Dave:
Monthly rentals have moved from a niche to a meaningful slice of the housing economy and there is finally a dataset that shows how and where it’s growing. I’m Dave Meyer and today I’m joined by Furnish Finders Jeff Hurst to unpack their new monthly rentals report with Air DNA. We’re going to start by talking about what this report is, how it’s built, because it’s pretty cool. It’s the first of its kind where we’re actually getting some new insights and data about the really profitable midterm rental market. Then we’re going to dig into specifics like where demand is rising, which markets lead and the playbook for investors who want to get into this segment. We’ll cover what you need to know and how to act on it. This is on the market. Let’s get into it. Jeff, welcome to On the Market. Thanks for being here.

Jeff:
So glad to be here again and excited to be talking to everybody.

Dave:
Yeah, we had a super popular show last year with Jeff, but for those of you who haven’t listened, Jeff, maybe you can just reintroduce yourself.

Jeff:
Absolutely. So I’m Jeff Hurst. I’m the CEO at Furnished Finder. We are a monthly furnished rental platform. The platform’s been around about 10 years. I’ve been here about two years when we partially bought out the founders with some private equity and I have been upgrading the software, upgrading the team and helping ’em provide a better experience. Before that, I spent over a decade as the president of vrbo, the chief strategy officer of HomeAway, and also the Chief Operating Officer at Expedia Group. So most of my career is short-term rentals and along with that I’m a real estate investor and so I own three short-term rentals. Previously self-managed, one of them for about a decade, and now they are all property managed, so I’ve got one on the beach, one on a lake, and a working ranch, which has been a different type of adventure.

Dave:
Well, that’s great. I mean, I feel like that’s everyone’s dream life, right? It is like you have a collection of short-term rentals, hopefully making you a little bit of money, at least. Hopefully we’ll get everyone on who’s listening to this to that 0.1 day. That’s our collective goal here, but we’re here today to talk a little bit more about longer term rentals, so not necessarily short-term rentals, but Furnish Finder work together with Air DNA to put together a report on monthly rentals. Can you just tell us a little bit about the scope and methodology of this report you put together?

Jeff:
Yeah, absolutely. I mean, first of all, for those who don’t know Air DNA, they’re without question kind of the gold standard of reporting on short-term rentals. And so for over a decade they’ve been tracking Airbnb, vrbo, booking.com. They’re constantly updating their data sets, and so I’ve known the team there for a long time from my life in short-term rentals, and I had reached out to Jamie Lane there to see about collaborating on, Hey, listen, we’ve got kind of different data sets and I think this thing’s bigger than a lot of people and my old orbit short-term rentals think it is, and so I’d love to get together and just see what we learn. As it turns out, they had already been looking at upgrading their data products, which they’ve now done to be better at understanding when 28 days or longer and when it’s not.
It’s tricky with the way they’ve built their platform, but they’ve done a great job doing that. Furnish Finder is a classified site, so we don’t have great booking data, but we have a ton of signal on where tenants are trying to go, where landlords are adding inventory and then the characteristics of what’s in demand and not. So we thought it was a great compliment, and so it kind of came about as just an idea and we were like, Hey, let’s all peek under the hood and look at each other’s data and see what the story says. And for us, it was really exciting because it was confirmatory of a lot of us kind of staking our next careers on this opportunity of that. It’s says monthly furnish rentals are growing really fast and there’s a ton of demand for ’em. Interestingly, it says it’s very different than what most short-term rental demand is. It’s not leisure based, and so it does shine a light on this thing’s growing a lot faster than short-term. It’s adding more inventory and it’s a different type of asset class.

Dave:
What are some of the differences between the short-term and midterm rental industries?

Jeff:
You start with, it’s obvious the difference is one’s for 30 days or more, but when we look overall, so one key difference, smaller footprint, and so 70% of the inventory on furnish finders two bedrooms are smaller. When you extend that to apartments.com and Zillow, totally the same trend, smaller footprint where it is way less likely to be in a leisure destination in general, think about it as being around universities, hospitals, and commuter corridors, and that’s because the tenant types the largest is commuting for work. That could be skilled trade, but it’s also a lot of professional services. Second largest is healthcare, which is how Furnish Finder built its name. The third largest and fastest growing is relocating families. I think that’s the most interesting for investors because it really opens up where the category can go because of those things. It’s overwhelmingly unlike suburbs, small towns, it’s in major urban areas, but it’s not in the downtown corridor.
What’s exciting about that is the assets tend to be less expensive than short-term rental. For the price of a short-term rental, you might be able to buy a duplex or a quadplex and have a different type of key strategy. It’s probably typically a better cash on cash return because the entry price is lower and the cost to outfit these is way lower. Think like $7 a square foot. I was talking to Garrett at BiggerPockets routinely, a short-term rental might be more like 30 to $50 a square foot because you are investing in wow amenities because you’re trying to really help somebody have a great weekend. We’re trying to help somebody get through a tough time or maybe have a comfortable place to sleep while they’re on a work assignment.
So those are the key differences. The thing that I think surprises a lot of people, the average length of stay on furnished finders over three months and over a third of the tenants extend, and so you’re talking about doing three turns a year and if you’re doing it well, the occupancy is actually a lot higher than a short-term rental. You might only have a few days between turns, like 90% plus, and so it’s very different, but people who are great at short-term rentals can be excellent at midterm rentals because it’s actually easier. You’ve just got to do a different type of asset hunting.

Dave:
It seems easier from a property management perspective and from a design perspective as well. Totally is what you’re saying. I was kind of curious about that. If people spend as much effort into a medium term rental or there’s no ROI on that

Jeff:
They don’t, you think about when you’re designing for a short-term rental, you have to think about who’s coming, where are they coming from and what’s the wow amenity? Is it pickleball? Is it that we’re going to do foosball and ping pong? Are we going to have some sort of different visual aesthetic or fire pit? Everybody knows how to sleep comfortably. It’s like, can I stock a kitchen with basics? Can I get a reasonably good couch in TV and can I have a quiet place to sleep comfortably? You don’t need to have a designer. You need to be pragmatic and you need to know how to do these things efficiently and you need to be really good at locating where are people going to need this type of inventory?

Dave:
Totally. Yeah. Just to my own experience with midterm rentals, I moved to the Seattle area about a year ago, didn’t know where we wanted to live, stayed in a midterm rental in one area for two or three months, figured out we wanted to live on the other side of the city, moved to that area, stayed in a midterm rental for two or three months while we did some house hunting and ultimately found the place and we wanted somewhere comfortable. We wanted parking, we wanted proximity to the grocery store, stuff that you look for more in a traditional long-term rental as a tenant. Whereas yeah, if I’m taking a short-term rental, I’m like, give me a golf simulator and a view of the mountains and I’ll be pretty happy, but it’s not what I’m

Jeff:
Expecting. Interestingly, the midterm use case, because it’s not long-term, it curb appeal matters a little less. Like you don’t care as much that there’s wow curb appeal that there’s a fantastic, you need maybe a lawn for pets, but you may not need the perfect manicured front lawn and stuff like that because it’s really transitional and you need it to be comfortable. And so that gives you a different type of flexibility. Also, like what you’re describing I’d say is our fastest growing use case, we call it try before you buy, and it’s people who aren’t sure where they want to be in a new town, but it’s also people who might be priced out and so they can’t afford to make a mistake with the way housing inventory and affordability is right now,
And so they’re going to be really picky about what they buy after they figure out where they’re going to buy, and that might mean they’re in these for six to 12 months and furniture’s a bad investment, and so they’re also want to be sure they buy furniture for the place they’re going to be in for a long time and aren’t moving it and moving it. And so it’s an interesting dynamic and I’ve found it to be my kind of eat crow moment is at vrbo. I often thought that Chesky at Airbnb was kind of like, I didn’t believe his story about how people were going to live and increasing like, okay, I get it. People are going to live more flexibly. And what’s shocked me is it’s both ends of the generational curve. Yes, it’s younger people, but it’s absolutely boomers in late Gen X

Speaker 3:
Really,

Jeff:
My mom lives two to three months a year in Maine. She’s not. It’s because she’s crazy wealthy and has another home. She travels with a friend, people are grandparent traveling instead of living in the guest room of their kids, they’re getting a house nearby that’s a duplex and they can walk to their kid’s house but have the grandkids at their duplex. And there’s a lot of these use cases because of the generational wealth transfer and housing where I think the older generation’s actually catching up or exceeding this idea of flexible living.

Dave:
That makes sense. I guess now millennials are mostly, at least those who can afford it, trying to settle down into a home and are less having kids, they’re a little less transient, traveling less probably than these other generations, so that makes sense. Alright everyone, we got to take a quick break, but we’ll have more with Jeff Hurst from Furnish Finder right after this. Welcome back to On The Market, I’m Dave Meyer. Let’s jump back into my conversation with CEO of Furnish Finder, Jeff Hurst. So you mentioned earlier, generally it sounds like the industry, the category as a whole is growing. Is that both on the supply and the demand side?

Jeff:
It is. So in the report, air DNA has got a better view of demand, so they estimate that there’s over 6 billion of transactions on the short-term platform that are 28 days and longer. So that’s big. We have seen from 2019 to 2025, the furnish fly through platforms gone from 20,000 listings to over 300,000. Oh

Speaker 3:
My gosh.

Jeff:
So 15 times more inventory. We think we’re probably the biggest site for monthly furnished inventory just period. So like Zillow has about 50,000 monthly furnished apartments.com, about a hundred thousand. There’s not a great number out there for Airbnb. We estimate it to be about 150,000, but then of course they’ve got millions of homes that could be rented for 30 days plus, but they’ve got a three day minimum or a one day minimum. So it’s explosive growth. It used to mainly be healthcare and some niche use cases. Think about what trucks are at an extended stay America and increasingly it’s way beyond that. And that was the other interesting confirming stat, 40% of all new hotel starts are extended stay.

Speaker 3:
Really

Jeff:
The big institutional money is going into extended stay and you see that with new strategies of higher end extended stay, but it becomes, again, to your point of commercial or long-term real estate, a little bit easier to go hunt because you just look where the hotels are, who’s great at asset identification, Hilton and Marriott, they don’t screw it up a whole lot. And so if you go figure out where they are and have a duplex nearby, then your equation becomes, okay, well the Hilton extended stay property is going to be $3,000 a month. I can deliver twice the square footage and a private space for $2,000 a month. Are people going to choose that? Yeah, if they know they’re going to choose it. It feels like short-term rental in 2010, it’s just way better. It hasn’t gotten as complicated yet.

Dave:
Where’s demand for monthly stays coming from? Where are you taking it from? Right. I guess hotels is one part, but is it also, I mean long-term rentals too, it sounds

Jeff:
Like? For sure. Yeah, I mean it’s part of the long-term rental platform. I think that when you look at the big macro trends declining home ownership increasing, they’re not really caring whether you’re renting in a 12 month lease or a three month lease that renews four times, you’re just a renter.
And so the macro trend of more people renting probably plays into it the most. I do think there’s hotel share steel, but I don’t think it’s zero sum. I think the hotels realize there’s so much excess demand that they’re building supply and we’re helping augment the need for more supply. If you’re a landlord, you’re probably advertising on Furnish Finder a little over half or exclusive to Furnish Finder. You’re likely also on Airbnb or maybe also on Zillow, and it’s got more of a hustle dynamic. You’re more likely to also be telling your neighbors, you’ve got a space in the neighborhood for if somebody gets divorced or the roof catches on fire or whatever. That part’s unique of that. It’s a little bit more cottage industry that way and a lot of it is more referral or local relationships. And the asset class is unique that way because a lot of neighborhoods and even municipalities have banned short-term rentals, but this actually feels like a neighborhood asset.
You’re excited if somebody like you is moving to a neighborhood in Seattle and has a chance to live for three months and be sure they can buy something in the neighborhood, become a part of the community. You’re not excited if a family gets divorced. But it is nice that the husband and wife can both stay in the same neighborhood and have kids close to each other and maintain family consistency. And then if somebody’s plumbing burst or roof catches on fire or just wants to remodel, it’s great that your friends get to stay in the neighborhood. It just feels like an asset

Dave:
A hundred percent. I think I probably, I was on Furnish Finder the other day because starting to remodel in the next couple of months thinking about where I’m going to

Jeff:
Stay, it’s going to be over budget. So you’re looking for a way to save some money too. Yeah, exactly.

Dave:
So talk to me a little bit about, we see demand seems to be going up, supply is certainly going up. One of the knocks or the question marks about short-term rentals recently has been about oversupply. Do you have concerns about that? And I’m sure it varies market to market, but do you have concerns about oversaturation in the midterm market as well?

Jeff:
No, nowhere near what I did with short term.

Dave:
Really

Jeff:
Short term obviously went through a fantastic boom period. I think the dynamic at play there is there’s a lot of what I’d call irrational buyers. It’s very often almost like the middle class version of buying a sports team. There may be someone out there who’s willing to buy it with no intention of making money. It’s not an investment, it’s actually that they just want it for usage. And so the dynamics of who’s buying those are different. It went through a boom, but the boom was very consolidated and Gulf Coast and lakes, rivers, mountains, so there’s oversupply in a small number of places. What do you have everywhere? But there under supply everywhere there’s a housing shortage and in most places it’s a pretty durable housing shortage. And so I think the estimate is we’re over 10 million units of housing short. And so when you think about where midterm rentals plays, it actually plays way more in the suburbs and in places where there aren’t any short-term rentals than it does in the places where there’s saturation. And so it’s more likely to be where there’s a new community coming up where there’s a new nearby or where there’s a new hotel, then it is where there’s a new Ritz Carlton or a new resort property

Dave:
And how can people measure or get a sense of where there’s good supply and demand dynamics. Obviously you mentioned one tip of following the hotels, which is a great tip, but are there any other ones you recommend?

Jeff:
Yeah, so there’s a tool on furnish finder called Market Insights. You can reach it from the homepage, you can put in any city in the US and it’ll tell you how many visitors have seen that map grid. So how many people are searching the area where your property could show up, it’ll show you how much inventory is there and it’ll show you by price point, bedroom type. What’s the distribution?
This is, I’d say it’s a solid B product we’ve built now, but there’s some real improvements we need to make. And so my advice to people would be check it out now, but check back on it every month because I think there’s going to be some things that we’re doing that help make it more powerful, like moving it to zip code search. We’re going to do some things that better represent that. If you’re looking at Austin and part of the map might show a smaller town outside of Austin, we may not be accurately showing you the exact demand for that small town. And so we’ve got to help better calibrate the way that works, but start on furnish finder. Second thing, use a site like Air DNA, because short term is a good indicator. And then the third thing is use the OTAs to your advantage. Go to a booking.com or an Expedia and look at where the extended stay properties. And you’re kind of think about this triangle where you’ve got furnish finder Airbnb and an OTA and you’re trying to figure out, okay, well where do things line up to where I’m getting a little bit of everything in that triangle and then you’re into something that’s pretty special.

Dave:
And then tell me a little bit more about what assets people are buying. You said it’s different, it doesn’t have to have this wow factor. Is there some sort of sweet spot that you find has a lot of demand but is also reasonable from an expense perspective?

Jeff:
Yeah, I mean I think what I’d start with is lemme just kind of describe the continuum. And so first of all, of our over 300,000 listings, 60,000 are rooms.
And that’s a very new product for me because at VRBO we didn’t do rooms. And so I’m kind like I’m learning about it also. It’s growing fast and it’s a really interesting strategy and I think of our partners. I think pad split’s a really interesting partner to learn more about, but, and how you rent out a room is a great strategy because America actually doesn’t have a room shortage. We have a housing shortage. My mom lives in a three bedroom home and she’s one person. There’s a lot of people like that. And increasingly as they think about are you willing to rent out a room or are you willing to add an A DU to a property, there’s kind of a starting place there. The second stop on the continuum would be there’s a ton of studio apartments and one bedrooms, apartments, condos, duplexes. But the important thing there is, unlike short-term rental, it is actually viable to where you can get into this and more of an arbitrage model.
And so you can take out a two or three year lease and most buildings and landlords are amenable to, Hey, I’m going to have four tenants in here over the course of the year as opposed to I’m going to have 54 tenants in it over here over the course of the year. And so there are people who kind of dip their toe in the water with arbitrage and then the majority is a single family and it’s two bedroom or smaller. I think the sweet spot is one bedroom with a bonus room so that you have the opportunity to play in housing a family of three or four or having a slightly bigger place for a couple or somebody who wants some office space while they’re there. That’s probably the sweet spot. The inventory class in general is moving to larger footprints because of the family dynamic, but it’s more like three bedroom is the larger part. There’s nothing here exciting for your five bedroom, your six bedroom, you’re like some of the most successful STR formats are those like sleeps 23, put four families here and you’ll save the cost of eight hotel rooms. That’s my lake house.

Speaker 3:
That’s

Jeff:
Not part of the situation here. I think it’ll cap out around three or four rooms unless, and then the co-living strategy can allow you to yield a lot more if you’ve got five different tenants and a five bedroom house and are treating it more like a monthly product. And so it’s very flexible. And I think what’s interesting as an investor, it’s a lot easier to invest in what you just kind of think about, oh, I can put one of these within half an hour of my house. Where could I look within half an hour of my house? And then self-managing is way more of an opportunity than short term. It is closer to your primary residence and you’re only dealing with it three or four times a year.

Dave:
And I imagine that it’s also a little more flexible, not just on size, but in type of asset. Just hearing you talk, Jeff, it makes me feel like you could potentially buy attached homes, condos or town homes, whereas I think for short-term rentals, in my experience, most people want to buy single family dwellings just to stand out a little bit. But I don’t know, in my experience as a midterm renter, I don’t really care. I just want a comfortable place, like

Jeff:
You said. Yeah. Is it as private as a hotel room? That’s kind of the bar. And so an A DU or an attached property for sure. Yeah. I think some of the people that have had the most financial success play in that duplex quadplex space
Because you can own the dirt. You do have more flexibility. And I think some of the best investors in the category underwrite it as like, okay, my worst case scenario is this is a successful long-term property. What does that return profile look like? Okay, well what if I can then do 40% better than that as a midterm rental? What does that return profile look like? And that kind of establishes your range and that midterm range can get really exciting and start to kick off cash really quick. Basically, what’s the return on furniture? And furniture usually pays itself back in six months on our platform because it’s five to $7 a square foot and then you’re just making more money forever the depreciation lifecycle of furniture in a mid terminal, maybe three or four years. So you’ve got three years of extra cash before you have to refresh.

Dave:
Let’s talk a little bit more about the economics here because in my mind there’s sort of this continuum where it’s like long-term rentals least amount of management on a day-to-day basis usually, but the lowest cashflow potential, if you break it down by how much revenue you’re bringing in per night, that’s going to be the lowest then in my mind, correct me if I’m wrong, midterm sits in the middle where it’s a little bit more work. You have maybe three tenants, like you said in a year instead of one, you have to furnish it. There’s maybe some more maintenance and costs there, but the daily rate you can get is higher. And then short-term rentals are sort of the highest revenue potential, but also the biggest management burden. Is that the right way to think about it?

Jeff:
Yeah, that’s exactly it. I mean, I’d say a pretty average short-term rental is probably doing something like $2,000 a week in rent. An average monthly rental is doing more like $2,000 a month in rent, and then your long-term rental is probably more like $1,500 or 1700 when you adjust for four. And so we look at furnished as your premium’s probably 30 to 50% increase in monthly rent over long-term, and you’re paying for furniture and you’re paying for flexibility to break the lease sooner, but it’s all almost a fully occupied short-term rental. Well, if you could get a fully occupied short-term rental, it wins it’s way more money. And the only other difference I’d add to it is management fees are actually pretty notably

Speaker 3:
Different

Jeff:
Because of the extra turns, the extra standard of care management fees for a short-term rental, I think minimum are going to be 20 to 25%. And when you add in lodging taxes and all that sort of stuff, it can be like 40 to 50% of what the tenant pays in a short term actually doesn’t go to the owner in a long term. It’s more like 10 to 15%, and in midterm it’s more like 15%. You can kind of get it closer to 10, but you’re way more likely to be able to self-manage it and save all that money. And so you end up with more independent landlords kind of self-managing who are really about profit percentage maximization in midterm. I think.

Dave:
And I think it’s really important for everyone listening to just think about, there’s sort of a positive efficiency here where short-term rentals, yes, I think everyone agrees most revenue potential, but the expenses scale with that revenue a bit. And what Jeff is saying here is that the expenses with midterm rentals aren’t necessarily proportionate to how much more revenue can make. So your margin can actually increase definitely over long-term rentals, but potentially you could get a similar profit margin in some respects as a short-term rental. We do have to take a quick break, but we’re going to be right back with Jeff after this quick word from our sponsors. Welcome back to On the Market. Let’s jump back into my conversation with Jeff Hurst. Jeff, do you have any data on just the average occupancy? I totally get the potential is really high, but if you’re not booking these things out, potential means nothing.

Jeff:
I don’t have great data on it because we’re a classified site,

Dave:
And

Jeff:
So we do surveys on it. The surveys would tell you that the people who are good at it are 90% plus. When you’re full-time strategy and you’re treating this a second job, not just a puzzle, but you’re out talking to insurance companies and really marketing you can be 90% plus.

Dave:
Whoa.

Jeff:
Yeah, man, you’re talking about eight vacant days a year.

Dave:
Wow.

Jeff:
And it is skewed a ton of these end up with a tenant who rents for three months and is there for two years, and then you’re at the higher rent for two years just rolling it over and rolling it over and rolling it over because they got comfortable and they can afford it and it works fine and they don’t want to change it. And so that skews the numbers a little bit. My hunch is more of the average occupancy probably feels more like 75, 80% that there is a little bit more churn because we’re in a lot of locations where I think there is seasonality. That’s something to consider. There’s basically, there’s two pure strategies here. One is I’m a midterm rental only. I’m out there trying to hustle. And the big difference you’ve got to think about is your calendar’s no longer a game of Tetris. You’re going to get the next midterm rental booking and then that’s it. And then when they give you notice, they’re moving out, you’re going to go get the next midterm booking, but there’s no forward calendar. You don’t have a booking six months out in a weekend here in July 4th, and all these things that you’re balancing, you’re just taking a booking at a time. Whereas the hybrid model would be like, I’m actually kind of willing to take a midterm booking or maybe seasonally, that’s my preference, but I’m a short-term rental.
I’m actually always going to book July 4th at max. I’m always going to book Labor Day at max. And if I’m in Michigan, yeah, that’d be great if I got a 90 day rental in the winter, but I’m also maybe not going to turn down a Christmas booking because that might be a great booking for me. And so you’re playing a different game there. The book to Stay Windows, interestingly, almost 30% of bookings for 30 day plus days happen within a week. So the book to stay window is actually shorter than short term.

Speaker 3:
Really.

Jeff:
And you think about it and it’s like, oh, well, if I’m a healthcare worker or a business worker, a lot of times you find out two to three weeks out there, Hey, you’re going to Akron, get ready, go figure it out. And so there is some of that. Or if your pipes burst and a freeze, you need a place tomorrow. And so it’s intuitive, but it surprises people just because you’re going support for 90 days and you’re figuring out on five days notice, a lot of the time

Dave:
You’re not planning it like a vacation.

Jeff:
Yeah. No one wants to screw up spring break, they plan it six months in advance at vrbo. It’s like, what do you do when you finish New Year’s? Do you plan spring break?

Dave:
One thing, Jeff, I’m curious if you can give some advice to our audience here is I buy rental properties and every time I walk into one these days, they’re like, it could be a midterm rental. And I’m like, yeah, sure it could. But I don’t know if that means it should be a midterm rental. So do you have maybe thoughts on what you should talk to your agent about if you want to look for these or if someone’s telling you you should make this a midterm rental. How do you gut check if that’s really the best strategy for the given asset?

Jeff:
Yeah, a very cheap way to gut check it, especially once you own the place, say, a common scenario for us is people get married and they’re trying to figure out what’s to do with the other house. Do they turn it into a long-term rental? Do they sell it? Do they make it a midterm rental? And so lemme take that use case and then I’ll get to your how do you decide what to buy And that use case, my biggest advice is one, if it’s already furnished, furnished finds $200 a year, just buy it and see what happens. Go put up an advertisement, and if no one’s bit in a month, then it’s probably not your right strategy. If you’ve got an unfurnished place, put it up unfurnished finder, unfurnished with a picture that says, I’m going to furnish it for the first tenant, and you’ve got an $8,000 budget to pick out what you want.

Dave:
Whoa.

Jeff:
And so then you may end up with like, oh, well, I actually do want three twin beds in my two bedroom because I’m a single mom who’s going to be with three kids. This is huge. Now I can get three twin beds in there. That’s great. And then you end up not having to invest in the furniture until you have the tenant. And the tenant actually often likes it because all the stuff’s new and they get to have some input into what you put there.

Dave:
Wow.

Jeff:
Now, if you’re earlier funnel, I’m looking for an investment property and thinking about buying, the first thing is you go back to that first principles conversation. We had Airbnb, furnish finder, OTAs calibrate on what have the realtor explain why they say that. But if they’re not calibrating with one of those three data sets, there’s not another data set out there except they want to tell you that or someone else told them that.
But I’d say you’re still in a very safe space with a thesis of if that investment works as a long term, it’s all upside. You can’t say the same about, well, hey, this investment as a short term is supposed to do $110,000 a year. Well, the midterms probably not going to do $110,000 a year. And so if you underwrite as a short term and end up in a midterm, you may end up underwater. And we do see a lot of that with regulatory pressure. Somebody comes in and they’re like, I can’t rent this out for less than 30 days in most major cities. Now what do I do? I’ll make it a midterm. Great, you’re going to have some bookings, but it’s actually not going to be as much money as you had thought you were going to make as a short term. And there’s some fundamental disconnect there, which is a little bit of a market clearing problem.

Dave:
Jeff, this has been super helpful and I think our audience is going to really be interested in this. Any last pieces of advice for people who are interested in the midterm rental market?

Jeff:
I think all investing, find something that you feel like you’ve got a personal attachment to and something you’re curious about. And then just get started. So what does your neighborhood need? What do people in your area need? And start there. It’s way more approachable than, I had a great trip to Telluride. I wonder what it would be like to try and buy something in Telluride and find out who else lives there.

Speaker 3:
It’s

Jeff:
Actually pretty hard compared to, I know a traveling nurse nearby. I wonder where she stays and what she does, and can I provide that service better? So just start really first principles and then use data from Air DNA or Furnish Finder and otherwise, and go see if it works. But you can do this in a way that’s not a financial future risking type of model. Like start with a room, start with an adu, start with something small, and go try and make your first $500. And I hope it turns into 5,000 and 50,000 in financial independence.

Dave:
Yeah, I love that. I mean, that’s a really cool approach because in real estate, you don’t often get to do that. A lot of times you have to take a really big bite before a big

Jeff:
Swing.

Dave:
Yeah. And this is an opportunity where you can learn a little bit and maybe take a page out of the tech approach and just be a little bit more iterative about how you’re going to build and learn and go and improve all the time. Well, Jeff, thanks so much for being here. We really appreciate it. A link to the report will be in the notes. You should check that out if you want to learn more. There’s all sorts of great information maps about where demand is growing, all sorts of good stuff. So check that out. Thank you all so much for listening to this episode of On The Market. We’ll see you next time.

This article is presented by Proper Insurance.

Airbnb has become more than a place to earn a bit of cash from strangers crashing in your spare room. In the last 17 years, it’s expanded to include more offerings, from entire homes to Experiences in select cities. It continues to grow, with over 8 million listings worldwide.

The company recently announced a new endeavor for growth: Airbnb Services. This is meant to enhance guest stays, as they can receive on-site services like private chefs, spa treatments, hair stylists, and personal trainers. 

While this is great news for guests, it introduces new liability and property risks that standard coverage may not address.

What Airbnb Services Actually Mean

Airbnb Services rolled out in May 2025 and includes on-site offerings in 10 different categories. These include private chefs, massage therapists, hair stylists, nail technicians, personal trainers, and photographers—services that happen inside your property, even though you didn’t hire or vet the providers. 

Airbnb properties are automatically opted in to offering Services, but hosts can decide not to allow them by contacting Airbnb directly. For hosts hoping to attract more guests and increase income, allowing Services can enhance the guest experience and potentially improve a property’s visibility on the platform—creating a clear incentive to remain opted in.

More concerning for hosts is that Airbnb Services introduces additional layers of activity at the property, including third-party involvement, increasing an owner’s risk exposure and liability.

According to Proper Insurance, a specialist in short-term rental coverage, third-party, on-site services add layers of liability that many traditional policies were never built to address.

Hosting a short-term rental already carries heightened risk compared to simply owning and personally using a property. With the introduction of Airbnb Services, another variable is added. Liability is no longer limited to the property owner and a guest’s actions or incidents, but may also involve service providers the host did not personally vet.

On-site activities and third-party vendors increase overall liability exposure and can further blur insurance grey areas. If an incident occurs involving a guest and a service provider, the property owner would likely be drawn into the claim or legal process—highlighting the importance of understanding how your insurance policy addresses short-term rental risks and third-party vendors.

The Real Risk of Airbnb Services

While Airbnb says Service providers need to have their own liability insurance coverage, having services on your property drastically increases your own risk as the host. There are several risks from Airbnb Services, including: 

Liability

If a guest or Service provider is hurt while on your property, you, as the property owner, could be named in the liability claim, even if the incident arose from the Services itself.

Damage

Having Service providers utilizing your property could increase the risk of accidental damage. Services could increase the risk of damage, from a private chef spilling wine on your custom rug to floor damage on your wood floors from sports trainers during a workout session. These scenarios are already being discussed in host forums.

Privacy and conduct

Misbehavior or alleged misconduct on a property by a Services provider could impact more than the guests’ experience. Because you aren’t personally vetting the Service providers, if there is an issue, it could discredit your listing, cause a guest to leave a negative review, or even pursue legal action.

Income disruption

Increased risks due to damage could mean repair downtime, which could impact your hosting schedule. Without the right coverage, this could lead to uncovered repairs and lost rental revenue. Proper Insurance includes revenue protection to help cover lost income during covered damage claims. 

Why Standard Policies Aren’t Enough

If you’re a host, your traditional homeowners or landlord policy won’t cover these exposures because they were never designed for an active income-generating business like an Airbnb. 

AirCover is not an insurance policy with your name on it; it’s a platform protection tool with vague exclusions and no guarantee of payout. Assault, invasion of privacy, and property damage caused by Service providers are all excluded. In fact, for hosts with six or more listings, Airbnb’s liability insurance is secondary to other insurance policies. 

Proper Insurance completely replaces your homeowners or dwelling/landlord policy with protections designed specifically for short-term rental hosts, with no exclusions for third-party services like Airbnb Service providers.

Offering more to your guests shouldn’t mean risking everything you’ve built. Learn how Proper Insurance protects hosts with their unique commercial homeowners policy, offering robust coverage for your property, liability, and business revenue. Get a quote today.

Depreciation has been the gift that keeps on giving for President Donald Trump and his many real estate investments. Now, it appears that everyday American homeowners could enjoy some of the same.

As BiggerPockets has reported, the president has been on a tear recently, offering a deluge of ideas to help the affordability crisis in the lead-up to the 2026 midterm elections. Among his aerosol-spray approach to brainstorming money-saving strategies for homeowners, he’s turned to one that has served him well in his own business. Often called a “phantom tax,” depreciation is essentially a tax on the wear and tear of the property, calculated over 27.5 years of ownership.

Even if the property is maintained in immaculate condition, you can still claim depreciation. The tax break is currently limited to investment properties. However, by floating the notion that owner-occupied homeowners could also benefit from the break, the president could potentially save homeowners a fortune in taxes. 

Considering many real estate investors also own personal residences, it could offer a double whammy of savings.

What the President Actually Said About Home Depreciation

As President Trump is often prone to do, his words on depreciation fell into the “musing out loud” category rather than any specific proposal, draft legislation, or Treasury regulation. 

The president was speaking at the World Economic Forum in Davos, Switzerland, last month. His exact words, according to CNBC and other outlets, were, “The crazy thing is a person can’t get depreciation on a house, but when a corporation buys it, they get depreciation.” He added, “OK, here’s something we’re gonna have to think about.”

How Personal Home Depreciation Would Work in Practical Terms

One of the main advantages of owning a rental property is the depreciation it generates, so that even if a property is breakeven on cash flow, the depreciation could still make it worthwhile to hold on to if rents and equity are expected to increase.

Depreciation on personal property raises some interesting questions—mainly, would it be calculated under the same guidelines as investment properties? Under current rules, depreciation is calculated on the building’s cost basis (purchase price plus certain improvements, excluding land).

Ultimately, it would be up to Congress to apply the same recapture rules. Questions about whether deductions would phase out at certain income levels need to be ironed out.

There is no question that depreciation on a personal residence would be a significant benefit to homeowners, offsetting the taxes they owe. For W-2 earners, it would mean getting a bigger refund from the IRS, and for real estate investors, it would mean more deductions they could throw into the kitty. 

In short, the fewer taxes the public has to pay, the more money they have to spend and/or reinvest.

The Depreciation Headache: House Hacking and Short-Term Rentals

If you rent part of your home, the income-producing area (measured in square feet as a percentage of your home) can be depreciated. For example, if you own a four-unit home and all units are the same size, and you live in one, assuming the other three units are rented, 75% of your property qualifies for depreciation. The actual equation is: 

Adjusted basis of the property x rental use percentage = Depreciable value of rental portion.

Using the example from REIhub, if a duplex is rented and the owner lives in one unit (50%), and the property’s adjusted basis is $350,000, the property’s depreciable value is $175,000.

Depreciable value of rental portion ÷ 27.5 = Annual depreciation for your house hack

For the duplex example, the annual depreciation amount is $6,363.63.

However, issues arise in calculating depreciation when individual rooms are rented, and certain living spaces are shared, making the calculations more difficult. Short-term rental sites such as Airbnb do not calculate your depreciation for you. That headache should be left to an experienced accountant specializing in short-term rentals.

How Bonus Depreciation Fits Into the Equation

Bonus or “accelerated” depreciation has been one of the most lauded tax breaks for real estate investors in recent years, and the president has been a champion of it. 

Bonus depreciation is a federal tax incentive that allows businesses to deduct a large percentage of the equipment they purchase for their business in the first year of use, rather than over a long period. For real estate investors, this includes all appliances and materials not included in the property’s construction (stoves, refrigerators, cabinets, etc.). The good news this tax year (2025) is that 100% bonus depreciation is back, meaning investors can depreciate their equipment in one year rather than spreading it out over several years.

It’s unlikely bonus depreciation would play a role in the personal home depreciation scenario, unless a part of that home is used for a business—such as a short- or long-term rental—in which case, it could offer another source of tax savings for homeowners.

Final Thoughts

The slew of recent housing ideas by the president, broadly geared toward increasing cash flow for everyday Americans, has arrived like a flash flood in a dry valley creek for one reason: politics, namely the 2026 midterm elections. 

Whether suggestions such as the 50-year mortgage, Fannie Mae and Freddie Mac buying mortgage-backed securities, and a ban on large investors buying single-family homes will have much effect on moving the affordability needle is questionable. 

However, two of Trump’s most recent topics for discussion—increasing capital gains exclusions on single-family homes and allowing homeowners to claim depreciation—will have tangible results. Whether talk turns to reality remains to be seen.

A real estate gold rush is coming to a town near you—only this time there won’t be shiny nuggets glinting in the sunlight amongst the sound of picks and shovels, but silicon chips surrounded by the whir of sophisticated HVAC systems, keeping racks of hard drives cool.

“The largest infrastructure buildout in human history,” is how Nvidia CEO Jensen Huang described it at the World Economic Forum in Davos, Switzerland, recently. Huang’s company provides the chips and supercomputers responsible for the artificial intelligence (AI) revolution, which have been in unprecedented demand by every major tech company that is spending trillions of dollars developing data centers across the U.S. In the process, they are bringing an arsenal of jobs and tertiary businesses to the country, with vast amounts of housing a natural by-product.

Construction Jobs Are in Unprecedented High Demand

Aside from the tech- and energy-related jobs that data center construction will bring, Huang stated that traditional blue-collar jobs will also offer six-figure salaries. “It’s wonderful that the jobs are related to tradecraft, and we’re going to have plumbers and electricians and construction and steelworkers,” he said at Davos in a conversation with BlackRock CEO Larry Fink, as reported by Fortune.

Global management consulting firm McKinsey estimated in a report that, in the U.S. alone, there will be a need for an additional 130,000 trained electricians, as well as 240,000 construction laborers and 150,000 construction supervisors. “Everybody should be able to make a great living,” Huang said. “You don’t need to have a Ph.D. in computer science to do so.”

A recent ConstructionConnect report gives some idea of the scale of the need for construction workers in data center hubs such as Virginia, Texas, Pennsylvania, Georgia, and Ohio. Spending reached about $53.7 billion year to date through November 2025, a 138.6% jump over 2024.  

How the Vast Expenditure Trickles Down to Small Landlords

A McKinsey report suggests that U.S. data center demand could triple by 2030, requiring a $7 trillion investment to keep up. 

A recent pact between OpenAI, SoftBank, and Oracle saw the three companies pledge to commit $500 billion in AI infrastructure through 2029 through the Stargate Project, The New York Times reported, with Meta and Alphabet doing likewise. For smaller investors, knowing that that kind of commitment is in place for years to come means local real estate markets are unlikely to experience any boom-and-bust cycle. Instead, a boom-and-boom scenario means relocating capital to data center area markets is likely to be a prudent move.

Jobs, Wages, and Local Housing Demand

The immediate demand for construction workers means there is also an immediate need for housing. 

“The same electricians, welders, heavy equipment operators, and HVAC specialists who once built office towers or shopping centers are now being pulled into data center projects at record speed,” Skillit CEO Fraser Patterson told Realtor.com. He added that in Dallas, electricians working on data center projects are earning 30% more than the going rate for a similar role. 

High wages and labor demand are supporting local communities, driving the need for workforce housing, which means that mom-and-pop landlords in the right submarkets could enjoy a deluge of qualified tenants, stronger occupancy, and room for wage gains.

Rural States Could See Their Economies Change

Rural states with minimum infrastructure and housing could see a dramatic shift in their economy when data centers come to town. For example, Wyoming is on track to become a major AI hub after Laramie County approved plans for a 1.8-gigawatt data center campus that could expand to 10 gigawatts, making it the largest AI campus in the country. 

To take advantage, real estate investors have a few different angles they can pursue, including:

A Best-Case Scenario

Amazon’s extensive data center buildout in the unassuming small city of Umatilla in northeast Oregon has transformed the community of 80,000, Niagara Falls Redevelopment LLC reports. The daughter of Mexican-born farmhands, Yesenia Leon-Tejeda traded her job working at an Amazon fulfillment center for a Realtor’s license, closing 35 deals in one year, buying her own house, and purchasing Airbnb investments to cater to the housing demand. 

Umatilla city manager Dave Stockdale said the government’s annual budget surged from about $7 million in 2011 to $144 million in the past fiscal year.

Final Thoughts: Practical Strategies for Providing Data Center-Related Housing

Big tech has the immediate area around data centers sewn up, but it’s not in the housing business—at least not yet. That means infrastructure-adjacent markets that house commuting workers will be in demand. The data centers themselves consume vast amounts of energy and water, which is not conducive to building housing. Until this issue is resolved, investing here seems impractical.

Demand for housing will be most acute in areas with land availability, established infrastructure, within a commutable distance, and that have an existing affordable housing stock. These are most likely to be in infrastructure-adjacent economies. 

Here are some practical pointers on how to take advantage of the data center boom from a residential landlord’s perspective.

Focus on proven and emerging data center corridors. 

Prioritize metros and counties that have already approved large ground-up projects, such as Northern Virginia, Central Ohio, and parts of Arizona, Texas, and Nebraska. Refer to Business Insider’s exhaustive mapping of over 1,200 U.S. data centers, and cross-reference it with the latest data center developments in 2026. Also, use planning and economic development websites to confirm these new facilities have been permitted rather than just announced.

Target commutable neighborhoods. 

Look at neighborhoods within 10 to 45 minutes of major data centers, where construction workers and support staff are most likely to live, as described by Brookings. Also, look for neighborhoods without ongoing disputes with data centers over energy usage. Check home values to ensure they have been positively affected by data centers, but not alarmingly so.

Buy where blue-collar and tech wages are rising, but housing is tight.

The Wall Street Journal reports that, according to the Associated Builders and Contractors trade group, the construction industry is short 439,000 workers, driving wages to spike, particularly for skilled labor.

Focus on specialized, durable workforce rentals that appeal to tradespeople, not those with luxury finishes. 

Coordinate with workforcehousing specialists, such as Nearsite, to ensure your rentals are booked months in advance. Also, rentals at modest price points have a better chance of finding future tenants once construction on data centers is complete. 

Brookings notes that some companies are deploying mobile homes to appeal to construction workers, underlying the need for functional housing.

Look for areas of interconnectivity. 

Ashburn, Virginia, is home to more than 150 data centers, according to Databank. Why? It has many fiber networks and critical submarine cables on the Virginia coast, and is close to Washington, D.C., and New York City.

Look where employer and project concentrations are high to reduce vacancy risk. 

Also, try to factor in other business activity in the area, so that when data center construction is complete, there will still be demand for jobs.

Avoid areas where electricity rates and land prices have spiked. 

Bloomberg reports that in many areas, such as Hillsboro, Oregon, utility costs have increased dramatically. The Lincoln Institute warns that competition for land can drive gentrification, displacing long-time residents and making it hard for new residents to afford to live there.

Real estate investors and their accountants have turned tax avoidance into a fine art, with a sophisticated panoply of techniques designed to keep Uncle Sam’s cloying hands at bay. However, in a plot twist, presented in the form of another of President Donald Trump’s freewheeling, shoot-from-the-hip ideas to increase affordability, Uncle Sam might be changing roles—from pillager to provider—by eliminating capital gains tax on the sale of single-family houses. 

For small investors sitting on a pile of equity in their personal residence, a potential tax-free windfall could be deployed for investments.

Why a Higher Capital Gains Exclusion Matters

The hits keep on coming because, for once, amending the capital gains tax law has received bipartisan support.

Following a massive increase in house prices since the COVID-19 pandemic, as of last March, homeowners have a mighty $34.7 trillion in home equity, according to Realtor.com. Current federal law allows homeowners to be forgiven capital gains taxes on $250,000 in profit from the sale of a single-family home if they file separately, and $500,000 if they are married and file their taxes jointly, so long as they have lived in the property for two of the previous five years. However, this law, with those numbers, was set as part of the Taxpayer Relief Act of 1997 and has never been adjusted for inflation, even as home prices have soared.

The discrepancy has left many homeowners house-rich but cash-poor, especially retirees who have lived in their homes for a long time. As their equity has increased, their fear has been that selling would expose them to a large capital gains tax bill.

This is especially true in affluent or rapidly appreciating areas. A 2025 analysis by the National Association of Realtors found that 29 million homeowners—about 34% of all owner-occupied households—now risk surpassing the $250,000 gain threshold as individuals, while around 8 million, or 10% of homeowners, could exceed the $500,000 cap as married couples filing jointly.  

Trump surprised many people when he was questioned in the Oval Office on July 22, 2025, by saying that ending all capital gains taxes on home sales was in the cards, instead of just increasing the limits, telling reporters, “We’re thinking about that,” when questioned. “If the Fed would lower the [interest] rates, we wouldn’t even have to do that,” the president added. “But we are thinking about no tax on capital gains on houses.”

Trump’s comments came two weeks after former Trump acolyte Rep. Marjorie Taylor Greene, R-Ga., introduced the No Tax on Home Sales Act to eliminate capital gains taxes on primary home sales.

New Proposals in Washington in 2026

The argument for revising capital gains limits picked up steam toward the end of 2025, and over the last few weeks, Realtor.com reported that, during a National Association of Realtors (NAR) advocacy week in Washington, D.C., government officials said revisions to the capital gains limits were underway.

“Based on our best information and insight, there would be a significant increase in the number of homes that would be put up for sale [if the capital gains tax were reformed], but it would vary quite a bit between local markets,” Evan Liddiard, NAR’s director of federal taxation, said, citing studies commissioned by the group.

“Roughly a third of all homes that could be on the market could be subjected to that tax, and it’s locking people in,” Shannon McGahn, NAR’s chief advocacy officer, said at the event. “It’s great to see that there’s bipartisan support.”

Frank Cassidy, commissioner of the Federal Housing Administration (FHA), added that changing the law, a decision that needs to be made by Congress, could bring far-reaching changes to the housing market.

“The more transactions we can have going on in the private sector, and the more we can incentivize the supply side, is what will really have long-term effects,” said Cassidy. The FHA oversees the Department of Housing and Urban Development’s $2 trillion in mortgage insurance programs.

Realistic Exclusion Limits

Rather than ending capital gains taxes on personal residences entirely—as Trump touted in the summer—which seems unrealistic, Rep. Jimmy Panetta, a California Democrat on the House Ways and Means Committee, suggested, way back in September 2022, that the limits simply be doubled as part of his More Homes on the Market Act—$500,000 for single sellers of personal homes, and $1 million for married, filing jointly sellers. The bill has stalled twice since its introduction, but has recently gained traction, with 94 cosponsors—58 Democrats and 36 Republicans.

“This isn’t just a coastal issue anymore,” Panetta said of housing inventory strain. “This isn’t just a blue state or blue congressional district issue. This is a red issue. It’s a center-of-America issue, and I think that’s why we’re getting more and more momentum.”

A Seniors-Only Exclusion

Despite the increased number of homes on the market it could engender, changing the capital gains limits could still be a big revenue hit. That’s why Arthur Gailes, a research fellow at the American Enterprise Institute, estimated that 4 million to 9 million seniors could benefit from capital gain adjustments.

“It’s not an overwhelming thing that’s going to solve grand problems, but it would break up a logjam in the market, and that could be helpful,” Jim Parrott, a nonresident fellow at the Urban Institute, told Realtor.com. “And it’s targeted enough, it wouldn’t be that expensive.”

Final Thoughts: How Real Estate Investors Could Benefit From Changes to Capital Gains Exclusion Limits

When $1 million of tax-free money arrives on your balance sheet, you have options. Should Panetta’s bill pass, that is the potential amount of money some single-family homeowners could be sitting on in areas that have appreciated substantially since they first purchased their homes. 

Here are a few real estate investment strategies equity-rich homeowners could employ.

Sell, downsize, and recycle the money to buy rentals

This is perhaps one of the most obvious strategies. Assuming the homeowner has the appetite to be a landlord, using the tax-free proceeds from the sale of a personal home to downsize or rent and redeploying the money for a down payment on cash-flowing rentals could be a great way to build an equity-rich portfolio.

Sell and use the proceeds to move into a fixer-upper personal residence. Rinse and repeat. 

If landlording isn’t your cup of tea but you don’t mind living around construction, this is a safe way to build tax-free equity. Essentially, it means moving into a flip for two years while you renovate and then put it back on the market to realize the capital tax exclusion. It’s a good strategy if you don’t mind moving often and are handy, so you can do some of the work yourself and save on construction costs.

Combine downsizing with upgrading your existing portfolio through ADUs and renovations. 

If you’re happy with your existing portfolio and don’t want to add more houses but want to maximize what you have, using the surplus cash to add ADUs, convert basements and attics, and perform overall upgrades could help you generate more income without buying more units.

Use tax-free cash to pay off mortgages on rentals. 

Selling and downsizing and paying off the mortgages on your existing rentals could usher in retirement sooner than you thought possible.

Turn today’s primary home into tomorrow’s rental, and sell strategically. 

As long as you have lived in your rental for two years, you can rent it for a further three years (or any combination that allows two of the five years for owner-occupancy) and sell strategically. This allows you to gain rental income and realize appreciation while downsizing.

Sell and move into a small multifamily with an FHA mortgage. 

Selling your primary single-family residence and buying a two-to-four-family home with an FHA mortgage allows you to take advantage of FHA’s low down payment programs and live mortgage-free in a small multifamily, as your tenants’ rents will cover your mortgage, while possibly still having some cash on the side for repairs or emergencies.

Dave:
There’s a prominent theory originated by real economists, not just rogue YouTubers, that the real estate market runs in 18 year cycles and at the end of each cycle there’s a crash. And according to proponents of this theory, it accurately forecasted the 2008 crash. And now in 2026, exactly 18 years after 2008, the cycle is coming to an end yet again today on the market, we’re digging into the 18 year housing cycle theory and what, if anything, it can tell us about the future of real estate. Hey everyone. Welcome to On the Market. I’m Dave Meyer, chief Investing Officer at BiggerPockets. I’m also an investor and analyst, and these days I find myself a housing market theory fact checker, and today I’m digging into a theory about real estate markets that has existed for almost a century and according to proponents accurately called the last two real estate downturns in 2008 and previously in 1990, the theory is called the 18 year housing cycle, and it is true that one of the big proponents of the theory, Fred Harrison, a British economist, actually called the 2008 housing crash in 1997, a full 11 years before it happened.
So naturally, because of that accurate prediction and some economic research into the topic, people are rightfully wondering if we’re about to see the big decline at the end of this cycle. After all, it is now exactly 18 years after 2008, and there are some very famous, very popular YouTubers, people on the internet who talk about economics and housing, and they’re pointing to this data to support their forecast about housing market activity in the coming years, most notably saying that we’re due for a crash. And it’s not just people on YouTube. Even the Cato Institute talks about this, and I saw it actually being discussed on a Harvard University website. This theory has some legs. So today on the show, we’re digging into the 18 year housing market theory and breaking down what it can and cannot teach us because spoiler here, there is a little of both here, in my opinion.
It’s not all right, it’s not all wrong, but there’s a good amount that we can learn and take away from this research. So today on the show, first we’re going to just cover the theory itself. Then we’ll talk about how it came to be its track record in predicting cycles, what proponents say and detractors say, and then I’ll give you my own personal opinions about this theory and what can be learned from it. Let’s dig in. Alright, so here’s the theory. The 18 year housing cycle theory goes a little bit like this. Land is finite. You can’t make any more of it when demand goes up, which makes it prone to speculation. And when there is speculation and people are pouring money into land and real estate, eventually prices, outrun incomes, you might notice that is going on right now. That does happen, and then when no one can afford land or property anymore, the bubble pops.
So that’s the basic logic behind the theory, but let’s dig into sort of the different phases of the cycle that exist at the end of the previous crash. That is when the next cycle starts. This is when land prices are cheap, right? This is the beginning of the cycle where things are really inexpensive and that affordability is really what starts a recovery process. People can afford property again, they start buying things, vacancies on rented land start to fill up. Banks start to feel a little bit better about things. Credit starts to loosen up so people can buy a little bit more and more. As this is happening, developers see that things are getting better and they start to build. They see that the cycle is starting again and they start to add more inventory. They start to develop land. We see this all the time according to the theory.
This takes about the first seven years of the 18 year cycle. You’re seven years in, developers are starting to build and at that point there’s a little dip according to the theory, right? Seven years in, people are saying, ah, things have been growing for a while. Time to pump the brakes a little bit and you see a dip in prices, a dip in activity, not quite, but roughly halfway into the cycle. But then after that little dip, this little pause that goes on, the theory says that there is an explosion. It’s sort of this boom stage where for another 7, 8, 9 years, there is just massive speculation. People are just pouring money into the market. You sort of lose touch with the fundamentals. Prices go absolutely insane, and then after many more years of that, about 14, 15 years into the cycle, according to the theory, prices become unsustainable and then they crash.
And that’s the cycle, right? This cycle happens on repeat every 18 years according to this theory, and it sort of makes sense, at least logically, right? It actually is, in my opinion, quite similar to research that exists and theories about markets and economic cycles in general. This isn’t, in my opinion, super unique to real estate. If you look at just the business cycle in general, you see a relatively similar pattern. Each cycle starts at the end of the last one at the crash period, there is an expansion, then there’s a peak, then there’s some sort of recession and the market starts all over again. But this theory goes beyond just the general business cycle and claims to at least have more specificity. The theory has actually existed for a long time. It was first introduced by a guy named Homer Hoyt. He was an economist at the University of Chicago and back in 1933, he released a paper after studying land prices in the Chicago area from the 18 hundreds up until 1933.
But since then, even since the 1930s, this theory has prevailed. It has been carried on by other economists. A guy named Fred Berry used it to make some accurate predictions and most recently and most notably by an economist named Fred Harrison, who forecasted the recession of 19 91, 8 years before it happened using this theory, and he also famously called the 2008 housing market crash back in 1997. So this is why the theory has so much legs right now is that this guy has called the last two downturns, 1990 just for reference, was a lull in the housing market. Prices did go down a little bit. Obviously we all know what happened in 2008, but this guy, Fred Harrison, has been using this theory and has predicted the last two crashes, and so that’s why people are paying so much attention to this right now. Now, I should mention, and we’ll get to this more, that this guy, Fred Harrison does have a new book out and he predicts that peak housing is coming in 2026, which is why again, people are talking about this right now.
Now of course, me being, me being a data analyst, I did not just want to take everyone’s word for it. I wanted to actually go and find the data about these cycles and see if this pattern actually exists for myself, and I did find the data. Basically, it goes back to 18. 18 was the first time we saw this data that land peaked. Then again in 1836, exactly 18 years later, we did see land peak again in 1854. Exactly 18 years later, we saw it peak again. Then the numbers go off a little bit, but it’s still roughly 18 years, give or take a year or so. We saw it again in about 18 72, 18 90, 19 0 8, and then in 1925 again, so when you look at that, it’s kind of compelling, right? You look at this, and it’s pretty darn close to 18 years for about a century Now, from 1925 to today though the last a hundred years, the data is a little less compelling, so there really wasn’t a peak in land pricing and it doesn’t follow the cycle at all in the 1940s.
If it was 18 years, exactly, you would’ve seen this happen right in the middle of World War ii. Now, proponents of this theory say that the war sort of threw the cycle off and then it started again in 1973, but as we’ll talk about later, that is a 50 year gap where the cycle does not repeat. But in 1973, land prices did peak again and they did peak again in 89. That was 16 years, but proponents of the theory again, say it’s pretty close, and then we saw it again in 2006. I know people say 2008, that’s when the financial crisis happened, but land and home prices actually did peak in 2006. It was roughly 16, 17 years again, and now we’re roughly close to that. But if you believe the theory every 16 to 20 ish years, with the exception of those 50 years from 1925 to 1973, a pattern does repeat.
Again, it’s not exactly 18 years, but proponents of the theory think that this average is cult enough to make these types of predictions. So if you follow this data, it follows that a crash would come right now and it has somewhat accurately predicted the last two crashes. Now, there’s a lot to break down here, but before I give you my personal take on it, I want to share with you some other research about what other experts say about this, both in support of the theory and against this theory, and we’re going to get to that to determine does this actually have legs? Does this mean there is going to be a crash here in 2026 because the cycle has ended? We’re going to get to that right after this quick break.
Welcome back to On the Market. I’m Dave Meyer getting into the 18 year housing cycle. We’re talking about this because it seems to be a lot on YouTube. It’s in the BiggerPockets forums in the communities right now. People are talking about this, and I shared before the break the history of the theory and some of the data that does show that going back 200 years, there is some evidence that there is a pattern that repeats somewhat regularly. There are some exceptions. It is not perfect data, but there’s enough that we should break this down. So let’s look at the arguments for and against this theory, and we’re going to start with the arguments for, I looked hard for a lot of evidence of it, and basically the main thing, the piece of evidence that people point to is the prediction of the 2008 crash. This is what proponents say over and over again is the reason that there’s going to be a crash in 2026 because it was an impressive call.
I mean, if you called that in 1997, that seems like you’re an oracle. You have the crystal ball that we all talk about because you kind of nailed it and people think that if they predicted it once, it will happen again. The other piece of evidence that people point back to was that it really was fairly accurate. There was a regular cycle of land values peaking and crashing in the 18 hundreds. That part is true. If you look at 18, 18, 18 36, 18 54 and so on, it was pretty darn close to 18 years for honestly about a century. That pattern really did exist. Now using that pattern and frankly that pattern alone, Fred Harrison, the proponent who the guy who made those two calls is saying that there is going to be a crash in 2026, and he said it will be worse than 2008. So that’s basically the theory for it.
What about the arguments against it? Well, there are a couple. The main ones are, number one, the giant gap in evidence from 1925 to 1973. It’s a pretty big gap in my opinion. That’s nearly 50 years without evidence of the cycle. Now, proponents point to World War II is the reason for that, but it is still, even if you believe that, that’s a long time without the pattern repeating and then without, frankly, a lot of evidence. Proponents say that it started again in 1973. That’s not really true. There was a peak in 1973. Then it kind of peaked again in 1979, and so that was only a six year gap. Now, there is debate among proponents about if this happened and whether it happened, but basically from what I found, they can’t really explain it in any convincing terms. The next argument against it is that it’s not precise.
It’s not actually exactly 18 years. For a couple of years in the 18 hundreds, it was really 18 years, but it’s kind of just an average, which opponents say defeats the entire purpose of the measurement in the first place because if you’re using this to make investing decisions or to predict the cycle, the difference between 15 or 16 years and 20 years kind of matters, right? If you get out of the market too soon, you get into the market too quickly. Kind of defeats the point. Imagine someone saying that the stock market crashes eight years and you acted on that and it didn’t turn out and they said, oh, well actually that’s just an average. Sometimes it’s five, sometimes it’s 10. Kind of loses the purpose, right? What good is it if you cannot actually use it to make investing decisions? It kind of doesn’t matter.
Another argument against it is that the theory does call for mid cycle dips, and that didn’t really happen this cycle, right? If prices crashed in 2008, they bottomed in 2011, you would’ve expected some dip in housing prices during the 2010s. There was a little bit for kind of a minute in 2008, but not really according to this theory, so it didn’t really hold up there. So those are the arguments for and against it, and honestly, you can have your own opinion about this. There’s no right or wrong here. It’s just a theory. There’s no law here, so I will give you my opinion. I spent a lot of time researching this and basically where I come out on this is there are some things that we can learn from this cycle, but not everything. For example, will nominal home prices peak in 2026, and by nominal I mean non inflation adjusted prices.
This is what you see on Zillow or realtor or whatever. That’s a nominal price. Will they peak in 2000? Yeah, I think so. I’ve said that for a while now. I actually think we’ve been in a correction for a little bit because real home prices have been pretty flat, but amazingly, I actually do think the theory is probably going to be pretty close on this one, and we’re going to see nominal home prices peak for this cycle in 2026. That shouldn’t be news to you. If you listen to the show, I’ve been saying it for a while, I expect prices to be pretty flat this year. I don’t expect them to go up if they do a little bit, and if anything, I’m leaning on the side of one 2% nominal home price declines this year, and so the theory amazingly, somewhat, I think might be kind of accurate on this.
That is one big part of this to pay attention to in general. I also agree with the idea that land is finite. Then speculation does happen in the housing market. That absolutely does happen. There is this term irrational exuberance that does create asset bubbles. It’s usually fueled by debt, and corrections do happen because people start overpaying for things. This is just true. If you look at history, asset bubbles do exist. They do happen in cycles, but they’re not really unique to real estate. These cycles exist in most debt back markets. They certainly happen in the stock market. We even see them in art markets or collectibles markets. These kinds of cycles do exist, and that is something that we can learn from. Actually, if you know J Scott, he’s a regular contributor to show he is written a lot of books. I co-wrote real Estate by the Numbers with him.
He put out a great book, recession Proof Real Estate Investing is what it’s called, and he talks all about the business cycle and how there are different cycles in real estate and how what you should be doing as a real estate investor should change based on where we are in those cycles, and I 100% agree with that. If you are in a recession, you invest differently. If you’re in an expansion, you invest differently If you’re in the peak or the trough, you have to do different things in your investing decisions based on what’s going on around you. That’s the whole premise of this show is that we are talking about what’s going on in the market. We’re talking about data and economics so that you know what to do with your investing with your portfolio based on where we are in the market cycle. I highly recommend if you have not read that book, it’s a really quick read.
It’s a pretty slim little book. If you just want a primer on how to behave in different parts of the market cycle, check out Jay Scott’s book, recession Proof Real Estate Investing. I highly recommend it. You can get it BiggerPockets, Amazon, wherever. So those are two things that I take away from the theory cycles are real. They absolutely are, and it might be right this year, right on 18 years, if you time it from 2008 to now, it might be right peak prices actually were in 2006, so I think we’re about 20 years out, but proponents of the theory say that this year is going to be the time that it corrects, and I think we are already in that correction, so I do agree with that. Again, that said, I do not buy the idea that real estate works in precise cycles of exactly or honestly, even roughly 18 years.
Economics just don’t really work that way. It ignores the human element of the market. It ignores geopolitics. It ignores government intervention to help prop up the economy and it ignores new policies that exist and are always being introduced into the market. It just doesn’t happen like that. Even if you look at theories of recessions, right? A lot of people say that the broader economy operates on a seven year cycle and that is the average, but guys, an average is a conglomeration of tons of data. There are years that it’s five, there’s years that it’s 11. There’s years that it’s two. That is an average and an average is not a forecasting tool. You cannot say because the average has been there’s been a recession every seven years on average that it’s going to happen exactly seven years from the last one. It doesn’t happen like that.
Just look at this. I mean, yes, we kind of in theory had a recession in 2020, but from the time the last one started, that was 11 years, some people thought we were in a recession in 2022. Some people think another one’s coming this year. The reality is you actually have to look at the evidence on the ground that is going on in front of your eyes to make predictions. You cannot just say it happens like clockwork every seven years. I think everyone logically understands that it probably just doesn’t work that way, and if you break down and examine this theory in more detail, it kind of breaks down. Look at the evidence. Since World War ii, there is this massive gap between 1925 and 1973. That’s nearly 50 years where the cycle did not repeat. Then from 1973 to 1989, the next cycle that proponents of this theory site is only 16 years.
It’s not 18. Then the next one is to 2006, people call 2008, but again, housing peaked in 2006. That was only 17 years and now we’re in 20, 26, 20 years later and there hasn’t been a crash. Yes, there is a cycle, but it is not precisely 18 years and since 1925, it’s actually never been exactly 18 years. In fact, the only real evidence for a precisely 18 year cycle actually comes from the 18 hundreds. Just let that sink in for a little bit. It’s from the 18 hundreds. I think we can all agree that things have changed a little bit since then. We are no longer an agrarian economy. We’re speculation drives the real estate market. There are still some patterns that exist, right? Property still has speculation. Absolutely. I’m not arguing with that, but land speculation, which they cite in the 18 hundreds as the core of this theory is not really what’s going on in the market.
Back then, we didn’t have a central bank. We didn’t have long-term fixed rate debt like a 30 year mortgage. We didn’t have a fiat currency. There are so many differences between the economy today and the housing market today and what was going on in the 18 hundreds. Frankly, I don’t really think that data is relevant anymore. It’s kind of like if someone started telling me that at 38 years old, that’s how old I am, I had reached my full life expectancy in the United States because that’s what the data from 1850 told us. That was life expectancy in the 1850s, but I don’t take that too seriously because just so much has changed with the medical system and reality. Just like so much has changed with the housing market and the economy, we can’t really rely on data and patterns from the 18 hundreds. So much has changed.
That data was good when it existed back in that kind of economy and that reality, that data did make sense. If I was sitting here in 1880 and someone said, Hey, there’s an 18 year housing market cycle, I might take it more seriously, but in 2026, I am not banking my own real estate investing decisions based off of data from the 18 hundreds. Okay, so that’s one thing. The data is fuzzy at best. Next, let’s talk about real versus nominal home prices. This is my favorite thing to rant about recently because it’s important, but basically people are saying that housing prices are going to crash or peak this year and start declining in nominal terms. That might be true, like I said, but as an analyst, what I try and look at a lot is real home prices. This is inflation adjusted home prices, and when you look at it that way, the cycle actually already ended.
Home prices have not been going up in real terms for the last three years. In fact, if you look at it, home prices have been pretty flat for the last three years in real terms. Now, I know you have been seeing prices rise on Zillow and Redfin because those are nominal. They are not doing inflation adjusted terms, but if you do it the way that I think you want to, if you were predicting cycles for you as an investor, if you want to look at things in nominal terms, go ahead and do it. That makes total sense. But for predictions, if you actually look at the way real estate cycles works and trust me, I I do all the time. If you look at the way cycles work, real home prices, inflation adjusted home prices are a much, much, much better predictor of where the cycle is than nominal home prices and if you look at that, we’re in the flat part of the cycle.
It actually ended three years ago. That’s another reason I don’t really buy this is that it uses nominal home prices, which doesn’t really tell you the true genuine change in home prices that I think we as investors need to be paying attention to because that’s where the alpha comes from. That’s where you actually get these huge gains in wealth and value is when real home prices change and this uses nominal home prices. One other thing I just want to mention is that back in the 18 hundreds, it was a much weaker federal government. They were not as interventionist in economic cycles as we are now, for better or worse, both sides of the aisle do this. It has become politically untenable to have a recession or especially a housing crash. That is something that politicians will avoid at all costs. They will implement policies and stimulus and quantitative easing or whatever they got to do to try and keep these things going up, and so that is another reason I don’t really buy into this theory is that we just have a more interventionist government than we had when this data was accurate, and so that’s another reason to think that the cycle working on perfect 18 year increments is probably not true because the government is devoted to extending that cycle as long as possible.
I don’t personally think they can do that forever. I think it actually increases the long-term probability of bubbles and crashes, but that is just what they’re doing. I don’t think it’s a good idea, but that is what they do. So that’s my general take on the theory. If you want to learn something from it, learn that the housing market operates in cycles. They might be right that nominal home prices will peak this year. I personally think that is correct, but I personally put almost no stock in the number 18. I do not think that 18 is magic, just like I don’t think there are recessions every seven years as a housing analyst. I just have seen too much data. I know that it doesn’t work this way and I don’t think that you should take really any stock in the number 18 and you’re much better off listening to the show or reading a newsletter or whatever, figuring out what’s going on in the market today and where we are in the cycle for yourself.
That is the most important thing that you can do if you want to time the market. Now, I personally don’t time the market in a way where I’m like, oh, I’m getting in or out of the market, but I do change my tactics based on where we are in that cycle and I recommend that you do too. That’s just smart investing, so that’s another theory, but I do want to talk about one more topic. The theory says that prices will go down and I actually agree, but Fred Harrison has said in 2026, the market correction that is coming will be a crash quote worse than 2008, and I want to get into that because if I agree that housing prices are going down, does that mean we’re going to see this catastrophic crash? We’re going to get into that right after this quick break. Stick with us.
Welcome back to On the Market. I’m Dave Meyer going over the 18 year housing market theory. I’ve talked about what you can learn from this mainly that there probably will be home price declines this year at least. I think that that’s my base case at least a little bit, and that the market absolutely does work in cycles fueled by speculation and debt and unaffordability, and there are evidence of some of those things right now we do have low affordability. We have had prices run up in a massive way, so there is reason people are looking at this theory and saying, Hey, I actually see evidence that this is repeating again, and some of the most diehard proponents are saying this means that we’re going to see a massive crash worse than 2008. Now, I want to dig into that a little bit because I don’t believe that just because I am saying that they might be right, that 2026 is the peak phenomenal home prices for this cycle.
That does not mean I am predicting a crash, and frankly, when anyone says that the next cycle is going to be worse than 2008, when someone says that it’s just nonsense. I’m sorry. There is no data, there is no evidence that suggests this is happening. It is just to get attention and nothing more. There is no one I know, not a single respected economist or forecaster who’s looking at data on the ground stuff that’s happening today and says, I see a crash coming. Instead, it is people pointing to theories like this that are overly simplistic. Use data from the 18 hundreds for fearmongering. That’s it. Pure and simple. It is fearmongering. People want there to be a crash or they want attention and they’re using this theory of 18 years that was accurate in the 18 hundreds to scare people. That is basically what I think is going on, but I’m not just going to say that and denounce them.
I’m actually going to share with you real information and real data about what is going on that supports my belief that we are in a correction and not a crash. 2008 was a crash that was fueled by speculation. That is absolutely true. We saw wild speculation in the early two thousands and that was made much worse than normal. Speculation is something that happens in the housing market and there are corrections to correct that, right? That’s the definition of a correction, but what got so bad in 2008 is that speculation was able to get far worse than it ever should have because people were giving away ridiculous loans that they shouldn’t have given away. If you’ve heard of the Ninja loan, it’s no income, no job. There was no income verification on a lot of these loans, and so people who could not afford to speculate were speculating, and that is what created the crash.
It built stuff up so much and it allowed people who could not afford to take a hit on their speculation. Sometimes investors speculate knowing that it’s risky, but in 2004, 2005, 2006, the way that worked in the United States, it allowed people who did not really qualify for this kind of speculation to get into it, pump up prices higher than they could ever been, and then when property values went down and adjustable rate mortgages kicked in, people could not pay their mortgage that was essential to the crash. One, the debt that they shouldn’t have, and two, that most of these people could not service their debt. Once their adjustable rate mortgages happened, they were giving away these loans saying, Hey, come in 0% interest rate, 2% interest rate for the first year. Then during the crash, those interest rate adjusted to five, six, 7%. No longer could these people afford these loans because they could never qualify for these interest rates in the first place.
They stopped paying their mortgage, they got foreclosed on that had an influx of supply to the market, and that’s what caused the actual crash. That did happen in 2008, but the idea that markets always crash at the end of the cycle, it’s wrong, and it’s honestly, in my opinion, the invention of the media or particularly social media. I don’t think even 20 years ago, 30 years ago, people were talking about housing crashes because it’s happened once since the Great Depression, and that was 2008. The idea that a cycle ending means a crash is not accurate. The stuff that happened that I just described in 2008 to make that cycle very unique is not happening right now. Could it happen again? Yes. Could something else happen that make the next cycle or this cycle result in a crash? Yes, absolutely, but the idea that all cycles end in a crash is absolutely not true.
The downturn that Fred Harrison predict in 1990 wasn’t a crash. It was a correction. Prices were down for six quarters and they were down just a little bit in real terms, so it was not a crash. That was a normal correction, and frankly, I think it’s good when that happens. Corrections make things correct. They get you back to normal prices, what prices should be, what the market can actually bear, and most of the time these things are relatively mild, particularly in the housing market. They’re pretty mild. In 2018, actually prices went flat and they actually dipped a little bit. Do you remember anyone talking about a crash? I don’t. It wasn’t happening. People weren’t talking about it. It’s just that people have a lot of economic fear right now, and by saying the word crash, it gets people riled up. It gets ’em to click on their YouTube, watch, their social media, whatever, but please remember, a massive crash is not the normal conclusion of an economics or housing cycle.
Those are the facts. Now, I’ve talked about this a lot on this show. Is this cycle going to end in a crash? It’s an important question. It’s a legitimate question, and we talk about it all lot on the show, but I will go into a little bit just to make sure we are all on the same page. A full crash happens when there is more supply and demand. That is basically how prices decline. There’s more things to sell. Not a lot of people want to buy them, and so the people with stuff to sell keep lowering and lowering and lowering and lowering their prices until they can entice people to actually buy it. That’s how a crash actually happens, whether it’s in the housing market, stock market, whatever. That can happen in the housing market in two ways, right? People no longer want to buy housing or people are forced to sell raising inventory, and right now, neither of those things are happening.
Yes, demand is down from where it was during the pandemic. That is absolutely true, but it is relatively balanced with supply. That is why we are not seeing runaway inventory. It is also why we haven’t seen prices decline because demand and supply are relative, and when demand dropped after the pandemic, so did supply, and that has kept them in balance. The other thing I should mention is that demand is actually up year over year from where it was in 2025 to where we sit here in 2026. It’s actually up as measured by the Mortgage Bankers Association measurement of mortgage purchase applications. That is actually up, so the idea that demand is fleeing the market is not true. The other part that can happen is that there’s a flood of inventory. This is what a lot of doomers YouTube crash bros are saying is that there is going to be a flood of inventory.
Now, inventory is up from the pandemic, but remember, the pandemic had artificially low levels of inventory, so seeing it come back to normal levels is what we would expect, and actually we’re seeing growth in inventory start to moderate the year over year growth rates for inventory. New listings are starting to come down, which again are signs of a correction and not a crash. If there was going to be forced selling, if people were going to be forced to sell, we would know. We would see it in delinquencies, we would see it in foreclosures. Right? Now, I reported on it the other day, they’re actually lower month over month. They’re up from the pandemic absolutely when they’re artificially low, but they were still below pre pandemic levels where they were in 2019 and no one was talking about a crisis in 2019 with foreclosures or inventory, right, and we’re below that level.
Secondly, credit quality is excellent. Right now, if you look at the average borrower profile, who owns a mortgage in the United States, pretty darn qualified for the mortgage that they have. Another thing is that there’s very few adjustable rate mortgages. They’re very unpopular these days, and so the people who are paying their mortgages are likely to keep paying their mortgages. Now, if unemployment goes to 10%, that might change, but right now it’s at 4%, so I think we’re kind of a long way away from that happening. So I just want to reiterate, if you see news about this, people saying this about the 18 year cycle, yeah, they might be, I think coincidentally, right, that the year that nominal home prices pick is 18 years after 2008, the market can correct. It’s what I expect that will happen, but will it be worse than 2008? No.
I think that is highly, highly unlikely, and if something changes where that becomes more likely, I promise, I will tell you. So takeaways from this. Number one, housing, a hundred percent works in cycles. You should pay attention for them. Again, kind of the whole idea behind the show, you need to know how to handle different parts of the cycle. Also, check out Jay Scott’s book. Really good reading on that if you’re interested, but that’s where the lessons of the 18 year cycle I think end the idea that something as complex as the US housing market can be predicted on some precise timeline using data from our agrarian society of the 18 hundreds. I just don’t buy it. The evidence doesn’t back it up. In fact, anytime someone says anything economic or business related can work on some fixed precise timeline, don’t believe it. When knows anything in your life, economic or not worked out in that sort of clockwork fashion, I’m sorry, but the world is just more complicated than that. The only way to know what’s going on is to stay informed and continuously update your understanding of the markets. That’s what we do on the show. We don’t rely on data from the 18 hundreds. We stay up to date and keep ourselves as informed as possible. Thank you so much for watching this episode of On the Market. If you like this episode, give us a share, a like, or even better, leave us a review on Apple or Spotify. Thanks so much for listening. We’ll see you next time.

Ashley:
Owning rental properties doesn’t get easier. As you grow, it gets more complicated. And if you’re running your real estate business through texts, emails, and spreadsheets, that things are going to start slipping through the cracks.

Tony:
Our guest today built a cash flowing real estate portfolio in just two years, but what most investors don’t see is the systems behind that portfolio. And today she’s breaking down how she digitized her project management so she could run multiple rentals across multiple markets without losing control. So get ready to take notes because this episode is packed with tactical takeaways you can actually use today.

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

Tony:
And I’m Tony j Robinson. And with that, let’s give a big warm welcome back to the show to Jamie Banks. Jamie, thanks for joining us again.

Jamie:
Thanks so much for having me.

Tony:
So Jamie, you previously joined us on episode 5 42 where we got to deep dive your story, your origin story as a real estate investor. But one of the things you mentioned during that episode was how you built systems around your portfolio and we thought it was such a cool little tidbit that we wanted to bring you back. So we’re excited to today go into not the portfolio itself, but the tools and the systems and the processes that have allowed you to scale this portfolio.

Ashley:
So Jamie, let’s start with someone that maybe has one or two rentals. They’re listening right now. What are the most common ways you see them accidentally creating chaos in their business?

Jamie:
I would say having more than one way of doing something. So I remember one thing that was a big irritation for me was having more than one way of paying vendors. It was one property you have for short and midterm rentals, cleaners, handyman, and women vendors, maybe a runner, someone who stops by and I remember just taking whatever way they’ll take payments. And so I’m creating PayPals, Venmos all of this versus having one system that I was using. And then kind of same thing with communication, text, email, WhatsApp, turn messages, lists can kind of go on and on. And I think it’s just so chaotic then when you want to recall the information or remember how or who to pay when you have so many different sources you’re looking at for that information.

Tony:
That’s a great point and just multiple ways of doing it. And it’s so funny you mentioned payments because that was one of the first big pain points for us where we were scaling our short-term rental portfolio. We were paying a lot of different people for a lot of different reasons and we were still using Venmo and I don’t know if you guys know this, but there were caps on how much money you can send through Venmo on a weekly basis. And we kept hitting these caps, so we’d use all of the money for my wife’s account until she hit her cap. Then my account, then our partner’s account, it’s like sometimes we would spend so much money that all of our accounts would be caps and then we’re trying to figure out how to do that. So side note, I know we’re going to talk about project management software today. One of my strong recommendations for you guys is to get the right business banking platform. I use Relay Ash, you use Base Lane, but having a tool that’s actually built to support small business and real estate investors in particular can save a lot of that headache. So not to go too far down a tangent, but you just said that and it brought back a lot of dark days of sifting through Venmo transactions, trying to figure out who got paid for what reason.

Jamie:
Yeah, it seems like some PTSD, but I definitely get it. It’s so hard, especially then with bookkeeping tax season, it can kind of just not having the right system again with just one property can really create a headache for all different reasons.

Ashley:
So how do you help someone tell the difference between normal growing pains and I need a better systems now?

Jamie:
That’s a great question. I think really identifying what is the problem. I can give a perfect example. I remember I was talking to someone who was like, my virtual assistants are the problem. I’m like all of them, every single one. And they were from different places and I’m like, five people can’t be the problem. Let’s talk more about it. And it really was all of them were complaining that there wasn’t one place for them to look. So if they’re like, oh, who’s the cleaner for 1, 2, 3 Main Street? And it was someone doing arbitrage scale, they have over a hundred properties, it would take them 30 minutes to find the vendor. And this is an emergency situation. And so I think just digging in of what is the problem or coming in from what a system fixes, because usually you can, whether it’s a communication issue, whether it’s I can’t find things issue, whether it’s not clear on the process issue, it usually can come from having a better system, having a standard operating procedure or SOP. I feel like that’s usually the key of most issues where growing pain is just going to be that there’s maybe things are happening too fast, but again, with the right system, I think a lot of the growing pains can go away.

Ashley:
And Jamie, can you explain what an SOP is and what it stands for?

Jamie:
Yeah, so SOP stands for a standard operating procedure and just a fancy, I was fancy way of saying just like what is your procedure? So before we did this interview, I have a new sales rep I created A SOP for that was literally four sentences, one sentence per bullet because that’s all I have for right now. But it’s a new role and as it develops, that list will kind of go on. So if it’s handling a maintenance request, you get the maintenance request, you delegate the maintenance request, then you pay the vendor. Obviously very, very simple way of putting it, but really that SOP is going to be the base of how something you want it to happen.

Ashley:
Are you using any software to create these SOPs? I know I’ve heard of Tango or Loom to help you create these things instead of just doing it from scratch.

Jamie:
Great question. So I use kind of a combination of Loom Scribe and Chat GBT. And so it really, I won’t go too much into the type of SOP, but with Scribe or Loom, those are going to be better for a simple process. For example, how I pay my vendors, I can record my screen and scribe just for people who don’t know, creates a document based on I click in the base, I use Base Lane team, you click in the base lane, you go to this tab, this tab, it would create an SOP for you. But with Loom I would say it’s more explaining it’s going to be a video. This is great. I have mostly Filipino virtual assistants on my team and that’s great because they’re very visual. However, both scribe and Loom, we would download into whatever method like CSV or docs they would download in, we put it in the chat GBT to put it into my ideal formatting.
And then I would say sometimes you’ll have a longer process like maintenance requests. You can’t really use Loom or Scribe for one of those because a maintenance request is there’s a lot of different steps and what ifs and if this happens then do this. And so that’s going to be something that I probably would start in chat gbt because guess what? Every real estate has dealt with a maintenance request and it can give you a basic of this is what happened. And then as you’re going through a maintenance request kind of live, which I always recommend making the SOPs when you’re doing it because if not, it just kind of creates duplicate work and then you might forget things. And so as you’re updating it, then you actually update it to your exact process.

Tony:
Jamie, I couldn’t agree more with that last point you made of making the SOPs as you are doing it. And I found that to be one of the best ways, and we will talk a little bit later about how it’s actually go about building these out, but I can’t agree more with that statement. But I want to go back because I know that we maybe all can deal with a little bit of pain in our business, especially as we’re scaling. There are certain things we’re just like, yeah, it sucks a little bit, but hey, I can manage it. I guess when you were personally earlier in your portfolio, what were some of those things that were painful but manageable at first that later became maybe bigger pain points or bigger bottlenecks for you?

Jamie:
I would say not logging just key information on the property and what I would say the key information was the furniture. I have all midterm rentals, so just understanding what I bought, how old it was, because then when it’s time to replace it or you’re submitting an Airbnb request because someone broke something, you need to know exactly what that is. I would say another thing is just the key information would be, well, my clothes on the property and we have our inspection reports, we’ve gotten all this information on the property and then also your insurance agent, what insurance do I have on the property? The coverages I would say of the first year, I’m like, I don’t need to log all this. And then comes tax time and then you’re like, oh shoot, what is going on? Or you’re at the point where you want to get another quote and then you have to go through your email to find what was my insurance information so that I can get quotes.
And so things like that that I would say that happen during the acquisitions process or even things that might just happen once a year come that second year, you’re going to be really upset at yourself for not at least having it saved in one area or one source of record for that information. I think tax time is usually when investors really realize how not disorganized they’re, because then everything’s in different places. So information like that is definitely something that’s key to, although it may seem redundant and a lot of work, but just something for me that was like, okay, I need a little bit better systems just to make tax time a little easier.

Ashley:
If an investor is ignoring these problems and just continues on, and I personally have done this when I first started out and waited a long time before I put my systems in, processes in place. But if they just keep managing everything manual, what starts to happen if they ignore these problems?

Jamie:
I think two key things, one is burnout. There will become a time where you’re like, you can’t do it. I’ve seen people are like, I just had to extend my taxes. I don’t care how much I owe because I just cannot do it too much. You don’t want to get to that point because that’s not just burnout, that’s also missed opportunity slash money because you’re paying or even opportunities where now I can’t take on additional properties or if you’re co-hosting or providing services, you can’t take on additional clients because you’ve reached your max. And so if you’re at the point where burnout is something that just is taking you and then also saying no to things, not because you don’t want to because your business can’t handle it, that’s a key sign as well.

Tony:
And Jamie, I think that being a real estate investor forces you to wear a lot of different hats and someone could be really, really good at door knocking and finding good deals and talking with sellers and doing all the work to acquire the deal, but they could also be very, very poor at what goes into being able to manage that asset and actually see it reach its full potential based on whatever underwriting you initially did. And I get that systems isn’t the sexiest word, but it is such a necessity for anyone that wants to scale beyond one or two properties because as you add more chances are you’re probably doing this while you’re working a busy day job while you’ve got maybe family commitments or community commitments or whatever it may be. You’re not doing this in a vacuum. So you’ve got to be able to make sure that you’re maximizing your impact while minimizing the amount of time it takes for you to actually manage these properties. And it starts with what we’re talking about here

Ashley:
After the break. Jamie breaks down how to replace chaos with clarity without getting lost in tech or over building systems as a real estate investor. The last thing I want to do or really have time for is to play accountant, banker and debt collector. But that’s what I was doing every weekend, flipping between a bunch of apps, bank statements and receipts, trying to sort it all by property and figure out who’s laid on rent. But then I found a base lane and it takes all of that off my plate and it’s actually BiggerPockets official banking platform that automatically sorts my transactions, matches receipts, and collects rent for every property. My tax prep is done and my weekends are mine again. Plus I’m saving a ton of money on banking fees and apps I don’t need anymore. Get a $100 bonus when you sign up [email protected] slash bp BiggerPockets pro members even get a free upgrade to Base Lane Smart that’s packed with advanced automations and features to save you even more time. We’ll be right back. Okay, so now we’re back and we’ve talked about why systems matter. Let’s get to very practical. How does someone with one or two rentals actually start building them? So Jamie, someone listening and maybe they feel overwhelmed right now thinking that we have been talking about them and this is how they feel. Where should they even start? What’s the first system every investor should build?

Jamie:
I would say a system that’s your centralized operating system, which really is just going to like a fancy way of saying your system of record. This could be a Google sheet or an Excel file where you have a list of all your tenants, all your properties, all of your insurance or utilities. I just think that having something centralized, it’s going to help and then you’re going to build off of it when you’re buying, when you’re applying for loans, there’s a lot of different times when property information is needed and even if you have two properties, instead of having to memorize the address and making sure that the zip code is right, just having a Google sheet of what that information could really help out in the long run.

Ashley:
That is one thing that I created and I love, I call it my master entity list and capital letters and it’s like starred in my Google drive to the top thing to easily access. And I have the LLC name, the EIN number, I have each point of contact, so who’s the accountant, who’s the bookkeeper, who’s anything that anybody would do for that LLC, the va. Then I have which properties it owns. I have any mortgages that are in any of those properties, who the lender is the bank accounts. I have the routing number, I have the account number. I can’t even tell you how many times I go to have to look up the routing or account number to do a quick pay an invoice through email or things like that that this has made it so simple. But I think just I agree, starting out with some kind of spreadsheet or document that all of that basic information in one place for you has been super, super helpful for me. As just a starting point too,

Tony:
I’m going to echo what both of you just said. I call ours isn’t the, what did you call it? The entity master, command center, whatever it’s called. Ours. I like the man center. Ours is just called the property tracker, but it has a lot of those same details and I just pull mine up. So we have the date that we purchased it. We have our purchase price, what we originally bought it for, the escrow company that we used, our settlement statement, our closing disclosures, the entity name, our short-term rental permits, our parcel numbers, what day the trash gets taken out, because that’s big for short-term rentals. I like to have in the bank details where we have the last four of the debit card associated with that property, the door lock type. We have different door locks on different properties. So just all those details that you feel like you find yourself trying to reference, getting them into one location, especially as you start to build the team around yourself. One of the best things that I think we’ve ever done now, Jamie, one of the reasons that I think we all kind of bonded over this is because we’re also using the same tool, I believe for most of this. So I use Monday Ash, what are you using?

Ashley:
Yeah, I’m using Monday.

Tony:
Monday And Jamie,

Ashley:
Yeah, monday.com.

Tony:
Monday.com as well, right. So we are all monday.com evangelists. So Monday, if you’re listening to this, you got to make sure you sponsor some episodes in the future because we love the product. Jamie, sir, are you building out your, I guess lemme maybe frame the question this way. How do you decide what lives inside of a tool like monday.com? There are other options out there like Airtable notion, there’s lots of other popular options out there.

Ashley:
Google

Tony:
Sheets. Google Sheets even. And I guess that’s what I was going to ask. How do you decide what lives inside of just a basic Google sheet versus what makes more sense inside of your actual property management software or management tool?

Jamie:
That’s a great question and I think it really comes to the intended purpose, right? So let’s say you’re someone who has one property, your purpose is just having the information somewhere. I’ll tell people all the time, don’t use Monday, use a Google sheet. If you have one property, your might not buy another one for a while. Google Sheet’s probably going to be your best bet. But the great thing about Monday, and I’m a Monday nerd, so there’s work management, which is probably when you think of Monday, when you Google Monday, that’s what comes up. But there’s the Monday CRM, just know I’m particularly talking about the Monday CRM because it has different capabilities. With the Monday CRM, it really takes things to the next level of like, okay, so I have a property in New Orleans, I have to get termite pest control. If you don’t get it exactly 364 days before, it goes from 300 to 3000, so I need to pay the three, that’s a scam.
But anyway, I’m not missing that date. And then also I want to do it after the fiscal year for tax reasons, whatever, I’m not missing that date. If it was just in Google Sheet, I would still have to put a reminder somewhere of that date or I’m not going to remember. I know now because it’s like PTD, it’s January 7th, but I don’t want to have to remember that date all the time. But in Monday I can have it listed, have it, mine’s called just like my property management board, and then I have a reminder of, I think it’s 14 days before that due date. I’m getting a reminder and then I build off of that. Now I have a virtual assistant who handles property management, so he’s getting that information in an email and is told to pay it. And so then monday.com or any system like Asana notion, there’s similar systems that will do those actual automations for you.
And I think another thing is with this Monday CRM especially, it could take some of those tasks away. So a lot of times things we have to do as investors or email someone or a checkout is happening, a maintenance request is happening, someone needs to stop by the property for X, Y, ZI, for me, wanted to use a system that can then take care of sending that email. Because if I’m sending the same email to the same person, even if it’s quarterly, bi-annually, if it’s annually or if it’s every three years, I want to be able to send those things automated. And that’s from maintenance requests. I raise private money for my deals. There’s not really a system when you raise private money of making sure that those lenders are getting the information and are getting paid. And so really monday.com for me has really helped me take that next step. And for people who actually want to be able to do some of those things, those automations and things, that’s where a system like Monday could help versus a Google sheet or another spreadsheet.

Ashley:
Jamie, I want to clarify a little bit here. Are you using monday.com as your property management software then too? Or are you using anything else outside of that?

Jamie:
No, I use monday.com literally for everything. I say acquisitions when a new, I pretty much buy things on market. My virtual assistant scrubbing Zillow based on my criteria, entering the data into my money.com board. So the data you would get from Zillow, the price they want, not the price I’m going to pay, but square footage, bedroom bathrooms, because I’m buying a certain type of property in the same market. All my calculations are done by Monday. I know I can get a thousand per bedroom. So Monday’s doing those calculations and spitting out my projected cashflow. And then if it meets my criteria, I’m being alerted to take the next step and basically do some more due diligence to make a offer. Or if it doesn’t meet my criteria, I don’t see it. And so from that to property management, the only thing Monday can’t do is rent collection. So I use baseline for rent collection. It can’t collect any type of payment. And then even from asset management. So I have an equity partner on a deal and she’s getting basically automated reports so I don’t have to email her every quarter to tell her what’s happening.

Ashley:
Yeah, that’s interesting. I never thought of it as a property management tool, but that would definitely work. I use for my short-term rentals, I use Hospitable, then I use Turbo Tenant for my long-term rentals. And then my monday.com board is more of just tracking or if I’m doing a rehab to track the rehab project, different things like that. Tony, how are you using Monday and then what other software are you using to compliment it to manage your properties?

Tony:
Yeah, more the way that you described Ashley, it is more of a repository of information, but I’m still using my property management software hospitable for my short-term rentals, price laps or pricing, all these different things. But we are using it similarly to how Jamie described where we wanted to automate some of the work associated with these things. I’ll give you guys a real example. We had a property where we missed the deadline to renew our short-term rental permit. And when that happens, it is the worst thing because not only do you effectively have to close your short-term rental until you can then go through the entire approval process all over again, the price is also double for a new application versus a renewal. So even though we’re the same exact donors, same exact property, nothing changed. They’re treating it as a new application because the original one expired.
So instead of it being, I dunno, I think it’s like $400 for a renewal, it was close to a thousand dollars for a new application. So we’re doubling the cost there. So anyway, it was a big deal. We had to shut the property down, had to pay double the fees, wanted to make sure that didn’t happen again. So now inside of Monday we already have the short-term rental permit on there. Now we just added another column that says permit expiration date. And we have now reminders that go out 90 days before that expiration date, 60 days before that expiration date, 30 days before, 21 days before and seven days before. So now literally there should be no chance of us ever missing a permit renewal. And it’s because all of that’s automated through Monday. So that is one of the big reasons that we like it because there is that functionality there. So it’s a bit of a blend ash, we’re using it both in the way that you and Jamie are using it. So Jamie, you talked about this a little bit, right? You talked about acquisitions, you talked about the actual property management, but how do you personally break your rental business into its different buckets or categories and how does that kind of correlate with how you’re using your project management software?

Jamie:
Yeah, so I break it down into, I call ‘EM department. So acquisitions, property management is an asset management, also dispositions if I’m selling anything. And then I have a CEO kind of department where it’s basically things that I have to do. And so I think with that it helps because back in with monday.com, but also I’m sure with other tools is you can build your automations based on those things. So if it’s an acquisitions tool, we know time is money. We know that with acquisitions that goes a lot faster. So our automations for due date is a lot sooner of something comes in, we need to do it now where maybe asset management, that’s really going to be the things that are done. Think of your owner’s reports, think of your high level, how is my portfolio performing? Could also be looked at as portfolio management.
That’s really for me and my partners internally, that’s not something that needs to be done right now. So we can kind of set due dates apart from that. And then I think too of what I want to delegate, I know I mentioned a little bit, I use virtual assistants and my goal is to not have to work. And I have a consulting business with Monday com and I hope investors with their systems. And so I want to focus on that. I don’t want to be focused on my midterm rentals day in and day out, especially with midterm. And my average length of stay is about five to six months. We don’t have a lot day to day. And so the things we do have are going to be your, when someone moves in, all of those, the messages they’re getting, the moving instructions, the confirmation, reminding them of trash day and beloved trash day or wifi, things that we might already tell them, but we know they’re going to have a reminder in. And then also the things for the move out instructions, some properties in an HOA that they have to turn in their parking badge and things like that where there’s things that are happening at the beginning and end of that process. So automating those has been really helpful. And then just having the virtual assistant in the middle. So anything that I can delegate, I want to have categorized or put into money.com because then someone else can do it. And then also I would say things that are happening, and reoccurringly could be monthly or even annually.

Ashley:
Can you maybe walk us through how you turn something messy into something beautiful like a turnover or maintenance issue into a repeatable process that someone could do over and over again?

Jamie:
Sure. So I would say let’s do my maintenance process. So my strategy, and I’m talking about in the last episode is more working with businesses for midterms. So while my properties are on Airbnb and different sites are mostly working direct, and the problem with direct is direct could be email, it could be text, it could be different things. And so one thing I do, the only way that we take maintenance requests is by someone filling out the maintenance form. If you text us, if you email us, if we tell you, however we’re not, we’re going to say fill out the form. What I’ve done is took it a step further. I have a QR code that’s actually on the refrigerator of each property that takes them to the form so that I’m sure you’re eating every day. So you can see that the maintenance request form is there, and I just tell all my tenants that just ensures that we get it timely.
And then also it asks all the questions that we’re going to ask anyway. And so it’s a short form, maybe five questions in monday.com, you can have triggers. So if someone says it’s water rate, water is very bad and can be very detrimental to a rental property. And so there’s additional questions, where is the water? Can you include a video? How deep is the water if it’s a standing water issue? And so then they fill out the maintenance request form, a few things happen. One, they automatically get an email that says, hi so and so. And then based on what they select, there’s an automations on what this will say, but essentially says, Hey, so and so thank you for your maintenance request. If it’s urgent, it’s going to say, we got the request, we’re on it. We’re going to be in touch as soon as possible.
If it’s wifi, we remind them our business hours are nine to five, we’ll get in touch with you when we can. It’s something more professional than that. But even I jinx, I have four properties, but I still want to run a professional management company. And so even them knowing and just getting the confirmation that, oh, hey, they got it. I know they got it, I know they’re handling it, that’s helpful. And then on the backend, it’s being logged into the system. Everyone on the real estate team, which is me, and then also one of my virtual assistants is being notified of that request. And then my virtual assistant is taking it forward. We have another, they’re called boards of the property vendors because I’m in three different markets. And then, so based on the category I’ve selected, my virtual assistant would choose the appropriate vendor.
Then once they’re selected, they’re notified automatically via email as well of the request. And then from there, there is a lot of back and forth, not a lot, but there could be back and forth depending on the maintenance request. And just what my so p says is that it has to be logged. So even if I’m dealing right now with a washing machine that knock on wood, hopefully done, but there’s been maybe three or four different conversations with the tenants with my handyman of this install. And so every time something happens, it’s being logged in Monday, like talk to handyman, wrong washer was bought or talk to tenant, wash machine still isn’t working. All of those things were logging so that when it comes down to five months later, and maybe there’s an issue, maybe there’s not. Or maybe unfortunately, sometimes there’s, especially with Airbnb, like a tenant could come back and say, Hey, this wasn’t done.
Or the Airbnb usually coincide with the guest. And so even having that log that I could print out, that I could download the PDF screenshot, whatever I want to do to show, okay, this is exactly what was done and this is when it was done. And so that means with the maintenance request, we’re not going through email, text, whatever other WhatsApp and Airbnb, let’s say, although there might be a different method of communicating, everything is logged in Monday. And so I know my VA knows if someone else is hired on the team, they know exactly what happened with that request. And then a good thing, when I say with asset management, what I do of putting my CEO hat on is quarterly I’ll review the maintenance request. So with this washing machine issue I’m having, I noticed that there was three repairs. There shouldn’t be three repairs on the wash machine. That’s wasting money. We can just replace it. Replace. And so that’s something that my retro assistant isn’t going to say, Hey, this is the third one, because I’m not dealing with it day to day. But as I saw it and I was doing my review, like asset management, I realized, okay, I’ve spent X amount of money on this repair that’s been through repairs. It’s time to replace this.

Ashley:
Jamie, I guess, why haven’t you decided to switch to a property management software that has a lot of this already integrated into it? So for the maintenance issue, like switching to a property management software that has the troubleshooting built into it, the AI chat that’s talking with the tenant and then having all that communication in one place instead of having to screenshot it from text and then uploading it into Monday. What do you see as the benefit of using Monday compared to a property management software?

Jamie:
I would say of using a, because I have used, and I used to co-host, so I used a software and if you used to have short-term rentals as well, there’s no channel management. So that’s a drawback that monday.com has. But for me, when I had a property management software, I also needed something for the information because I think a property management software will do some of the things, but you can’t keep, I have three lock boxes for all properties. One that’s visible, two that are completely hidden because I’ve had too many lockouts, I couldn’t put all the different locations of those attached to my property file. As well as I have different types of business. I have a business, my portfolio, and then also I hire, I’ve hired a few virtual assistants this year. I can also have my hiring process on Monday. And so for me, when I was looking at different tools, I realized, one, as I want to grow a business that I can delegate and then also sell one day.
I want to be able to have a tool that’s the source of record. And definitely Monday can have the drawbacks with payment. You can’t collect payment. But then also Don have to set up payment once. So it’s okay with going outside of the platform to set it up once. But I think for me, just having a system that I can train that my virtual assistants and other team members can really learn, and then also just having multiple hats of my business departments of my business in the same place helps me. And then also too, I think with there’s different integrations and Monday can integrate with QuickBooks, Monday can integrate with different things that I’m also using for my bookkeeper, for other outside vendors. And so I like that. And I think I always tell people to try out multiple to see, because for me, I, I felt like doing property management half in the software and then half on Monday or even Google Sheets because I had to keep the information where someone maybe who has short-term rentals, it might be better suited for them to have a property management software or channel management software like owner Sify, et cetera, and then just use Monday as a backup.
But for me it was just personal preference of really wanted everything in one place. And also, I’m a data nerd, so I like analytics. And so I can track a lot of the data by my average rent rate or raising private money, I can use those analytics to then show my private lenders like, oh, this is how my property’s performing. Loan me all your money. So a few different reasons for that.

Tony:
Well, Jamie, we talked about why building out these systems and processes are important. We covered how to actually start going about building those out. And I actually want me and Ash to share how we’ve started building out those in our own business as well. But then more importantly, once you’ve built it, how do you make sure you stick with it? So we’ll cover those right after. A quick word from today’s show sponsors. Alright, we are back here with Jamie Bakes and we just discussed why creating systems and processes are so important as you build your real estate portfolio. And Jamie shared some really strong tactics on how to start building those out. But Ash, I want us to kind of open up, give a peek behind the scenes for our own business as well. If you remember, if you can, what was maybe one of the first things you built an SOP around and what was your process for actually putting it together? Because I think a lot of folks, again, can understand the importance, but it’s the how where they actually get stuck. So I know I’m sending you in the time machine right now, but if you remember, what was that first one?

Ashley:
Bookkeeping

Tony:
Time was also bookkeeping. That’s funny.

Ashley:
It was an SOP of enter the website for the bank, get the bank login, log in, go to bank statements. And then I was using QuickBooks login to QuickBooks, go to this entity, go in, go to reconcile. And it was like going through the monthly bank reconciliation from start to finish of what you would need to do. And that was my first one. It was just literally a Google Doc step by step by step by step. Yeah,

Tony:
Mine was almost exactly the same thing. We were using ESSA when we first started and when we first launched our portfolio, I was doing all the bookkeeping and that was one of the first things I wanted to get rid of. So we hired a virtual assistant, and as part of her training, I just recorded myself going into essa, categorizing every single one of the transactions, attaching the receipts, and that was the first SOP that I created. But now obviously we’ve got lots and lots and lots of SOPs. We primarily use a combination of Loom and Google Docs for hours. But Jamie, I’m curious for you, how do you decide what actually needs an SOP versus something that can just remain as a one-off? Where is that tipping point on the scale where it actually makes sense to turn it into an SOP?

Jamie:
I would say I myself, two questions. One is someone going to have to do it again? I know I like to spend my time thinking about growing my business, not thinking about a process that I had to do a year ago, and now I have to remember. And then also, will it be delegated? A lot of times I’ll do something once and I’ll decide, okay, this is something that I’m then going to delegate. And so just taking that extra 15 to 30 minutes, it’s not always fast to create the SOP, but taking that extra time to create it then will save me time later. And so I feel like if it’s something that you’re not going to do for a while or you’re still maybe deciding between softwares probably doesn’t make sense to systemize it, to put it into an SOP, but yes, you’re going to be doing it on a recurring basis or delegate it. That’s kind of like my trigger is an SOP is needed.

Tony:
I would agree. Anything that I find myself repeatedly doing that I don’t want to do, that’s usually the trigger for me. Okay, I need to put this into an SLP. Right now we’re actually dealing with this in our business where we switched over to new payroll and scheduling software for our hotel, and I was the one that spearheaded setting this up. So I’m still the one with a lot of this tribal knowledge and it’s been working great. But one of the things that I haven’t offloaded yet was the actual publishing of the schedule. So literally, I’ve been getting texts from my team like, Hey, Tony, schedule’s not out yet. Schedule’s not out yet. So I’m like, I just need to record the SOP so I can then give this to someone else to go knock out. But there is that pain of like, man, it just takes longer when you have to record it and voice through everything that you’re doing. But now, this is the fourth week in the road that I’ve done this, and had I just done it the first time, I wouldn’t have to be doing it anymore. So I get that it’s painful, but we’ve got to be able to kind of move through that pain so that we can delegate it to someone else.

Ashley:
It’s also so awkward talking through it, especially the first goal times you do it. Okay, now I’m going to go into this. I think the first time I ever did that, I stopped the recording and start it over three or four times, and eventually it was just like, okay, it doesn’t matter, just record it.

Jamie:
Yeah, I think with Loom it’s really cool. They have Loom ai, so it takes out your As and ums and filler words and stuff because then I’ll forget, I’m recording and I’m sitting there, I’m like, what am I doing? Oh, I forgot. So yeah, it’s definitely something that can be awkward, but I feel like now I don’t even know the number of SOPs that I have, but I realized that it’s easier to have it because then I can, even if I have three or four SOPs that are a few lines long, I can throw that into AI chat GBT to kind of boost up to make sound a little bit better, or to even combine into one process. So instead of like, oh, how to list on Airbnb versus Furnish Finder, you could have one that take two kind of incomplete ones, put it together so AI could create one for you. So AI definitely specifically, excuse me, chat GBT for me helps. And then also on chat gbt, you can actually upload your SOPs. I think I have the business chat g bt, but you upload your SOPs as your company knowledge. So if my VA’s asking about what’s the checkout time at X, Y, Z property, it pulls my SOPs, it links to monday.com, it links to everything, and we’ll tell ’em the checkout time. So that’s another reason for having it is because then you can also train the AI tools on how to work smarter for you.

Ashley:
I remember we had a guest on who talked about this where they took everything, every document they had for their company, and they fed it to ai. And so it was like their company directory, so anybody on their team could ask a question. I just remember my brain exploded after they said that. Like, oh my God, that’s such a good idea still.

Jamie:
Yeah, now it integrates. Well, now it’s even easier because it integrates with Google Drive. So assuming you have all your SOPs on Google Docs, it just takes a few minutes. But that’s been so helpful. Or it’s like, oh, that’s why I’ve created all these SOPs and taking so many hours. They’re right at the end of the tunnel.

Tony:
I believe it also connects to money.com. Now, if I’m not mistaken, chat GT does. So if you’re saving those things in any of those places, you can go there. So Jamie, obviously we talked about why it’s important. We talked about how to do it, but I think for a lot of folks, they’re worried about perfection as they start to build out that first or those first few SOPs. So how do you balance just getting it out versus it actually being good enough to be useful? How do you strike that balance? Because in my mind, it’s an iterative process and what your SOP looks like today is probably different than what it might look like a year from now, but you got to start somewhere. So I guess how do you draw that line of like, okay, it’s good enough. Lemme just hit ship. Let me hit publish on this one.

Jamie:
Yeah, I think for me, I look at it as the first time you do it, maintenance requests, but that’s at the big SOP. But if you’re sitting down and you’re doing the request and you’re putting every single step and let’s say three to four different sections, you have number one A, then you have the Roman numerals, right? You’re never going to finish that. SOP, that SOP is going to be a work in progress for probably the rest of your life. And so what I like to do is like, okay, if I’m starting the SOP today, that’s the one I started today. I have four or five steps. I’m not going into that next section. If you’re on Google Doc, I’m just doing 1, 2, 3, 4, 5. I’m saying go to this website. Number two, submit the details, whatever process. And I would say of just put enough so that if you weren’t feeling well or you were on vacation the next time it came up, someone could read through it and at least know where to go.
Or at least I’d rather someone come to me with one question, not 20 questions. So just starting somewhere is important and I think, or even something sounds I’ll do, because again, I love SOPs and systems. It’s all just time block. Okay, I have 30 minutes to get this SOP to the correct place. Because if you’re a perfectionist or you’re like, oh, well what if this happens or this, it’s just like it’s better to have something than nothing because remember, the purpose of the so P is to help you that next time. If you’re doing it, you don’t have to start from scratch or if you’re delegating it, they have a base to start. And so you’re not going to start perfect. I used to work for a large corporation. I worked for Capital One, and that’s where I learned system and processes. And so obviously my systems and processes aren’t as great is Capital One that’s been around for, I don’t even know how many years, that’s 40,000 employees.
That’s my level of perfection. My system suck compared to them. But just knowing that I have the steps that I need to get through and just know of, for me, I’ll create an SOP. Well, guess what? I’m not going to be doing it. My virtual assistant is So if my virtual assistant can do A to B without asking me, it’s a success. I don’t care what the so P says, right? It’s a success. And so realize too, if you’re doing it for you to remember and then you’re like, oh, it’s not perfect, well guess what? Oh, you’re going to see it. Or if it’s for your VA or another team member, just making sure that it at least has the, its intended target of getting through the step. It doesn’t have to be perfect. Again, I don’t know. I use open phone. They changed their name to, I don’t even remember. So technically half my SOPs are wrong because it says open phone. That’s okay. Next time that we use the SOP where we need that system system, we’ll just replace it because you’re always going to be updating your SOPs. It’s going to be a living, breathing document.

Ashley:
I’ve also done SOPs with people’s names, as in then if the position changes, it’s not their name anymore, but I find and replace on Google Docs. Very, very useful in situations like that. But I guess, Jamie, before we wrap up here, when is the time that you fix a system? When do you realize that it’s breaking and you actually need to go in and change or adjust or create a new system for something?

Jamie:
Honestly, if you’re spending more time thinking about how to do the process than doing the process, it’s broken. So like a maintenance request, I shouldn’t be thinking about what to do. I should be calling, emailing, doing what I have to do to get the maintenance issue solved. Or even this one key thing, underwriting, right? If we’re analyzing deals or you haven’t looked at a deal in a while and you’re trying to remember how you analyze or remember your underwriting assumptions, and remember, you could just have the SOP because you should be spending your time going from point A to point B and securing that deal, analyzing a deal, writing in your offer, that’s where you’re actually going to make your money in that deal not and trying to remember how you analyze the deal.

Ashley:
Well, Jamie, thank you so much for coming on today and giving us a mini masterclass and SOPs and project management. You mentioned monday.com, there’s Asana. There’s a ton of other programs that you can check out like Jamie had said a bunch of times, like Find what works for you to be able to do this. So Jamie, where can people reach out to you and find out more information?

Jamie:
I’m most active on Instagram. It’s under my name, Jamie Banks and in Real Estate.

Ashley:
Well, thank you guys so much for listening today. If you enjoy the show, make sure to leave us a review on your favorite podcast platform and make sure you are subscribed to Real Estate Rookie on YouTube. I’m Ashley. He’s Tony, and we’ll see you guys on the next episode.