is that I bought a decent deal. What it doesn’t tell me is how profitable that deal really is. So cashflow, I think it’s just kind of grown this almost personality where it’s like cashflow is what you need to retire and quit your job, but that’s not what truly builds wealth. Equity is far more important for those things, but cashflow is more a measuring stick. Are you buying a deal that at the end of the day the property is paying for itself? That doesn’t tell you if it’s a great investment as a property. It just tells you this deal pays for itself,

Dave:
Right? It doesn’t. If I told you, Henry, I have a fourplex that I spent a million dollars on and it earned me $500 a month in cashflow, you’d probably say that’s a pretty bad deal, right?

Henry:
Yes.

Dave:
That’s not a good use of my money,
And I think people need to sort of just back this out a little bit because if you just think if you have a goal to let’s say, get $10,000 a month in cashflow, that’s your ultimate goal. 10, 20 years from now, if you’re earning an 8% cash on cash return, you’re going to need 1.25 million in equity to do that. If you’re earning only a 4% cash on cash return, then you’re going to need 2.5 million in equity, meaning you’re going to have to earn twice as hard, and so I think it’s sort of trivial to say, okay, I’m making 400 versus $500 per month. My goal is always to keep that rate of return as high as possible. That means I have to do less. I could buy less properties, I have to work less. That just means I have a better quality of life because my deals are more efficient.

Henry:
Yes.

Dave:
Well, all right, there we have it. That’s six and a half. We gave you six and a half. We lied. Six and a half numbers that you need to know. There are obviously other things that you can calculate. I literally wrote a whole book with all sorts of other numbers that matter to you, but if you’re new or maybe you just don’t like overanalyzing things like I do, these six numbers can absolutely tell you whether or not you’re having a good deal. Everything else on top of that is kind of gravy, in my opinion. These six numbers are what you need to know about every deal, and if you don’t feel confident about these numbers, don’t buy that deal. You have to feel like these numbers inside and out and you feel like your assumptions about these numbers are right before you pull the trigger on anything.

Henry:
I think we covered a lot of ground, but I really want people to understand the importance of studying these numbers because the more you’re comfortable with these numbers, the more you’re going to be comfortable with making offers and actually getting real estate deals that make sense. When people are uncomfortable in a deal, it’s probably because they didn’t have a great grasp of one of these concepts.

Dave:
Well, thank you all so much for joining us. Two resources for you guys if you want them. If you want to learn more numbers, I literally wrote a book called Real Estate by the Numbers. You can check it out, or once you have a firm grasp on these numbers and you want to go run deals, the BiggerPockets calculator, if you have a pro membership, you can put all six of these numbers into those calculators. It’ll do all the math correctly for you, and you can tell whether or not you have a good deal. That’s all we got for you today on the BiggerPockets podcast. Thanks, Henry. Thank you all for listening. We’ll see you next time.

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

The Effect of Increasing Tenant Protections on Small Landlords

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

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

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

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

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

Connecticut

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

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

Illinois

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

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

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

Oregon and Washington

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

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

Maryland

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

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

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

Final Thoughts: Strategies for Small Landlords in a Tougher Landscape

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

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

Key issues include:

Consider eviction rules

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

Increase your slush fund

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

Research rent control laws

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