Dave:
2026 is almost here and that means we are still in the swing of prediction season and we got good predictions for you here today. I’m Dave Meyer joined by Kathy Fettke and Henry Washington. And today we’re sharing our boldest predictions and our hottest takes for 2026. We’ve each brought our own ideas about what could surprise investors in the year ahead, what might finally break, and where the biggest opportunities could emerge. Buckle up, this is On the Market. Let’s jump in. Henry, how’s it going, man? How are you?

Henry:
Fantastic. Good to see you. Good to be here.

Dave:
You got some bold ideas for us today?

Henry:
I don’t know how bold it is, but I got one for you.

Dave:
You got some takes. Okay. What about you, Kathy? Anything spicy for us?

Kathy:
Oh, I think so. Yep. Opportunity.

Dave:
Okay.

Kathy:
Yep.

Dave:
All right. Well, let’s just jump into this. We don’t want to get too spicy too fast. So I think Henry, we’re going to start with you. Maybe you can warm us up.

Kathy:
I’m spicier than Henry.

Dave:
You said yours was spicy, so Henry said his is just mild. Okay.

Henry:
Yeah, it’s mild toss. Mild in the sense that I think people have thought about it or maybe even thought that 2025 would be the year that this happened, and to some degree it did. But I think in 2026, there’s a real possibility that we’re going to see a mass exit of Airbnb properties, especially from the mom and pop hosts who are barely breaking even right now. I literally, this morning, sent two addresses to my realtor to say, “Hey, what could I get for these two properties right now?” And there’s a couple of reasons I think this. One is because of what’s happening in the market. We’ve got another interest rate quarter point drop, which helps with affordability. We’re starting to see slight upticks in buyers entering the market. I am personally seeing more showings pop up on listings I’ve had on the market for a couple of months over the last week to two weeks,
Which is unusual for the winter market right before Christmas. Typically, you’re not seeing a spike in showings, but I think that people are starting to feel like, “Hey, maybe there’s some opportunity out there.” We’re starting to see inventory go down in some markets where it was typically trending up. And I think if interest rates come down anymore, that’s just going to allow for some people to enter the market. But what I think is that these people who are holding on to these Airbnb assets that are breaking even or maybe losing a little bit of money each month, they didn’t sell in 2025 because it just wasn’t a good time to do it. Or maybe they tried to sell and they couldn’t transact because they have to sell these properties for a decent amount of money. Typically, a lot of these operators paid a lot of money for these properties expecting them to produce a certain amount of revenue and they’re just not performing.
And with 2025 not being the best time for a lot of these people to sell, I think they’re going to try to capitalize on a few more eyeballs, a little bit lower interest rate and the opportunity and the possibility of being able to get out. Maybe they’ll take a little bit of a loss, maybe they’ll break even, but I think you’re going to see a lot more Airbnbs convert into listings and people getting out while they have an opportunity to get out in 2026.

Dave:
Well, first of all, Henry, I feel attacked, okay? I actually agree wholeheartedly with you on this. I bought a short-term rental in 2018. The price has more than doubled. So my equity, I think, is 3X, maybe more. It’s been amazing, but the cashflow is really drying up. It’s harder and harder to get bookings. And I bought this place because I kind of wanted to use it and I just use it less and less.
And I’m thinking about all the work I put into it. I’m like, should I just get out now and take the money and do something else because I see opportunity in other parts of the market? But then I’m like, “This is the cheapest I’ll ever get a ski house for, so maybe I shouldn’t sell this and I should just sit on it. ” But I definitely agree with you. I think there’s going to be more and more people getting out of this market because this is obviously not a blanket statement, but it’s just not a good time to be a short-term rental investor right now. I’m sorry it’s not.

Henry:
I’m going to put a caveat on that because I totally agree with you. I think it’s not a good time to be a casual short-term rental investor.
I think if you are a professional short-term rental investor and you are studying markets and you are studying travel data and you are understanding what markets have certain regulations, and if this is truly what you do and you are excellent at providing experiences and researching what types of amenities you need, if you are that type of Airbnb operator, it’s probably not a bad time because there’s properties for sale. Sure. There’s people who are just casual who are looking to get out. Like myself, I would call myself a casual Airbnb investor. All of my short-term rental properties were bought because they have another exit and the short-term rental was icing on the cake. Professional short-term rental operators are typically only buying with one exit in mine and they’re operating professionally. So I think you’re going to see that a lot of the casual investors see an opportunity to sell that property and get close to what they want and get out of the game.
And you also have to think about it. There’s a lot of Airbnb investors who are like me, who are just real estate investors as a whole at heart and they can see an opportunity like you, for example.
You’ve got a couple hundred grand in equity, I got a breakeven or a property that’s losing me a little bit of money. I can deploy that couple hundred grand right now because they are buying opportunities on the market right now. You can buy cashflow again right now. You can buy great flips with great margins right now. Multifamily, there’s opportunities. And so I think you got a mix of people who are going to sell and redeploy. You got a mix of people who are just looking to get out because they got in thinking they’d make a fortune and found out it’s a whole lot harder than it is. And 2026 market conditions I think are going to make people feel like they might be able to sell it and either turn a small profit or just get out and break even.

Dave:
What do you think this means for the markets where there’s a high concentration of short-term rentals?

Henry:
I think the markets where there’s a high concentration of short-term rentals that were historically vacation rental markets are going to be fine because they have regulations or lack of regulations around short-term rentals because that’s what the economy calls for. I think of places like Hot Springs, Arkansas. That place was a vacation rental metropolis before Airbnb. If people start selling their Airbnbs, they’re going to be fine. But in markets like, you can see places like Joshua Tree where Airbnb investors are just getting out in droves and that is hurting the market because there’s less places for people to stay. So it just really depends on the market.

Kathy:
I’ve seen a little bit of a different take on this because you have so many CPAs teaching the tax loophole with Airbnbs, with the bonus depreciation. That’s

Dave:
A good

Kathy:
Point. I just spoke at a CPA event where there was hundreds of people there. And the number one method for saving taxes was to go buy an Airbnb. So I think a lot of those people, doctors, dentists, high income earners who need that tax break are running out and doing it and may not be even as concerned about the cash flow from it. They just want that huge tax break. So the people who are trying to get out may just have an opportunity to sell to somebody who wants in.

Dave:
Sounds

Henry:
Like a perfect storm.

Kathy:
Yep.

Dave:
Yeah. I’m curious about that. I think there’s still obviously opportunities. Sometimes with my own, I’m like, maybe I should just wait this out because people are going to all sell and then I’ll just still be there. I’ll be like, I keep thinking about selling this property, but the ski resort it’s near just announced it was doing like a massive renovation. They’re building a gondola to the town for the first time. It’s getting like 20% bigger. I think it’s going to be the second biggest resort in Colorado. I’m like, maybe I should just hold onto it.

Kathy:
I think it should hold. Unless it has a ton of deferred maintenance, then I would hold it with that kind of news.

Dave:
No, it’s in great shape.

Kathy:
And you have a low interest rate on it, right?

Dave:
Yeah, like under three, I

Kathy:
Think. Yeah. You actually have to keep that.

Dave:
Yeah, I know. I know. And I want to go use it. So I think we’re going to keep it.

Kathy:
Yeah.

Dave:
All right. I like this bold prediction, Henry. I don’t think it’s that bold. I do think it’s going to start playing out though because people have been talking about this and I think it does create risk, but also I think opportunity for sure for good deals, especially in places where we talked a lot mostly about vacation rental places, but if people are in a normal city, maybe they bought a place with an ADU thinking they were going to Airbnb it, now they want to get rid of it, that’s a duplex.That’s a good place that you could buy and rent out. Or midterm rental one, long-term rental the other. There’s going to be maybe some more interesting inventory coming on the market, which is always a good opportunity. All right, we got to take a quick break, but we’ll be back with Kathy’s spicier prediction right after this.
Welcome back to On the Market. I’m here with Henry and Kathy giving our bold predictions for 2026. We heard Henry’s about short-term rentals coming on the market, flooding the market perhaps. Kathy, what is your spicy prediction?

Kathy:
I think there is going to be a scramble to buy property and land in the newly designated opportunity zones.
You’re not going to know where those places are right away. You’ll definitely know by the middle of next year. In the process, I can just tell you from my experience, one of our realtors that we work with in St. Petersburg, Florida drove me around opportunity zones in St. Petersburg years ago, right when they announced it, right before they were announcing it. And these were rough areas. I was like, “I don’t think I’ve got the stomach for this. ” I was afraid to get out of my car, let’s just put it that way. But the lots were like 20 grand and I should have just trusted them and bought a bunch. Well, it was within months. Those lots were worth 100, 150 because that’s what Opportunity Zones can do. So we’ve got now with the one big beautiful bill that opportunity zones are permanent now and the governors are going, I think it’s the governors are going to be designating new opportunity zones and they’re going to be doing it every 10 years.
And the next time that they announce it, it has to be by I think the end of June of 2026. Yeah,

Dave:
That’s right.

Kathy:
But some governors are already letting people know and the cat’s out of the bag in some areas. So getting in front of that and on top of that, it’s going to be a little bit stricter because last time around some opportunity zones were not in impoverished areas at all. I don’t know how that happened, but this time it’s a little bit stricter. So you have to have, again, the stomach for it. These are not going to be nice areas generally, but in this case, it was just lots. We just buy the lots and sit on it. You don’t even necessarily have to have an opportunity zone fund or be looking for the tax benefits. If you just buy the property in an area that’s designated opportunity zone, then you’ve got these big funds who may want what you own. So lots of opportunity there and an opportunity to improve these areas where they’re designated for a reason.
Housing is needed, affordable housing, so you can kind of make a difference in those areas while you’re making some money.

Dave:
I like this one. I had not been really thinking about this. I’ll be honest, I kind of forgot that they were coming out with the new opportunity zones. I think it’s July 1st or whatever is the deadline. But maybe Kathy, can you explain to everyone what an opportunity zone is?

Kathy:
I’ll do my best, but it’s complicated and it’s changed a little bit. But with the first round is basically like a 1031, but different than a 1031. So if you sold a property and you had, let’s say, a $500,000 capital gain on that, you could 1031 exchange it, but you would have to buy the property within 45 days. There’s all these limitations and it has to be the same price. And with the opportunity zone that all changed where you could sell a property, have that $500,000 gain and maybe just put the $500,000 gain into the opportunity zone. You wouldn’t have to put the whole thing in. Like if you sold the house for a million dollars, the gain is 500, you had originally paid 500. With the 1031, you have to do the whole million with the opportunity zone. You could just take that 500,000 and invest it.
But the difference, the big difference is that you eventually have to pay your capital gain. If you bought a property in an opportunity zone with that $500,000 gain, you will then in the future still have to pay your tax on that. But the property that you bought with that $500,000, you wouldn’t have to pay any gain on that. Again, talk to your CPA. It is complicated. That’s why a lot of people just don’t do it because it’s complicated and you also had to have a fund. It couldn’t be. You just went out and bought it. You have to have an opportunity zone fund and file it that way. But like I said, you don’t have to do all that. If you just buy the property in an opportunity zone area, you know that lots of money is going to be pouring into that area. And if you buy right where development is expected, then you could really see an upside just holding it.

Dave:
Awesome. Yeah. I mean, it does seem like an amazing opportunity. From my understanding, it’s basically a long-term thing. You need to put money in.

Kathy:
Yes.

Dave:
And then if you invest it over … I think last time there was different tiers. It was like if you kept it in for a certain amount of time, you got to defer a certain amount of taxes. I think if you went the full 10 years, you got to defer 100% of your capital gains- On the

Kathy:
New property.

Dave:
… on the new property. Yeah. Yeah. So there’s all sorts of really interesting things here and I would be interested to see how much the previous opportunity zone spurred property value growth, but I’m imagining in ones that were done right, that there probably are really good growth and this will be interesting and hopefully a good way to spur investment into communities that need it. So I think this is a good one. I like this prediction.

Kathy:
I

Dave:
Assume you’ll be looking, Kathy.

Kathy:
Yeah. Yeah. As you know, that’s part of our business model is having boots on the street all over the country. So the teams that we work with will be on top of it. We actually are working with a team in Fort Worth that’s building an opportunity zone there. Oh,

Dave:
Cool.

Kathy:
Yeah, we’ll be paying attention, but again, this all happens next year, so it’s really a next year thing. All

Dave:
Right. Well, this is a great thing to keep an eye out for. I’m sure there’s going to be a lot of news because yeah, they’re designated by each state, the governor office and each state does it. So as these governors come out with this stuff, there’s going to be really interesting opportunities for everyone to keep an eye on. I like this one. Thank you for reminding me and everyone about this one, Kathy. All right, we got to take a quick break, but I will give you my bold prediction when we come back. Stick with us.
Welcome back to On the Market. I’m here with Kathy and Henry giving our bold predictions for 2026. So far, Henry made his about Airbnbs or short-term rentals specifically. Kathy shared hers about a potential land rush once opportunity zones are announced. I’m going to go a little bit outside of housing and I am going to just stick with my bread and butter and talk about economics. I think we are going to enter what I call the common person recession, the CPR. Kathy and Henry, I don’t know if you listened to this episode, but I literally spent hours of my life defining with new data a metric for an actual recession because you might know about this, but I think the current definition of recession, which doesn’t really exist, and the word recession means absolutely nothing. I think it’s completely nonsense and completely nonsensical. So I spent a lot of time trying to think about what is an actual recession?
What actually matters to Americans? And I came up with two things that need to be true to not be in a recession. Real wages need to be going up, meaning the average American spending power has to be increasing and unemployment can’t really be going up at a fast rate. I use something called the SOM rule that doesn’t really matter. As of right now, we are not in a normal person recession. Real wages are up, unemployment rate is relatively low. My bold prediction next year is that we are going to tip into the normal person recession. I think that real wages are going to turn negative as inflation goes higher than wage growth because AI, because a bad labor market, because inflation has gone up four or five months in a row. And even though I do think it will probably peak next year, it’s not going to come down that quickly.
And so I am not feeling very optimistic about the conditions, the economy for average Americans. And I don’t know if that means the National Bureau of Economic Research will decide to call this a recession because they get to choose that completely subjectively. But on the one I made up and I made a whole episode about this a couple weeks ago, if anyone wants to listen to this, I think we are going into a normal person recession, a common person recession because things are not good out there for the average American. And I think we need to just acknowledge that even though the stock market is great, things for the average American is not great. And I think that’s going to spill over into real estate if I had to guess.

Kathy:
I mean, I guess what I should hope for is that we’re seeing rates coming down and anytime there’s rate cuts like that, that’s money is cheaper to borrow and it tends to stimulate the economy. So that would be the little bit of hope that I would be leaning on that and QT, the quantitative tightening is over. And so that to me tells me more stimulus is coming. And if that’s the case, perhaps it will spread out into the economy. That’s my hope.That’s what I’m going to be thinking and praying about. And I don’t know, doing like an economy dance, not a rain dance, an economy dance. I hope

Dave:
You’re right too.

Henry:
Yes. Affordability is a problem, but I think it’s really a problem for the young college graduate, the people just starting out because the average American has probably been working for some period of time, may have some savings, may have had a different job or two, could possibly afford a house where rates are coming down. But when you’re just starting out, I mean, wages aren’t that much different in terms of starting out salaries now than they were when I got out of college and affordability is drastically different. I just don’t know how young professionals get into home ownership, especially if they’re going to work in some of these cities where these companies that they want to work for are located. They’re just more expensive places to own real estate. It’s not like you’re going to work for a major corporation in the middle of Kentucky somewhere.
The affordability is just that young professional, I can’t see how they’re not coming out of college in a recession.

Dave:
Yeah. I mean, the last month we have data for the unemployment rate for people 16 to 24, this is people who are looking for work. Unemployment rate, 10.4%. Wow. That’s a lot. Wow. That is very high.
And I think this is happening all over the economy. There’s so many things happening where wages are stagnating, where job openings are lower, where people are struggling. And I want to be clear, this is not a political thing. I think this is the accumulation of five years of inflation. We’ve had inflation for a really long time and people are just stretched. People can withstand it for a couple of years, but it’s been five years. And even though we’re not back at the … We’re at 3% inflation roughly right now. We’re not at 9%, thank God. But we’re not going to have deflation. I’m sorry, but I know people say, when are prices going down? They’re never going down. I can just tell you that maybe asset prices will go down. Stock market might get cheaper. Real estate might get cheaper in certain places. Goods and services are not going to get cheaper in aggregate.
It’s really never happened. It’s not even good. You don’t even want that to happen. What we need is disinflation, which is for the pace of inflation to go down, but that’s not even happening right now. The last four months in a row, it’s gone back up and people are just stretched thin. And I think American economy has been remarkably robust. People have continued to spend. Businesses have continued to spend, but I think the rubber has to hit the road at some point, and I think it’s going to happen in 2026.

Kathy:
Yeah. I think there’s a lot of confusion when people hear, okay, inflation’s not at 9%, it’s down at 3%. There’s this thought that prices went down at that rate and no, no, it’s the growth of inflation. So I’ve said this before. It’s like one year you gain nine pounds, the next year you only gain eight pounds, and the next year you only gain five, and now you’re at three. You’re not back at your original weight. You’ve gone up. And so people are like, prices are still high. Well, yes, they are because they’re still up that 9% plus 5% plus whatever it was. And the only thing that’s going to help is wages going up and prices kind of stabilizing. And after a few years of wages have gone up enough, then people will be back in an affordable place. But we’re still paying the price of the massive inflation from right after COVID and during COVID, which I believe is from, again, massive stimulus, massive stimulus thrown into the economy.
And now we’re kind of turning back into more stimulus. So that’s why I’m hoping it turns into not inflation, but hopefully more jobs. We’ll see. We’ll see.

Dave:
In my opinion though, the problem is even jobs, like the unemployment rate is low. It’s that wages are not keeping up.

Kathy:
And

Dave:
This has gone … I mean, I did another on the market about this the other day. Since 1984, in 40 years, real wages have gone up 12%. That is so embarrassing for our country. It is so ridiculous that the average American’s quality of life has only gone up by 12% in 40 years. It’s crazy. Actually, one of the bright spots about the economy over the last few years is real wages are up right now. I want to be clear, they’re up. That means people’s incomes are growing faster than inflation right now. That’s great.

Kathy:
Yeah.

Dave:
It’s what I think will change though, because I just think with AI and the labor market, people are losing their bargaining power in the labor market and with inflation staying high, those lines are going to cross. This is how I think I’m imagining a short in my head and those lines are going to cross. It’s basically that we are going to start to see wage growth go down. And again, I’m sure there are policy implications to all this, but I think a lot of it is like when you have a technology as disruptive as AI, it just creates a little bit of chaos. And I think that’s what we’re going to see. People are hesitant to hire right now. They’re hiring at lower wages. When the unemployment rate starts to go up, which I expect it will, people will accept lower wages for jobs, and that’s going to, I think, put us a little bit backwards.
And I don’t know if we call this a real recession, but I have to imagine the average American’s going to start cutting back on spending. And I think this spills into real estate a little bit. I’m not trying to be super dramatic here, but if you think about what Henry just said about young people, are they going to go move in with a significant other or are they going to still have four roommates? Are you going to live with your parents for as long as possible? It’s one of the reasons I don’t think rent is going to grow as much next year, and I don’t think we’re going to have a lot of household formation because I just don’t think people are in a position to take financial risk right now. Personally, I wouldn’t. If you were young and you were trying to find a job in an AI world, I don’t know if I’d take a financial risk.
And I think that is going to become increasingly common.

Henry:
Yeah. I think it’ll be interesting to watch how the long-term effect on real estate will be because we are so accustomed to people following the American dream, go to school, get a job, buy a house, or go to school, get a job and pay rent. But now people are struggling to do either. And so what does that look like in the long term and how does that impact investors like us? When I was doing some research for a different presentation, one of the two of the metrics we saw were that since 2019, home price growth is about 43%. I need to double check that, but-

Dave:
It sounds right.

Henry:
Income growth during that same period, since 2019, 7%.

Dave:
It’s crazy. It’s insane. And it’s not just housing. I think that’s the thing is we always think about housing, but just ordinary expenses have gotten crazy. I don’t know about you guys. I am in a fortunate financial position, but I’m in shock every time I go to the store. I still am in shock every time I go. It’s crazy. There are obviously things going on with the government, but there are also just structural, cyclical things going on in the economy as well that lead to this. And so I think it’s going to be tough. Kathy, I hope you’re right. Maybe there’s going to be some stimulus. Actually, I’m not sure if I want stimulus. I’m not going to say that. But maybe rate cuts will create more hiring. But do you guys really think the reason the job market’s slow is because the federal funds rate was at 3.75 instead of 3.5 because I sure don’t.
I don’t really think that’s going to change anything. I think there’s uncertainty and AI. There’s these combination of things that I think are going to slow down the labor market in a way that the Fed might not have the tools to fix.

Henry:
Yeah. I have no solve for that. I got nothing for this. I hope you’re wrong.

Dave:
Yes. I hope I’m wrong too.

Henry:
Hope and a prayer is all I got for you guys.

Dave:
Yeah. You know my favorite thing about investing is always wanting to be wrong, but that is my bold prediction. We got to come up with that. We can’t leave on that note. You guys got any fun predictions for 2026? Who’s going to win the Super Bowl?

Kathy:
My astrologist says 2026 is a year of great wealth, so let’s just go with that.

Dave:
Focus on that. I like that. All right. Astrologist is making a bold ticket.

Kathy:
Yes. And when I say my, I mean some lady I listen to on YouTube. So she must be right.

Henry:
My bank account’s in retro grade. I don’t know what that means for astrology.

Dave:
Okay. I have a real prediction that’s more optimistic. I think more first time investors will land their first deal in 2026 than in 2025 or 2024. I think the buying conditions are going to get better.

Kathy:
I agree.

Dave:
And I think more people are going to get started as real estate investors, and that’s pretty exciting. That is fun. That’s a good thing that we can go out on.

Henry:
I agree.

Kathy:
Absolutely.

Dave:
Okay, good. And if I’m right about the whole recession thing, mortgage rates could come down. So that could actually help people more a little bit as well. All right. Well, this was a lot of fun. Thank you guys so much. Sorry I was depressing at the end there, but I do want to give my honest opinion about things. I think that’s the whole point of the show is not to always have rose-tinted glasses, but to share what we actually think is going on. But Kathy, thanks so much for being here.

Henry:
Thank you.

Dave:
Henry, thanks for joining us.

Henry:
Absolutely.

Dave:
And thank you all so much for listening to this episode of On The Market. We’ll see you next time.

Foreclosure activity doesn’t move in a straight line. It comes in waves. Some months bring a surge of new filings, reflecting fresh financial pressure on homeowners. Others—like November 2025—signal a cooling period in early-stage filings, even though deeper in the foreclosure pipeline, auctions and REOs continue to rise.

For real estate investors, the “Foreclosure Starts” stage—also known as the first public filing—remains one of the most important signals. It offers the earliest insight into where distress is beginning to surface, and where motivated seller activity may soon emerge.

This month’s numbers show a national pullback in new filings, but the story becomes far more nuanced when we look at individual states—and even more revealing when we drill into counties where new stress pockets are forming. Whether you invest locally or analyze markets nationally, understanding where Starts are rising or falling is essential for anticipating future pre-foreclosure opportunities, auction volume, and eventual REO inventory.

National Foreclosure Starts Decline, but Year-Over-Year Trend Remains Elevated

According to the latest data from ATTOM, November 2025 recorded 23,239 Foreclosure Starts nationwide, down 7.65% month over month, but still 16.80% higher year over year than November 2024.

The monthly decline indicates a short-term slowdown in new filings after a busy October. However, the year-over-year increase confirms distress levels remain structurally higher than last year.

The bigger picture? Even with seasonal and monthly fluctuations, early-stage foreclosure activity is trending upward nationally—which means investors should pay attention to how these patterns shift across specific regions.

State-Level Highlights: Five Key Markets to Watch

Foreclosure dynamics vary dramatically across states. Here’s how the five focus states performed in November.

Florida

• 2,819 starts
• -31.84% MoM
• +15.63% YoY

Florida saw the sharpest month-over-month decline of any major foreclosure state. After a significant rise in October, November brought a reset. Still, the year-over-year increase signals long-term upward pressure.

California

• 2,090 starts
• -22.16% MoM
• +6.65% YoY

California cooled both monthly and annually. High insurance premiums and affordability challenges remain stressors, but filings this month loosened compared to earlier in 2025.

Ohio

• 854 starts
• -21.58% MoM
• +7.83% YoY

Ohio experienced a meaningful monthly drop, but the annual increase points to a gradual return to pre-pandemic foreclosure patterns.

North Carolina

• 525 starts
• -17.58% MoM
• +14.13% YoY

North Carolina remains one of the fastest-growing foreclosure states year over year, despite a quieter November. The long-term trend remains elevated.

Texas

• 2,612 starts
• -15.28% MoM
• +2.75% YoY

Texas continues its pattern of elevated but stable foreclosure activity. With a fast nonjudicial foreclosure process, starts here often flow to auction more quickly than in judicial states.

If you would like to see more data from other states, check out our foreclosure reports here.

County-Level Insights: Where Distress Is Rising Beneath the Surface

November’s headline numbers show cooling across the board—but the county-level data reveals the real story: Several key counties experienced meaningful spikes in early-stage filings, even as state totals declined.

These localized increases matter because county-level trends often predict where deals will emerge before they appear at auction or as REOs. 

Here are the most notable county-level shifts.

Florida: Hidden pockets of new distress

Even with a steep drop at the state level, several counties showed growing stress signals.

• Hillsborough County (Tampa) posted a noticeable increase in early-stage filings, bucking the state trend.
• Orange County (Orlando) saw a mild but meaningful uptick in Defaults and Lis Pendens.
• Miami-Dade and Broward cooled significantly, pulling the state average downward.

Investor insight

The Gulf Coast and Central Florida remain areas where early distress may reaccelerate in early 2026.

California: Inland Empire stirs again

While statewide Starts fell, a few counties moved in the opposite direction.

• Riverside County recorded a noticeable stabilization in filings, suggesting pressure hasn’t eased.
• San Bernardino County saw early-stage increases specifically tied to investor-owned rentals.
• Los Angeles County was mixed—some ZIP codes cooled, others heated up.

Investor insight

The Inland Empire once again acts as California’s foreclosure bellwether. Keep watching Riverside and San Bernardino for clues about 2026 inventory.

Ohio: Cleveland quieting, Columbus heating up

Ohio’s monthly decline hides county-level divergence.

• Franklin County (Columbus) posted a meaningful MoM increase—one of the state’s few.
• Cuyahoga County (Cleveland) saw a clear drop in Starts after a busy October.
• Hamilton County (Cincinnati) held steady, showing neither surge nor collapse.

Investor insight

Columbus stands out as one of the few Midwestern metros with rising early-stage filings this month.

North Carolina: Charlotte and Raleigh are still driving volume

Despite a statewide MoM decline:

• Mecklenburg County (Charlotte) showed a modest but significant jump in Starts.
• Wake County (Raleigh) also saw new filings rise above October’s pace.
• Cumberland County (Fayetteville) cooled sharply.

Investor insight

North Carolina continues to show long-term upward pressure, driven by its major metros.

Texas: Surprising county-level surge despite statewide declines

Texas saw several standout county-level increases even as statewide Starts fell.

• Harris County (Houston) showed one of the largest MoM increases in the entire state.
• Dallas County posted a modest rise.
• Tarrant County (Fort Worth) remained elevated despite the statewide drop.

Investor insight

Texas’ local markets move quickly—investors monitoring county-level filings gain a real-time advantage before auction calendars fill.

How Investors Can Use Foreclosure Start Data to Build Opportunity

Tracking Foreclosure Starts empowers investors in three major ways.

1. Identifying pre-foreclosure opportunities early

Investors who connect with owners before a Notice of Sale is issued often have:

• More time for negotiation.
• More flexible deal structures.
• The potential for deeper discounts.

Higher Starts in specific neighborhoods can signal where seller outreach may be most effective.

2. Predicting auction volume months in advance

A rise in Starts typically translates into increased Notice of Sale activity 60 to 120 days later.

Investors planning to attend courthouse auctions or purchase trustee-sale properties benefit from anticipating where volume will appear next.

3. Understanding future REO supply: Starts – Notice of Sale – REO

This pipeline is predictable. When Starts rise today, REOs rise months later—especially in fast-moving states like Texas.

Investors buying with a Self-Directed IRA or Solo 401(k) benefit from the slower pace of the pre-foreclosure window. It provides time to coordinate:

• Non-recourse financing.
• Title work.
• Property inspections.
• Investment partner structures.
• Long-term buy-and-hold planning.

Foreclosure Start data is a strategic early-warning system for long-term opportunity.

Take Control of Your Investment Strategy

Foreclosure trends are becoming more local, data-driven, and predictable. Investors who understand where early distress is emerging—and why—put themselves in the best possible position to act when the right deal appears.

If you want to explore how to use a retirement account to invest in real estate—such as a Self-Directed IRA or Solo 401(k)—you can learn more at Equity Trust Company.

Equity Trust Company is a directed custodian and does not provide tax, legal, or investment advice. Any information communicated by Equity Trust is for educational purposes only, and should not be construed as tax, legal, or investment advice. Whenever making an investment decision, please consult with your tax attorney or financial professional.

BiggerPockets/PassivePockets is not affiliated in any way with Equity Trust Company or any of Equity’s family of companies. Opinions or ideas expressed by BiggerPockets/PassivePockets are not necessarily those of Equity Trust Company, nor do they reflect their views or endorsement. The information provided by Equity Trust Company is for educational purposes only. Equity Trust Company, and their affiliates, representatives, and officers, do not provide legal or tax advice. Investing involves risk, including possible loss of principal. Please consult your tax and legal advisors before making investment decisions. Equity Trust and BiggerPockets/PassivePockets may receive referral fees for any services performed as a result of being referred opportunities.

Dave:
We have made it to the end of 2025, but the housing market continues to change and shift and confuse as it has all year. But today we are going to make sense of it. This is our December 2025 housing market update. Hey everyone. It’s Dave Meyer. I’m a housing market analyst and I’ve been a real estate investor for 15 years and I am the head of real estate investing here at BiggerPockets. And it’s hard to believe last housing market update of the year. It has been a truly wild year in the economy and the housing market. We started with one that was rapidly cooling. Rates were in the sevens. Things were feeling stalled out. Inventory was going up. And fast forward to today, although it might not feel like much has changed, a lot actually has changed. I see it in the data wherever I look.
We are very much in a different situation heading into 2026 as we were in 2025. And honestly, I think there’s some good news here. There are good opportunities starting to emerge, but of course there are risks that need mitigating too. We’re going to get into all of that, both the risks and opportunities in today’s episode. First, we’re going to talk about home prices. Then we’ll talk about some good news. Finally, on housing affordability. We’ll get into a new trend that’s emerging with sellers and how they are trying to wrestle back control of the housing market. And we’ll end talking about underwater mortgages and this article that I keep seeing everywhere in the news these days. I will address head on if underwater mortgages is a potential risk to the market going into next year. That’s the plan for today. Let’s get into it. First up, major headlines here.
What’s going on with prices? Everyone wants to know. Well, according to Redfin, prices are up 1.4% year over year. That’s still relatively good. We are not in any sort of crash. I would still call that a correction because prices are down in real terms. 1.4% is a little bit flattish to me, but not bad given where we started this year. Remember when rates were at 7.25, inventory was up 30% year over year. Everyone was saying that there was going to be a crash. I did not. Just for the record, I said we would be kind of flattish and I think that’s where we are. Just as a reminder though, just one year ago, appreciation rates were still at 5%, which doesn’t sound like much, but that’s well above the long-term average of 3.5%. It’s well above where we are today. So it is important to note that we’ve had significant cooling in appreciation rates over the last years, but we are not talking about declines, at least on a national level yet.
That said, there are major regional differences going on. According to Zillow, 105 of the top 300 regional markets are in a decline right now. So basically a third of the biggest metro markets in the country are seeing housing prices go down. And that number, the total of markets that are seeing a decline has gone up a lot. If you look back to January, it was only 31 markets. And by June, it had more than tripled up to 110, but now it’s actually back down to 105. So this is treading water and staying flat, and that’s really important. Obviously, the markets that are in a correction, you’re going to have to take different tactics in those markets than the ones that are still doing right now. But I think the fact that the number of markets that are correcting is relatively even shows some stability to the housing market despite everything that’s going on.
Now, the depths of those corrections are wildly different. If you look at Punta Gorda and Cape Coral, these are kind of the poster child for the Florida crash that’s going on right now. Punta Gorda down 13% year over year, that’s a lot. That’s a crash in that market. Cape Coral, down 10%. I think if you’re losing 10% a single year, you could call that a crash. I wouldn’t argue with you there. We even see all four actually of the top markets seeing declines, I guess you’d call those bottom markets, are all in Florida. Punta Gorda, Cape Coral, Northport/Sarasota, and then Naples. Those are the top four. After that, we see Kailua in Hawaii, Austin, and Texas. Then it’s back to Florida. Then we got Tampa, Sebastian, Vero Beach, Daytona, Port St. Lucie. So 12 of the biggest corrections in the country, 12 of the top 14 are all in Florida.
So you can see that it’s highly concentrated there. The other trends are in the Gulf region. So Texas, Louisiana are also seeing some of the bigger corrections. And then they’re sprinkled throughout the countries as well. There’s definitely markets in California. You see some markets where I live in Washington and Denver. There’s definitely corrections too, but if you’re just looking for the trends, the Gulf region is where it’s mostly concentrated. On the other end of the spectrum, no surprise here, Midwest is still seeing some of the strongest appreciation rates, but those rates are coming down. So Chicago, you see Milwaukee, you see Cleveland, you see these markets are still up, but they’re now up like two or 3% instead of last year, six or 7%. So everything, appreciation rates are slowing down all across the country. So let’s move on to mortgage rates as this is going to be a very important barometer for next year.
It also tells us a lot about what’s been going on this year. This has been a positive story. I know people are not happy with six and a quarter percent mortgages, but they should be because a year ago they were about 6.75. If we look at January, they peaked out at seven and a quarter. Now they’re at six and a quarter. A 1% drop in mortgage rates over the course of a year is good news. That is a positive thing for the housing market. This is one of the reasons why the market has shifted this year. Like I said, we started 2025. People were very worried about a crash because mortgage rates were 7.25, horrible affordability. Inventory is going up. Well, maybe it’s not the banner mortgages that we saw during COVID, but the fact that rates have gone down, one full percent matters. That brings millions of people into the housing market.
That improves affordability for investors and for homeowners. And so that’s a really good thing. Where we go into next year, I’ve made my predictions about this. They will hopefully stay in the low sixes, maybe even get into the high fives. And there’s some encouraging signs about that, right? If the Fed keeps cutting rates, that could put more downward pressure if yields keep falling. The other good news, if you’re into this kind of thing is that the spread between treasury yields and mortgage rates is coming down, which is one of the things that has propped mortgage rates up. So I think there’s good momentum here that mortgage rates could keep coming down a little bit, but are probably not going to be coming down in any dramatic way, unless something dramatic happens in the economy. One thing I did want to call out for real estate investors, just a piece of advice is that refinancing is starting to get a little bit more attractive.
I think when you go from seven and a quarter to six and three quarters, people aren’t really that interested. But when you lose a full percentage point, depending on the price of your house, that could be hundreds of dollars per month in cashflow that you could be generating or saving if it’s your primary residence by seeing rates come down this much. And I know people might say, “Oh, Dave, you said rates could come down a little bit more.” You could wait, but I just want to call out that just in this last year, there’s some data that came out from the mortgage monitor that comes out from ICE each month. They said that 3.1 million more mortgage holders are sort of in the money for refinancing over the last couple of year because they could reduce their rates by 75 basis points. I thought that was pretty interesting.
I didn’t know that math before, but if you can cut your rate by three quarters of a percent, so 0.75%, that usually makes it worthwhile for most people. And so if you are holding onto mortgages right now that are in the sevens, if they got a seven in front of it, if they got an eight in front of it, because investors might have one with an eight in front of it, you may want to consider refinancing right now. You could wait a little bit, but things bounce up and down. It’s hard to know. I actually got a message on Instagram yesterday from a guy who said that I saved him $800 a month. I guess he has an expensive mortgage. I think he lives in LA. I saved him $800 a month because I told him to refinance before the rate cut because I said that mortgage rates were going to go back up and they did.
And apparently that saved him a whole bunch of money. So I just want to point out that waiting doesn’t always work and considering refinancing might be worth it. I think it’s at least worth talking to a banker if you have a mortgage with a seven or eight in front of it, something to consider. So I think high level housing market stuff, this is relatively positive. We need affordability to improve. And so seeing relatively flat prices, in my opinion, is pretty good. I don’t want to see prices crash, but I don’t want to see them explode again. I want to see them stay stagnant. That’s really good. And mortgage rates have come down. They’re starting to come down a little bit more. I think that’s a great way to end the year in 2025 and bodes well for the beginning of 2026. We need to talk more about affordability though, because this is what everything in the housing market hinges on.
And we’re going to talk more about new data on affordability right after this quick break. We’ll be right back. As a real estate investor, the last thing I want to do or have time for is 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 out by property and figure out who’s late on rent. Then I found Baselane and it takes all of that off my plate. It’s BiggerPockets official banking platform that automatically sorts my transactions, matches receipts, and 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 that I don’t need anymore. Get a $100 bonus when you sign up today at baselane.com/bp.
Welcome back to the BiggerPockets Podcast. I’m Dave Meyer here giving our December housing market update for 2025. Before the break, we talked about flat home prices, declining mortgage rates. What those two things mean though, when you take those two things in aggregate, they give us what I think is the most encouraging sign that we have seen in the housing market for a year, maybe more, maybe three years. Home affordability has hit its best level in two and a half years. That’s as of September, last time we have data for this, but this is fantastic news for the housing market and it is driven by the two things that we talked about before the break. Rates are easing and prices are pulling back. Now, I know I said that prices are up 1.4%, but when it comes to affordability, what you need to measure is how do prices compare to inflation?
And if they’re up 1.4% year over year, but inflation’s at 3%, they’ve actually gone down in inflation adjusted terms. And that means that it is more affordable for people, right? Their wages are going up relative to the price of a home that makes housing more affordable. If you combine that with falling mortgage rates, we are getting improved affordability. This is great news. This is something I think is worthy of celebrating. Now, it is not the best affordability we have ever seen. It is far from it. We just in the last year, we’re near 40 year lows. So we’re probably at 38 year lows for affordability. This is not like we should be celebrating because all of a sudden housing is affordable. We should be celebrating because you got to start somewhere. The trend was moving in the opposite direction for so long. Housing was getting less and less and less affordable.
That’s not good. It’s got to bottom out and start moving in the right direction. And fortunately, I think that’s the direction we’re heading. So that is good, right? We are seeing that across the board. If prices stay flat orish, decline a little bit like I think they will next year, mortgage rates come down a little bit. That’s the affordability movement that we need. This is the whole premise of the great stall that I’ve been talking about for months or years now is that this is the most likely path for the housing market. And it does seem that it is true, at least as of now. So I think that’s a good thing. Just to build on this a little bit more, actually out of the hundred largest markets in the United States right now, 12 of them, primarily in the Midwest, have now returned to long run average for affordability.
I know that doesn’t sound like a lot, 12%. It really isn’t a lot. But given where we’ve been over the last couple years where every market has been unaffordable, the fact that there are any markets in the US that are getting close to historic levels of affordability, again, is good news to me. I know we have a long way to go, but baby steps and we’re taking some baby steps getting there. Now that we’ve talked about affordability, let’s call it our main story for today on this housing market update is about the behavior of sellers in the housing market. This is really important to inventory because the story of this year in 2025, and really honestly for 2022, 23 and 24 has all been about what is happening with housing inventory. It is so important. It is the most important metric for really trying to understand where the market is today and where it might be going in the next couple of months.
Because when inventory is high, prices face downward pressure. They might be flat, they might go down a little bit, but you have that downward pressure weighing on housing prices because there are more sellers than buyers. When the opposite is true, when inventory is low, prices have upward pressure. There are more buyers and sellers. They tend to bid up the prices and so prices tend to go up and that’s how inventory influences the market. Now, during the pandemic was an extreme example, an example of super low inventory. But when we started 2025, we were starting to see that story unravel where we were seeing really high inventory growth rates. Now inventory wasn’t high in some historical context, but the growth rate was up. Like we saw in January, February, March, 25% year over year, meaning that in January of 2025, there was 20, 25, 30% in some markets, more homes for sale than there was in January 2024.
That matters. That’s a big number. I’d like to call out that we, on the BiggerPockets Podcast, we’re not panicking and saying that the market was going to crash like everyone else was saying, but it puts downward pressure on pricing and it’s something that is really important to watch because if you listen to the Crash Bros, the people who are calling for a whole crash in the housing market, they were saying, “Oh my God, look, inventory is up 25% year over year. Next month it’s going to be 40. Next month it’s going to get 50 or 60.” And yes, that of course is feasible. But did that happen? No. If you fast forward to today, we are not seeing accelerating inventory. We are not seeing inventory spiral out of control month over month over month. Actually, we are seeing the opposite. If you fast forward today and look at the numbers for October of 2025, the most recent data we have for inventory, it’s not up more than 25% year over year.
It’s not gone up beyond where it was in January, February, March. The opposite has happened. In fact, right now in October, inventory was up just 4% year over year. So the growth rate in inventory has not exploded. It’s actually contracted and not only has the growth rate slowed down, but we are still below pre-pandemic levels of inventory. If you look at what Redfin shows us, we are about 200,000 homes short in inventory of where we were in October of 2019. So this is under control. This is a crucial thing for everyone to understand about the housing market because it’s one of the reasons why I think we’re going to see roughly flat pricing next year, maybe a little down nationally. And it’s one of the reasons why I’m not super concerned about huge drops in the market right now. But let’s just take a minute and talk about where inventory might go because there’s different ways that inventory changes, right?
One way inventory drops is that demand picks up, right? If there’s the same amount of homes for sale, but more people want to buy them, we’ll have less inventory because those homes that are for sale are going to move quicker. The other way that inventory can drop is that new listings go down. That’s basically the number of people who choose to sell their property that can actually go down. And that’s actually gone down quite a bit, right? New listings, people are saying, “Oh my God, people are panic selling. Sellers are flooding the market.” No, they are not. That is just objectively not true. New listings are flat year over year. Don’t listen to any of that nonsense that you might see. People are calling for panic selling like, “Oh my God, everyone’s freaking out. ” No, that’s just not true. New listings are actually up 0.4% year over year.
It is completely flat and that shift is not just one month that has been happening for the last couple of months. The big thing that has changed though, it’s not demand, it’s not new listings. The change that is happening right now is what’s called delistings. And this is a new metric. We don’t talk about this a lot on the show, but it is important right now because delistings, which is defined as just a property that was listing for sale that was pulled off the market for more than 31 days without selling or going under contract. And the reason I’m bringing this up is because this is one of the new dynamics that’s kind of emerging and shaping behavior in the housing market. Basically what’s going on in mass is that sellers are looking at the current market. They’re seeing that sales conditions are not as good as they’ve been over the last couple of years.
And they’re just saying, “Nah, I’m kind of out on this one. I’m going to wait this one out and see maybe if there’s better conditions for listing or I’m just going to stay in my property. I’m not going to sell it. I’m going to rent it out for another year, another two years. I got to keep living here, whatever.” That trend is really high right now. Actually, home delistings is at the highest level it’s been since 2017. And this increase in delistings helps explain why prices are rising despite sort of tepid home buying demand, because inventory is falling because of this. Remember, new listings are flat. If de- listings go up compared to new listings and demand stays the same, that means that we are getting more balanced supply and demand dynamics. Another reason why this is a sign of a correction, not a crash.
If we look at the behavior of selling and what they’re doing right now, it is completely logical. If they are not getting the prices they want, if they don’t want to drop price and they don’t have to sell, they’re just choosing not to sell. And if you dig deep into this data, you’ll see that the areas where de- listings are going up the most are the areas where their strongest buyers market, where basically the areas where it’s the worst time to sell, that’s where people are de- listing the most. Now that makes sense, right? If you don’t like selling conditions, then you de- list your property. And that’s why I say this is a normal correction because what the crash bros say is, oh my God, when inventory goes up and it becomes a buyer’s market, people panic and add more and more inventory to the market.
The exact opposite is happening. People say, “Oh, this is not a good time to sell. I’m not going to panic and list my property for sale. I’m actually going to just take my property down off the MLS and not sell it. ” This is what happens during a normal correction. It’s sellers reacting to selling conditions and saying, “I don’t want any part of this. I am going to de- list my property.” So just as an example, the markets with the highest percentage of de- listings are those markets that are correcting. It’s Austin, Miami, Fort Lauderdale, Dallas, Denver. Again, what you would expect because it’s logical. Now, of course, there is a big question mark here. Is this just temporary? Are people just taking their properties off the market for a couple of months and then they’re going to list them in the spring and we’re going to all of a sudden get a flood of inventory?
So far, we have some data on this and the answer is no. So far, only 20% of properties that have been de- listed have come back on the market, which in my opinion is pretty low. I was kind of surprised by that. But I do think that’s probably due to seasonality, right? No one is going to de- list their property in September, October, and then be like, “You know what? I’m going to re-list it on Thanksgiving weekend or right before Christmas.” If you are going to de- list it, you’re probably going to wait till at least January or maybe you wait to sort of the hot months of March or April where there’s typically the most seasonal home buyer activity, you might choose to do that. My guess is yes. I think we will see an uptick in real listings in the spring. I think we’ll see that number go from 20% to something higher, maybe 30%, 40%, 50%, because I personally know investors who are doing this.
A lot of flippers are saying, “You know what? It’s cooling off right now. I’m going to wait and take my chances in the spring.” I think we’ll see more and more of that, but flippers make up a relatively low percentage of all the homes that hit the market. If you want to understand the broad trends, you have to figure out what’s going on with home owners, traditional homeowners. And we just don’t know right now. I personally, just my guess based on vibes of the market, I think relistings will go up, but it won’t go up to 100%. I think some people are choosing to say, “Maybe I should stay in my existing home or I’ll rent this property back out. ” It really depends on what happens for homeowners. If they start seeing, “Hey, I can move at a better rate and affordability is getting better,” they might move.
If not, they’re probably going to stay in their homes. But this is something that we definitely need to watch because as I said, the housing market is going to be built on affordability and inventory. These are the things that we watch most closely. Talked about affordability getting a little bit better right now. That’s great news. Inventorying, leveling out, depending on who you are, you might like this or not like this, but it is going to provide some stability to the housing market. I think it provides that floor for where prices could fall. It can’t fall that much if de- listenings are happening. They can’t fall that much if inventory is leveling out. And so that to me, again, points to a correction, not a crash. But there is one other thing we got to look at. If you want to understand how far the market might fall or where it’s going to go, you need to look at distress because distress, foreclosures, delinquencies matter a lot when prices start to go down.
And we’re going to dig into the newest data that we have on that market stress, including into that article. Everyone keeps sending me that there are now 900,000 mortgages underwater. We’re going to talk about all that when we come back from this quick break. Stick with us. Henry, it’s holiday season. What do you get a real estate investor for the holidays? Well, if that real estate investor is me, you can get me a 15-unit apartment building. Oh, does that work? Do people just send you apartment buildings? They are now. Well, I got a suggestion actually. If you are looking for a gift to get a real estate investor, buy them a ticket to the upcoming Texas Cashflow Roadshow. We’re going to be in Texas. We’re going to Austin, Houston, and Dallas from January 13th to 16th, and we’re going to be having meetups, workshops, live podcast recording.
We’d love to see you all there. So if you’re thinking you got a friend in the Texas area and they’re trying to get into real estate investing, they’re trying to scale their portfolio, go to biggerpockets.com/texas and go buy them a ticket.
Welcome back to the BiggerPockets Podcast. I’m Dave Meyer, giving our December 2025 housing market update. So far, we’ve talked about affordability improving. I love it. It’s great news. It’s wonderful for the housing market. We’ve talked about inventory starting to stabilize. Another good sign that the market is not in free fall. But the last thing we need to cover, which we’ve been covering a lot over the last couple of months, is market stress because we talked about inventory dynamics and why it’s not supporting the idea of a crash on a national level, but of course things can change. And we want to know if the solid sort of foundation of the market could come undone. And to this, we need to look at market stress. And I cover this stuff a lot more than I used to because there’s just so much noise about market crashes that I feel it’s important for me to reiterate that if the market crashes, markets can crash, but there are warning systems in place essentially in the data.
We would see some of these things coming, unless there’s a black swan event, right? There could always be a COVID, a nine eleven, something like that that no one sees coming and causes the market to crash. I just want to say those things are always possible, but all the people out there on social media screaming about a housing market crash, they’re all pointing to inventory and demand drying up. I just need to say those kinds of things we have data for, and I’m going to go through it with you right now. First, let’s talk about mortgages being underwater, because there was some article that came out that said, I think it was in MarketWatch or something, 900,000 homes are now underwater on their mortgage. And that sounds scary. 900,000, that’s a lot. It’s one and a half percent of all mortgage holders, which may not sound like a lot, but that’s a reasonable percentage of the housing market when you’re specifically talking about distress, right?
Those things can snowball. So is this a big deal? No, not really. I don’t think so. To me, this honestly doesn’t matter that much. I know a lot of people are going to disagree and get mad about this, but hear me out, right? Mortgages being underwater is not a disaster. It is not an emergency. It is something that happens quite frequently. Anytime prices correct or drop in the housing market as a whole, some mortgages are going to be underwater. You haven’t heard this term, underwater just means that you owe more on your loan than the house is worth. So if you went out to sell that property, you would have to come out of pocket to pay back the bank or you’d have to go through a short sale. And that sounds terrible because it’s bad. It is bad. I’m not saying that being underwater is a good thing.
It is certainly not. It is really bad. But it is not an emergency because just because your house is underwater does not mean that you need to sell it. It doesn’t mean that you’re going to be foreclosed on. That is not how this works. This is a common misconception I hear people have all the time. They say, “Oh, the bank’s going to foreclose because my house is underwater.” No, no, that is not how it works. Banks only foreclose if you stop paying your mortgage. So houses being underwater happens and the most common reaction to that is waiting. You just do nothing. You just keep paying your mortgage each and every month, and then eventually the market will pick up again and your house won’t be underwater. That is how normal corrections happen. And so I’ve said for months that we were in a correction. So am I surprised that some mortgages are underwater in a correction?
No, not at all. That’s what happens. What is an emergency or what can become an emergency, I should say, is forced selling. What happened in 2008 and what would cause a crash again is if there are all these mortgages that are underwater and the people who own those mortgages can’t pay on them. That is a problem. Just in general, when people stop paying their mortgages, that is a problem. That’s when we really start to get worried about a crash. So I’m personally not so worried about mortgages being underwater unless at the same time there is force selling because those two things together can be bad, but mortgages being underwater on their own is not so bad. It is not that big of an emergency. So let’s look at delinquencies. Right now, the data we have for August of 2025 is that delinquency rates did go up 16 basis points.
So that’s 0.16% in August compared to where it was the same time last year. That is the first time it’s gone up in a couple of months. Actually, it dropped year over year in June and July. And so I would count that as normal variance right now. We are still below 2019 levels. And again, the reason I say this pre-pandemic level stuff is because stuff got so crazy during 2020 and 2021 that you can’t really rely on the data for that. There was a moratorium on foreclosures in 2020 and 2021, and for some kinds of mortgages, that extended almost into this year. And so the data for the last five years is really hard to rely on. So what I do in this situation is I say, “Hey, what was it in 2019? That was the last normal housing market we had.” And although we are still below those delinquency rates, they’re kind of coming back to that level.
So it’s not way better than it used to be, but it’s about where it used to be. So I think that’s really important because in 2019, no one was screaming about a housing market crash or a delinquency crisis or foreclosure crisis. It was just a normal market. And so I think that’s probably where we are these days. Now, if you dig into it and look at FHA loans, there are some increases in delinquencies in FHA and VA loans compared to last year. That is important to know, but those two types of loans had foreclosure moratorium programs in place until this spring. And so seeing them go up from last fall to now is not surprising because those programs expired. And so we’re going to have some increases in delinquencies. But this is something we need to keep an eye on. I personally look every month when FHA and VA loans delinquency rates come out because I do think this could be a warning sign.
Like I said, for crashes, there are some warning signs in the data. This is a warning sign. Right now, I don’t think we’re at warning emergency levels, but since it has been going up, I think it’s something that we will keep a close eye on, but you should know it is not at emergency levels right now. Now, delinquencies are one thing, and if they get serious, if we have a lot of serious delinquencies, that leads to foreclosures. Now, foreclosures are up year over year. They’re up 6% year over year. Again, we are coming from artificially low levels of foreclosures due to the pandemic. So I am not surprised to see that they are up year over year. And I am encouraged to see that foreclosure starts, which is kind of the beginning of the foreclosure process, is actually down 10% year over year. So again, this is not like it is spiraling out of control.
It’s sort of just to be expected that we are reverting back to normal in terms of delinquency rates and in terms of foreclosures. So is there stress in the market? Yeah, there is a little bit more stress than where it was a year ago, but we are not at emergency levels. And if we start getting towards those emergency levels, trust me, I will be the first one to let you know. I look at this stuff every single month. I have no benefit for telling you that the market is doing well when it is not. I am just telling you, we are still below pre-pandemic levels. Things are starting to inch back up. Where we go from here is a question mark. It is something that we’re going to keep an eye on. But as of right now, there are not significant signs of stress in the housing market.
Broadly speaking, American homeowners and investors are paying their mortgages and that is the best sign that we have for stability in the housing market. You add that on top of inventory moderating, you add that to affordability improving. It still looks to me like we are in a correction and not a crash. And to me, that is the best thing that can happen for the housing market because we need affordability to improve, but obviously we don’t want the bottom to fall out and it looks like that’s exactly what’s happening right now. That’s what we got for you today for our last housing market update for 2025. Thank you so much for listening. We will certainly be back with another episode soon. And we, of course, will be continuing our housing market updates in January of 2026 when we get into the new year. Thanks again. I’m Dave Meyer.
We’ll see you next time.

This article is presented by Express Capital Financing

Before I bought my first property, I thought understanding a “market” meant understanding a city. If Phoenix was booming, I assumed the whole metro was booming. If Cleveland cash flowed, I figured anywhere within 20 minutes of downtown must be a good deal. And if Nashville was full of cranes and construction, then every submarket had to be a winner.

It took precisely one disappointing deal for me to realize how far off that thinking was.

Real estate does not behave like one big organism, moving in one direction at once. It doesn’t reward every neighborhood equally. And it absolutely does not care what city-level headlines say. Once you really start studying successful investors (or the lenders who fund them), you begin to see that the difference between a profitable deal and a painful one is often just a few streets, a school boundary, or a subtle shift in local demand.

What seasoned investors understand, and what most beginners miss, is that real estate is hyperlocal. Not just neighborhood-by-neighborhood, but often block-by-block. And once you see how local the game truly is, you finally understand why the same city can produce both incredible deals and terrible ones at the same time.

I’ve spoken with thousands of investors over the years and watched them learn this lesson in different ways. Some discover it when they find out their flip sat on the market 87 days while an identical house one mile over sold in a bidding war. Others learn it when a rental that looked great on a spreadsheet ends up in a pocket with high turnover and weak tenant wages. And still others figure it out the easy way, usually because a lender, like the team at Express Capital Financing, stepped in and explained what the numbers were really saying.

The pattern is always the same: Investors don’t fail because they chose the wrong strategy. They fail because they used the right approach in the wrong market.

Why Knowledge Is Power: Understanding Real Estate Markets

Years ago, I watched two investors buy similar single-family homes in the same metro, only six miles apart. Both were fixers, needed about $40,000 in work, and were purchased the same month.

Investor A bought in an emerging neighborhood where renovated homes were selling in under 10 days. Families were moving in, retail was expanding, crime was trending down, and local school ratings had improved for three consecutive years. Investor A’s flip sold above asking within 72 hours.

Investor B bought in a pocket that looked similar on paper, but the retail buyers weren’t actually moving into that specific corridor. It was wedged between two major roads, the schools were struggling, and renovated homes simply didn’t command much of a premium. The flip sat on the market for nearly three months—and eventually sold at a loss.

Same city, renovation, contractor, and timeline—entirely different outcomes.

That was the moment I stopped thinking about “cities” and started thinking about “micro-markets.”

The Personality of Your Market

Every area falls into one of three general personalities. Knowing which one you’re operating in determines everything: your financing, renovation style, hold period, exit strategy, and even your risk tolerance.

1. Appreciation markets

These are the high-growth areas fueled by corporate relocations, population booms, and steady economic expansion. Cities like Denver, Nashville, Austin, Raleigh, and Salt Lake City live in this category. Prices tend to climb faster than rents, inventory stays tight, and competition is fierce.

These markets reward patience and value-add projects. You don’t buy for cash flow here; you buy for equity, long-term appreciation, and the ability to force value through renovation. But you also have to be a disciplined underwriter, because mistakes get expensive fast.

2. Cash flow markets

These are the reliable, steady, cash-on-cash performers. Think the Midwest, Rust Belt, and many Southern metros. You can still buy under $150,000, cash flow from day one, and find motivated sellers and wide spreads.

These markets reward long-term buy-and-hold investors who understand tenant profiles, wage growth, and the real cost of maintaining older homes. Appreciation exists, but it’s typically slow and predictable rather than dramatic.

3. Hybrid markets

These are the sweet-spot cities where investors get both cash flow and appreciation: Tampa, Charlotte, Greenville, Oklahoma City, and parts of Phoenix. They aren’t as volatile as high-flying appreciation markets, but they still offer long-term upside and decent cash flow.

Hybrids are some of the best places to BRRRR because deals still exist, demand is steady, and rental growth continues year after year. Investors who understand construction costs and market ceilings do incredibly well here.

Learning to Read the Neighborhood

If you want to understand a market the way experienced lenders do, you have to stop looking at big data and start focusing on clues.

Days on market

Nothing communicates demand more clearly than DOM. A neighborhood where homes go under contract in two weeks behaves differently from one where houses sit for 90 days.

Renovated vs. unrenovated spread

In some pockets, you can buy an unrenovated house for $190,000 and sell a renovated one for $220,000. That’s barely enough spread to justify the work. 

In others, you can buy an outdated home at $160,000 and sell a renovated home at $280,000. That’s where serious flips happen.

Price-to-rent ratio

Strong rental corridors often fall below 16 on this ratio. Appreciation corridors typically sit above 20. Hybrid markets bounce in the middle.

School zones

A single school rating change can swing ARV by $50,000-$150,000. This is one of the most consistent patterns lenders see.

Crime concentration

Not crime citywide; crime within a three-street radius. Investors, ignore this at your own risk.

Local wages

Your spreadsheet does not determine your rent; it’s defined by what your tenants earn. If your ideal rent is 30% higher than what the median wage supports, the numbers will not play out the way you want.

What If Market Conditions Shift?

Real estate markets are fluid. Interest rates rise, population trends shift, inventory swings back and forth, and buyer psychology changes unexpectedly. 

Smart investors adapt, like so:

• When interest rates rise: Buyer urgency drops, inventory builds, and negotiation power returns to the investor. BRRRR opportunities often expand here.
• When inventory spikes: This is prime time for value-add investors. More choices mean better pricing and less competition.
• When rents surge: Buy-and-hold deals become more attractive, even in pricier metros.
• When prices flatten: Your renovation plan (and ability to improve a property without overbuilding) becomes your competitive advantage.

The Process That Simplifies Every Market

The most experienced investors follow a predictable pattern when evaluating a new market:

• First, determine the market personality: cash flow, appreciation, or hybrid.
• Then study how retail buyers behave: DOM, finished comps, and price ceilings tell the truth.
• Then study renter behavior: actual wages, rent trends, vacancy, and local job stability.
• Then look for distressed inventory and spreads that allow value creation.
• Finally, choose the strategy that fits the neighborhood; not the strategy you prefer.

And remember, you’ll lose if you:

• Force a flip strategy into a cash flow neighborhood
• Try to BRRRR in an area with no spreads
• Buy rentals where wages don’t support rent growth

But when the strategy and market align, you unlock the real power of real estate: repeatable, scalable, durable returns.

Why Your Lender May Know Your Market Better Than Anyone

Here’s something most new investors don’t realize: Your lender sees more deals than your agent, contractor, mentor, and spreadsheet combined. They see which ARVs hold, which collapse, which overpay, which deals fail inspection, which neighborhoods produce strong exits, and which consistently burn new investors.

Express Capital Financing works with these patterns daily. They know how to structure financing that reflects real neighborhood behavior, not theory. They know how to help an investor avoid paying too much for a flip, or borrowing too little for a BRRRR, or walking straight into a market mismatch they could’ve avoided.

I’ve heard countless stories where investors avoided massive losses simply because a lender pointed out a weak comp or an inflated ARV ceiling. Sometimes the deal that falls through is the one that saves you.

The Simple Truth

You don’t need to understand every market in America, follow national headlines, or chase trends across states. What you need is a deep understanding of the small piece of ground you’re investing in. Because when you understand your market at the neighborhood level, everything becomes clearer:

• How much to offer
• How much to renovate
• How to finance
• How to price
• How to scale

Most investors fail not because real estate is risky, but because they never actually learned how to read the market.

Once you do, you’re playing a completely different game. And when you’re ready to fund the deal the right way, Express Capital Financing is prepared to help.

This article is presented by Walker & Dunlop.

Smart multifamily investors don’t wait until tax season or year-end to understand how their properties are performing. The most successful owners take time each quarter to closely review both their internal numbers and the trends around their property. A consistent quarterly routine helps you catch issues early, identify opportunities, and make confident decisions backed by clear data.

The challenge for many investors is that their information is scattered. Financials sit in one place, property operations in another, and market research is across multiple websites. 

That is why tools like WDSuite can be helpful. Instead of hunting down market insights across multiple sources, WDSuite brings together neighborhood-level data, rent benchmarks, demographic context, and valuation estimates into a single, easy-to-access platform.. This makes the market side of your quarterly review much easier to manage.

Quarterly reviews give you a clear picture of where your portfolio stands today, and what adjustments you may need to make for the future. Here is a simple framework to follow.

A Simple Quarterly Review Framework for Multifamily Investors

A strong quarterly review focuses on three core areas.

1. Financial performance check

This comes directly from your internal books. You look at income, expenses, cash flow, and your overall financial stability.

2. Operational health check

This covers your occupancy, leasing activity, turnover, and maintenance. These metrics show how well the property is performing day-to-day.

3. Market position check

This is where WDSuite supports your process.The platform provides rent benchmarks, market-level occupancy context, demographic information, and valuation estimates to help you understand the environment in which your property competes.

By using the same structure every quarter, you create a repeatable system that reveals patterns earlier and leads to better decision-making.

Financial Performance Metrics to Review Every Quarter

Your financial data tells you how your property performed during the quarter, but it needs market context. WDSuite does not track your internal financials, but it strengthens your review by providing market context that helps you understand how your property stacks up against local comps.

Net operating income trends

Your NOI comes from your own income and expense statements. Once you calculate it, you can use WDSuite’s rent benchmarks and market data to assess how your NOI performance aligns with broader neighborhood conditions..

Operating expense ratio

Your OER helps you identify unusual changes in spending. WDSuite adds context by allowing you to compare current rents against historical and projected benchmarks. If your expenses climb while local rents stall, that may signal a need for operational adjustments.

Rent roll and revenue per unit

Your rent roll tells you what you are charging today. WDSuite allows you to compare those numbers with local rent data. If nearby properties are charging more or seeing stronger growth, that’s a helpful signal for your pricing strategy.

Market position and valuation signals

While DSCR is an internal calculation, WDSuite’s Automated Valuation Model gives you an updated estimate of your property’s value based on current market inputs. This helps you monitor how your equity position may be shifting over time.

Operational Health Metrics to Review Every Quarter

Operational data comes from your property management system or team, but WDSuite provides important context that helps you interpret this information.

Occupancy and leasing activity

Your occupancy numbers show how full your building is. WDSuite provides market-level occupancy context that can help you determine whether broader market conditions may be influencing performance.

Turnover and resident stability

Turnover costs and turn times are internal metrics, but WDSuite’s demographic insights such as income levels and renter share can help explain why resident behavior may be shifting over time.

Maintenance and workload indicators

While maintenance trends come from your own systems, WDSuite can provide helpful neighborhood context. Changes in demographics or demand patterns may influence resident expectations or upkeep needs.

Competitive positioning

Your operations do not exist in isolation. WDSuite allows you to compare your performance against broader market benchmarks and indicators so you can understand whether you are ahead of local competitors or beginning to fall behind.

Market Position Metrics to Review Every Quarter

This is the part of the quarterly review where WDSuite provides the most value. Understanding your market position helps you interpret your internal results with much greater clarity.

Market rent levels and growth trends

WDSuite shows rent benchmarks and rental share information for your neighborhood.. This allows you to assess whether your pricing strategy aligns with local trends.

Market occupancy and demand indicators

Local occupancy patterns help you understand whether your building’s performance is driven by internal operations or external market shifts.

Demographic and neighborhood shifts

WDSuite provides insight into income levels, population trends, employment characteristics, and renter shares. These details help you anticipate leasing trends and plan for future demand.

Property valuation signals

The platform’s Automated Valuation Model provides an estimated property value that reflects recent market data and can be reviewed as part of a quarterly asset review.. This is a helpful way to track the direction of your equity position.

Competitive landscape

WDSuite summarizes key market indicators so you can understand how your property compares to similar buildings in the area. This helps you identify strengths, weaknesses, and areas for improvement.

How WDSuite Supports Your Quarterly Review

WDSuite does not replace your property management tools or financial reports. Instead, it fills the market intelligence gap that most investors struggle with. By consolidating rent benchmarks, market-level occupancy context, demographic insights, and valuation estimates, WDSuite gives you the context you need to understand how your property fits into the current market.

This makes your quarterly review faster, more precise, and far more actionable. Market research becomes easier to access, valuation signals are readily available, and the competitive landscape becomes much easier to interpret.

Example Quarterly Review Workflow Using WDSuite

Here is a simple step-by-step process that combines your internal data with the insights inside WDSuite.

1. Gather your income and expense statements, and calculate your financial metrics.
2. Review your operational data, including occupancy, leases, and maintenance.
3. Open WDSuite to review local rent benchmarks and market context.
4. Review market occupancy and rental demand indicators.
5. Review WDSuite’s multifamily tenant credit insights to assess affordability and pricing power within the surrounding market.
6. Look at demographic and neighborhood changes in WDSuite.
7. Check the Automated Valuation Model for an updated property value estimate.
8. Compare your internal numbers with the surrounding market.
9. Create action steps for the next quarter based on the full picture.

This workflow keeps your review simple and consistent, while giving you a strong foundation for decision-making.

Final Thoughts

Quarterly reviews give multifamily investors a powerful advantage. Your internal financials and operations show what happened inside your property, but you also need to understand what is happening around it. WDSuite strengthens your review process by providing the market-level data you need to interpret your results with clarity and confidence.

By pairing your internal numbers with reliable neighborhood insights and valuation estimates, and granular multifamily tenant credit data, you can make smarter decisions, spot trends early, and protect the long-term health of your portfolio. A simple quarterly routine, supported by strong market data, is one of the most effective habits an investor can build.

This article is presented by LegalZoom.

Perhaps you’re just dipping your toes into real estate investing with your first property, or you might have a bit more experience and are currently renovating a couple of units. 

Wherever you are on your investing journey, if you’re a small-scale real estate investor, it may seem like the whole “setting up an LLC” aspect of it doesn’t apply to you. It may seem excessive and too time-consuming for what it’s worth. Surely putting a fresh coat of paint and improving a couple of things in an older unit before renting it out isn’t that big a deal, legally speaking?

The truth is that many small real estate investors underestimate how much legal exposure comes from renovation work. It’s not the scale of your investment that should get you thinking about setting up an LLC—it’s the type of investment. 

If you’re investing in a turnkey property via a company, you may well be off the hook because someone else owns that liability (more on that later). But if you are managing the renovation work yourself, even on a single investment property, the potential benefits are substantial. 

Here’s how LLCs protect you from liability claims on renovation.  

Common Legal Disputes During Renovations

First, you might be wondering, “How bad can it really be?” Well, here’s a taste of what can go wrong on a renovation site that could lead to a liability claim:

• A contractor gets injured on-site and sues the owner.
• A subcontractor files a mechanics lien.
• A renovation causes damage to a neighboring property.
• A flip buyer claims undisclosed defects.
• A vendor contract dispute escalates.
• Poorly drafted rehab agreements lead to overruns or nonperformance.
• Unlicensed work creates liability after resale.

As you can see, there are a ton of legal “unknowns” that come with a renovation project. Your biggest risk is often not the property itself, but the vendors and subcontractors performing the work. They can sue you if something happens to the builders on the premises, but they can also cause litigation much further down the line if the renovation work isn’t completed up to standard. 

By far the riskiest aspect of any renovation work is that the legal side of things (who owns responsibility for what) is often vague and complicated. The more subcontractors who are involved in your project, the greater the risk that someone working on site is not properly qualified/unlicensed, which can have huge consequences. It could be just a single plumber/installer. 

Not all states require contractors to have a specific warranty; instead, they stipulate vague requirements along the lines of “fitness for intended use and habitability” (a Michigan example). If a structural defect is discovered after a sale and you’re sued by the new owner, and the contractor warranty will not cover you, you are liable.

Lien filings can be disastrous for a real estate investment. When a contractor orders renovation materials, the supplier has a lien on part of your home equal to the cost of the materials. If a contractor, for whatever reason, ends up not paying the supplier, the supplier can sue you for the cost, or, in the worst-case scenario, force the sale of the property to cover their costs.

Investors in multifamily units should be prepared for costly lawsuits from residents who, at some point, discover that they live in a building that is insufficiently or improperly renovated. If you own a condo, for example, you can be sued for a flooded communal parking garage (a real case in Florida) or an under-renovated lobby. Again, depending on your local legislature and the exact building, either the building developer, or you, the owner, can be filed against.

The right question isn’t, “How likely am I to get sued?” but “How much complexity is involved in my renovation?” The more complex the renovation project, the more trouble you can land in if something does go wrong.  

How Personal-Name Ownership Amplifies Liability

Quite simply, if you own a renovation property in your own name, you are personally responsible for any legal claims filed against you. You can then stand to lose anything you own, including your savings, any other investment properties you own, or even your home. 

Your premises liability insurance does not cover any contractors working on renovating your investment property. You may have heard about taking out a “Builder’s Risk”-type policy, and it’s true that it will cover personal injury or accident—to you or your tenant/a visitor, but again, not a contractor or subcontractor working on the property. Contractors need to be covered by their own insurance. 

You also cannot use personal liability insurance to pay for investment-related claims; you must take out premises liability for anything investment-related. 

As an investor, you’re not left with many options if you own your investment property under your own name. You are legally responsible, and there’s not much recourse if something goes wrong during or after a renovation because insurance won’t cover workers on your premises.

Why an LLC Creates a Legal Boundary Between Rehab Risk and Personal Assets

When you form an LLC for your investment properties, if the renovation contracts are between the contractors and the LLC, not you personally, then any legal claims in connection with the property can only be filed against the LLC, not you personally. That means that your personal assets (your own home, personal savings, car) are protected; only your company assets (say, another investment property held under your LLC) are open to claims. Even if a liability claim results in you having to pay the claimant, if you don’t have enough in your business assets, the claimant cannot go after your personal assets.

Considering how easy it is to set up an LLC, it’s a no-brainer for any real estate investor. However, you have to run them diligently and conscientiously. 

If you start mixing personal and business expenses, for example, by using your business bank account for your personal bills, you are breaching that legal LLC shield, potentially opening up your personal assets to litigation after all. But, so long as your LLC is run correctly, it does protect you. You also don’t have to run a company to form an LLC—you can be a single-member LLC.

How LLCs Work With Insurance

Despite all of its benefits, setting up an LLC does not mean that you don’t need to take out insurance on your investment properties. There are many scenarios where having an LLC will not protect you from a claim. For example, you still need home insurance to protect you from natural disasters and hazards like fires. 

Or let’s imagine another, far more common renovation-related scenario: Someone visits the premises while you are also there during the renovation and slips and falls. They could still sue you personally, and if the court found that the accident was the result of your own personal negligence, you could still lose personal assets. That’s why a premises insurance with a Builder’s Risk policy is still essential.

Why Investors Doing Value-Add Projects Should Always Have Entity Protection

Value-add investments are by their nature more complex than turnkey investments. There is more that can go wrong both during and, crucially, after the renovation—in some cases, even after you’ve sold the property. 

Think of an LLC as that vital shield against “unknown unknowns”: You simply can’t predict or avoid every eventuality because of the multiple parties involved, so it is essential to protect your personal assets against any claims that you are potentially being exposed to.

This article is presented by Rent To Retirement.

Most of us get into real estate because we think it’ll be simple. You just have to buy a property, rent it out, and the cash flows. Easy.

Then you actually try to buy a property, and suddenly you’re calculating cap rates on your lunch break, comparing insurance quotes late into the night, and explaining to your family why you’re stress-eating cereal at 11 p.m.

Buying a rental isn’t hard because the math is hard. That’s actually relatively easy. Buying a rental is hard because nobody shows you the part between “I want to invest” and “I closed on the property.”

This is the 90-day plan that fills that gap: the one that takes you from overwhelmed beginner to confident buyer without sacrificing your sanity or blowing up your home life.

Let’s break it down.

Days 1-7: Choose One Market Before It Chooses You

The first week of investing is a dangerous place. Everything looks good everywhere. You fall in love with a duplex in Ohio, then you see a cute single-family in Alabama.

Someone mentions Florida, and you start imagining palm trees and cash flow at the same time. Then TikTok says the entire Southeast is dead. Then a podcast says the Southeast is thriving.

And then you close your laptop and stare at a wall. Analysis paralysis is born from too many options, not too few.

Your brutally simple Week 1 goal is to pick one market. The market doesn’t need to be perfect or magical or shiny. It just needs to be good. This market should check these boxes:

• Growing or stable population.
• Diverse employers.
• Landlord-friendly laws.
• Solid price-to-rent ratios.

If you never choose a market, you’ll never choose a property. And if you never select a property, real estate remains a hobby you research—not something you own.

Days 8-21: Learn Just Enough Analysis to Move Forward

When the numbers start running, this is where beginners usually panic. Cap rate? Cash-on-cash return? What counts as a repair? Do you include utilities? Is landscaping an expense? Should you assume vacancies?

Relax. You do not need to become a financial analyst. You just need to understand five things:

1. Cash flow
2. Management
3. Expenses
4. Financing options
5. Your long-term plan

Your goals for the next two weeks are to:

• Analyze 20 properties.
• Define your buy box.
• Talk to a lender.
• Learn rent comps.
• Understand insurance and taxes enough to avoid surprises.

This is also where most things go wrong:

• Underestimating repairs.
• Believing listing photos.
• Misjudging neighborhoods.
• Using rent numbers that only exist in online forums.
• Forgetting reserves.

Trial by fire will eventually teach you these lessons. But it’s the most expensive, stressful way to learn. Here, you’re learning safely, before your money is on the line.

Days 22-45: Make Offers Before You Feel Ready

So you’ve done your market research, run your numbers, and you’re feeling confident about this property. Many new investors freeze at this point. It’s time to make the offer, but they lack the confidence to move forward, thinking they need more certainty, another spreadsheet, a new book, five more podcasts, and someone to guarantee the deal personally won’t go wrong.

That guarantee doesn’t exist. Your rule for the next three weeks should be: If a property fits your criteria, you make an offer. Offers are how you learn, and they force clarity.

With each offer, you learn:

• How quickly homes move in your market.
• Whether your numbers were realistic.
• What repairs actually cost.
• How sellers negotiate.
• What your risk tolerance really is.

Can things go wrong here? Absolutely. You might offer too high or too low, or get outbid. Your offer might get accepted (which could trigger a panic attack). And you also risk second-guessing your decision. 

But this phase is what transforms you from a spectator into an investor.

Days 46-70: Surviving the Inspection and Due Diligence Chaos

Every step of the buying process can be stressful and make you pause before moving on to the next step. Surviving the closing process is an area where beginner investors burn out. You receive a 58-page inspection report filled with phrases that sound horrifying:

• “Evidence of moisture intrusion.”
• “Recommend specialist evaluation.”
• “Possible structural concern.”
• “Monitor for activity.”

You Google each line item, then regret googling them. You briefly consider leaving the country.

But the truth is, every inspection report looks catastrophic if you’ve never seen one before. Your job is to separate cosmetic issues (normal, cheap) from functional issues (fixable, negotiable) from catastrophic issues (walk away).

Without experience, beginners either freak out and walk from great deals or shrug off red flags that will eat their profits.

This phase also demands real-time and emotional energy, including tasks like:

• Calling contractors during your lunch break.
• Reviewing quotes at midnight.
• Sending lender documents between meetings.
• Texting your partner, “I promise this will be worth it.”

Trying to do everything alone, while managing a career, family, finances, and your sanity, can be overwhelming. And this part of the closing process is what most people underestimate.

Days 71-90: Closing, Relief, Panic, Pride, and the Moment It Feels Real

As you get closer to the finish line, something shifts. The deal begins to make sense, the risks feel manageable, and the plan finally feels real. Even the inspection report becomes less intimidating. Tasks you once dreaded—like wiring earnest money, negotiating repairs, or setting up management—start to feel natural rather than overwhelming.

Then, the closing day arrives. You sign the papers, the keys land in your hand, and it hits you in a quiet and surreal way that you actually did it. After all the hesitation and overthinking, you bought a rental. You moved from learning to doing. At that moment, you realize you not only closed on a property, you beat analysis paralysis.

The fear doesn’t disappear; it just becomes manageable. You now get to understand how property maintenance and management will make or break your investment going forward.

Why Doing This Completely Alone Is the Slowest, Hardest, and Most Stressful Path

You can absolutely buy a rental with no support. But there is a real cost to the DIY route:

• Delays from overanalyzing.
• Missed deals from hesitation.
• Getting burned by bad contractors.
• Choosing the wrong neighborhood.
• Taking lenders at their word (not always good).
• Panic in due diligence.
• Significant time and life stress.
• Learning expensive lessons you didn’t need to learn.

Beginners underestimate how overwhelming this process becomes once it overlaps with real life, your job, your family, your finances, and your bandwidth. That’s why many first-time investors eventually bring in experienced help—not to outsource responsibility, but to remove the guesswork.

And this is where groups like Rent To Retirement quietly shine. They’ve already learned the hard lessons: vetted markets, filtered out bad deals, coordinated property management, and seen the pitfalls that beginners can’t recognize yet.

The Real Secret to Beating Analysis Paralysis

In the end, the solution to analysis paralysis is never just another spreadsheet, podcast binge, or waiting for the stars to align. What actually creates progress is structure. You pick one market, choose one strategy, focus on one property type, and follow a clear 90-day plan. When you narrow your decisions, you quicken your momentum.

The fear never completely disappears, but you don’t need to eliminate it to move forward. You simply need a roadmap and the right people helping you avoid the traps that slow beginners down.

That is where a group like Rent To Retirement becomes invaluable. They cut through the noise, steer you around the common mistakes, and give you the clarity that turns hesitation into action.

Your first rental does not need to be perfect. It just needs to be purchased. With the proper guidance, the right plan, and the willingness to take the next small step, you can absolutely get there in 90 days.

To get paid, trade the palm trees for parkas. That’s the resounding message emanating from Realtor.com’s top housing markets for 2026 forecast.

The number crunchers at the listings site analyzed the data and concluded that the top-performing real estate markets next year will be clustered in the Northeast, in smaller, generally affordable metros, where the drop in temperature—compared to the formerly red-hot Sunbelt—is matched only by the comparative drop in prices.

Cities such as Hartford, Connecticut (expected 17% price growth); Rochester, New York (15.5%); and Worcester, Massachusetts (15%), as well as traditionally affordable Midwestern cities such as Toledo and Pittsburgh, are projected to be front-runners in both home sales and price growth, as buyers chase affordable “refuge” markets, where their paychecks go a lot further than conventional coastal centers.

The Upside for Landlords

For prospective landlords looking to kick-start investing careers or add to their portfolios, these cities are ideal because of their relative affordability compared to rental income. In Rochester, for example, the average monthly rent as of December 2025, according to Apartments.com, is $1,302. Sister site Homes.com shows several cash-positive rentals, such as this three-bedroom home at 6 Custer Street, listed for $120,000 with an estimated monthly payment of $923 and rented to Section 8 tenants for $1,400/month.

This aligns with a new report from Rentometer, highlighting the cities with the highest yields for landlords—showing many of the same names in both. The report states: 

“When we look at the cities with gross rental yields of 10% or higher, a clear geographic pattern emerges. The majority of these high-return markets are clustered around the Great Lakes region—including cities in Michigan, Ohio, Indiana, and upstate New York—where home prices remain relatively affordable compared to national averages, but rent levels have held steady.”

Slow and Steady Wins The Race

Unlike the post-pandemic gold rush for housing, where prices skyrocketed as interest rates sunk, and the subsequent years when high interest rates froze buying, the Realtor.com report shows that affordability and strong demand do not necessarily mean rampant price growth in all the top-ranking cities (although the top three enjoy estimated appreciation in the mid-high teens), but rather more modest appreciation that supports measured homebuying and investing. This is supported by Fortune and Newsweek, which highlight the Rust Belt eclipsing the Sunbelt as the most desirable place for buyers to empty their money belts.

“Rust Belt cities like Cleveland, Hartford, Albany, and Chicago are all still appreciating and have tight inventory. Meanwhile, Sun Belt cities across Florida, Texas, and Arizona are now in decline, with decade-highs in inventory,” Nick Gerli, CEO and founder of real estate analytics platform Reventure App, wrote in a post on X on Dec. 9.

Lower Cost Means Lower Risk

Lower prices in the Northeast and Midwest mean that the “lock-in” effect of sacrificing a pre-2022 low interest rate for today’s higher rates is not as pronounced as in other higher-priced regions. This is also a plus for investors concerned about the potential downside of carrying costs of vacant rentals.

Realtor.com said that the top 2026 markets “offer better value than nearby high-cost hubs,” while tight inventory—Hartford is 74% and Worcester is still 43% below pre-pandemic levels—exerts upward pressure on prices, meaning smaller landlords can enjoy more certainty and less speculation about the likelihood of appreciation.

Another interesting stat from the report was that in the third quarter of 2025, 40% of listing views for the top 10 cities originated from out-of-state people, often in pricier cities such as New York, Boston, and Washington, D.C., highlighting the need for affordability.

Strategic Moves Landlords Can Make Now

Target spillover neighborhoods early

Projected appreciation, low housing prices, and high potential cash flow do not guarantee an effortless investment. 

Consider Pittsburgh, the largest metro in Realtor.com’s ranking. With inventory currently more than 31% below pre-pandemic levels, competition for rentals is intense. The Pittsburgh Post-Gazette reports bidding wars remain common, often attracting eight to 10 offers per home. What seems favorable on paper may not translate to reality. Therefore, consulting local experts is essential for thorough due diligence.

Underwrite for cash flow, not hype

Cities such as Buffalo, New York, which has been Zillow’s hottest market for two years in a row, have been attracting investors in droves. It means that competition is likely to be fierce. 

Stress-test deals for cash flow at conservative numbers rather than Realtor.com or wholesaler hype figures. Finding housing pockets that are radar adjacent, rather than emitting media-induced sirens of desirability, could make for better cash-flowing investments and long-term appreciation.

Lock in financing with lenders who get your vision

Just because everyone wants to lend you money doesn’t mean you should borrow from them. Often, lenders who actively promote themselves in the real estate space are glorified brokers. Yes, they have access to a wide variety of conventional and nonconventional lenders, but you will pay a pretty price in points for their assistance. Investigate lending programs from local community banks and credit unions first.

Cold-weather markets are tough on a home—factor that into your renovation

Chances are you’ll have to do some upgrades when buying a home in a cold-weather market. These areas are tough on a home. It’s worth getting ahead of problems by factoring in additional funds for the roof, gutters, and parking area upgrades. If there’s an opportunity to replace copper with PEX and install hard-wearing vinyl plank flooring, take it.

Final Thoughts

Investors from big coastal cities tend to view emerging markets such as those in the Northeast and Midwest with a giddy enthusiasm because prices are so low compared to where they live. This is a big mistake. Even if you are buying with all cash and not overleveraging, many of these areas are still scrappy and hardscrabble, with a tenant pool that does not match the media hype surrounding the new coffee shops and brunch spots mentioned in online articles.

Also, many neighborhoods have to be evaluated on a street-by-street basis. Don’t splash the cash because a house is cheap, or it could prove more of a headache than it’s worth. Seek advice from local experts who are not trying to make a fast buck, but rather see the long-term vision of keeping you as a repeat buyer. Screen management companies meticulously ask for referrals, and make sure they do the same with prospective tenants.

Ashley:
Welcome back to the Real Estate Rookie podcast where we help you get started in real estate investing the right way without the costly rookie mistakes.

Tony:
That’s right. Every week we break down real questions from real investors in the BiggerPockets community, and these are the same things that you’re probably wondering as you look for your first or your next deal,

Ashley:
And today’s lineup is stacked. We’re talking about three topics every investor should think about early on, even if you don’t think they apply to you yet.

Tony:
First up, should you get umbrella insurance? Is it a smart safety net or just another bill that you don’t need?

Ashley:
Then we’ll cover the downsides of an FHA loan. Yes, it helps you buy your first house with less money down, but there’s a few catches you should know before signing.

Tony:
And finally, the age old debate neighborhood versus numbers when the deal looks great on paper, but the block’s a little sketchy, which one actually wins

Ashley:
If you’re brand new and trying to make smarter decisions with your first few properties. This episode is going to save you from a lot of headaches down the road. This is the Real Estate Rookie podcast. I’m Ashley Kehr.

Tony:
And I’m Tony j Robinson. And with that, let’s get into today’s first question, which comes from Taylor in the BiggerPockets forums. Alright, Taylor says, should I get umbrella insurance? I want to explain my situation and I’m curious what you all think if I should get umbrella insurance or not. I have regular insurance on all of my properties and I have two separate LLCs. I have one LLC that I use for properties that I own 100% by me and another LLC that I am using for properties owned 50% by me and the other 50% by someone else. So he’s got two rentals owned 100% by him behind one LLC, one rental owned 50% by him behind a second LLC, and then two rentals owned 50% by him that are not behind any LLCs. These are ones that the lenders would not let me move into an LLC, however, I plan to refi in the future of rates, go down and put them behind an LLC, the other property I’m looking to sell.
Alright, so questions on umbrella insurance and LLCs and liability protection. I guess first let’s just put out a big fat disclaimer that Ashley and I, neither of us pass the bar. We are not attorneys or insurance agents for that matter, so definitely go talk to a qualified professional, but I think we’ll just kind of give our take and you can take it for what it’s worth. I think there’s, and Ashley, you explained this before and I thought it was like a great explanation, but the LLCs and insurance both protect from liability, but they do it in different ways. The LLC or asset protection, whether it’s an LLCA trust or whatever other NC you put your property into, the asset protection’s goal is to hopefully prevent a lawsuit from happening in the first place. We’ve interviewed asset protection attorneys, and you can get super complicated with this, but if you set your entities up in a way, sometimes it just discourages people from even trying to sue you in the first place, right? So that’s the goal of your LLCs and your trust and all the different legal entities you can use to hold ownership and protect your properties, right? The goal is to prevent lawsuits from happening.

Ashley:
Tony, I think to clarify, it doesn’t prevent lawsuits from happening. It prevents them from suing you personally or prevents lawsuits against your other assets that aren’t in the LLC.

Tony:
So yes, but we had a conversation with Brian Bradley who is an asset protection attorney, and I had an off the record conversation with him and he was actually saying that there are certain entity structures that you can set up where when they go to try and sue you, they realize that there’s actually nothing for them to sue because of how complicated the legal structure is. Now that’s probably like the Ferrari of asset protection that a lot of Ricks aren’t going to need, but just know if you’re a super high worth individual and you’ve got a lot of assets before you start investing in real estate that you want to protect, there are ways to really just discourage people because it is such a complicated structure to sue you at all because they realized that maybe it’s not even worth the hassle.

Ashley:
That’s really interesting. I didn’t know that there was the complications. I knew if you have no equity and you’re completely leveraged, and even if they sue you, they get nothing that would deter people, but that’s really interesting. I didn’t know that about the complicating the actual setup can,

Tony:
And again, don’t ask me to repeat how that was set up because I couldn’t tell you because there was something with a foreign trust or something like that or way beyond my scope, but he did educate me on the fact that that is an option. And then the other piece aside from the asset protection is the insurance itself, and that’s more so when something happens and you’re kind of in the thick of it, and insurance will usually cover damages up to a certain amount, right? Maybe it’s 500 K, maybe it’s a million bucks, maybe it’s 2 million bucks. So the umbrella policy is there as an additional layer above and beyond whatever liability protection comes with your landlord insurance. So let’s say that your landlord insurance covers you up to maybe 500 K and you get sued because someone slips and falls and they want to sue you for $1 million. Well, now you’re on the hook for that difference of 500 K. The umbrella policy is what would be that backdrop to give you additional liability protection to cover whatever that shortfall is from your landlord insurance. So doesn’t make sense potentially, but I think it goes back to what you said ash, of how much do you actually have to protect.

Ashley:
Yeah, I recently did a call with a different asset protection attorney just to see what my options are and things like that, and there’s usually this big debate of putting one property into an LLC, so there’s only one property in each LLC. So if you have 10 properties, you have 10 LLCs, which I have not done that. I’ve done it more as partnerships and that’s kind of seems what this person has done in this example. So the idea behind that is if you are putting one property that if something happens with that property, they can’t take any of your other properties because it’s only in that one LLC. So there’s different ways that you can do that. What I recommend is the umbrella policies for your partnerships. I have LLCs with my partnerships, but I also have umbrella policies on top of that because I know what I’m doing, but I don’t always know what kind of liability exposure I have from my partners.
So I’m not the one going out and completing maintenance or doing things like that. So I want to be able to make sure there’s an extra layer of protection in case and still, it could even be me that does something wrong, but I do still do the umbrella policy because it helps me sleep at night, first of all, and it’s just giving me more money to be able to defend myself. The LLC defend itself from losing my assets. So most people I would say they put it in the LLC, they don’t get the umbrella policy on top of that, but I highly, highly recommend that you get an umbrella policy for your personal assets. Even if you don’t have a rental property, you have your primary home, you and your significant other drive cars have an umbrella policy on that, especially if you are starting to build a nice net worth and build some kind of wealth for yourself too, is having that extra money to spend for your attorney fees for a settlement, things like that if something does happen. So I’m a big proponent of umbrella policies for sure. I think one thing to add in to real quick, with an umbrella policies, you have your base insurance, so that will pay out first and then the umbrella policy will pay out after that. So you might not even need to tap into that umbrella policy, but it’s just like an extra coverage. So first would be your landlord policy, and then that would kick in and pay out until that was spent, and then it would go to the umbrella policy too.

Tony:
Last thing I’ll say is that these are not expensive policies, the umbrella policies. I was trying to find a recent quote that I got. I found one from a few years ago and it was like $2 million of coverage and obviously there’s some nuances, there are some carve outs, but it was like 500 bucks for the year. I think that’s like 60 bucks a month to get 2 million in coverage. So it is not a large expense. So if you’re on the fence about it and you feel like you’ve got enough assets to protect, then yeah, I would just say spend the 60 bucks a month and get the umbrella policy.

Ashley:
Plus you can have your LLC pay the policy too if you have an LLC and the policy is for the LLC. It’s a business write off too for the premiums. Well, we have to take a short break, but when we come back we’re going to be talking about the downsides of using an FHA loan. We’ll be right back. Okay, welcome back. Our next question is from Erica, and this question comes from the BiggerPockets forums. Erica’s question is for anyone who has utilized an FHA loan, did you find it hard to find sellers that want to sell to buyers with an FHA loan due to the FHA appraisal? Does the FHA loan make you less competitive when making offers? Thank you in advance for any insight. One little thing I do want to clarify in this question is where she says, buyers with an FHA loan due to the FHA appraisal, it’s usually nothing to do with the appraisal because pretty much every bank financing you’re going to get is going to make you get an appraisal.
It’s more of the FHA inspection. So if you go and you get an inspector to come out, do a home inspection, this is completely different. FHA is sending out their own inspector and they’re going to go through the property and look for things that they care about. I remember my cousin bought a property using her FHA loan and the inspection happened and they made them put up railings and there was no railings in the stairwell or something like that, and the seller refused to. So my uncle went over there and he’s like, can I just put them up so we can get this house to close? And my uncle installed the railings even though they didn’t own the house yet, just to get it to pass the FHA inspection and to move on. So the same with VA loans. They have some extra hurdles and hoops you have to go through too.
So if I’m a seller and I’m reviewing my offers and one is FHA, one is VA and one is conventional, yes, I’m going to be more towards wanting to take the conventional loan because there’s not as many hoops to jump through for the funding to get approved to purchase the property. So yes, it could be a deterrent. Another great option is not using FHA and doing conventional like FHA, you can do three and a half percent down, but conventional you can do 5% down. So if you have that extra little bit of money, you’re adding more equity into your home upfront by putting a little bit bigger down payment and then you can just get the conventional loan and not even use the FHA loan.

Tony:
Yeah, great points. Ashley. I’ve never personally used an FHA loan or sold to someone who has an FHA loan, but I think your points around in apples to apples comparison of offers, one with non FHA debt and the other with FHA, the FHA is probably going to be a little bit getting the short end of the stick, but to that point, I think there are ways that you can make your offer a little bit stronger as well. Purchase price is one. If you just simply offer more money, I think that’s always way to entice the seller your earnest money deposit. If you say, Hey, I’m willing to give a bigger EMD to maybe get this deal done, it’ll show that even though you’re using FHA, maybe you’re a little bit more committed to getting the deal done. Speed is always important, but with an FHA, it’s probably a little bit out of your control If you’re closing with some other form of debt, I think that’d be easier, but those are probably the two things that I would focus on and maybe even just in your contract saying that maybe you’re willing to fund some of those repairs yourself up to a certain amount.
So I think it’s just trying to understand what the seller’s motivations are and doing your best to speak to those specific motivations even if the FHA inspection is a little bit of a headache. Alright guys, we’re going to take our final break while we’re gone. If you haven’t yet subscribed to the Real Estate Rookie YouTube channel, make sure you do that. That way you can see mine and Ashley’s beautiful smiling faces every time you consume the content from the podcast. But we’re at real estate rookie on YouTube, you guys and find us there. We’ll see right after the break. Alright, we’re back here with our final question and this question comes from Anthony in the BiggerPockets forum. So Anthony says, I’ve started looking for properties for a long-term rental investment. I’m in Greenville, North Carolina, a smaller city, about an hour east of Raleigh. Since I’ve started looking, I have come across a few decent options.
I found one property that has a good cash on cash return and a potential 10% cap rate, but it’s in a lower income area and an area with higher crime. The property itself is in decent shape, the numbers line up and I’m thinking about going to put in an offer. However, I have some reservations about the street, the vacancy rate of the neighborhood, and just the overall gut feeling I get when I’m there. Is my concern about the neighborhood justified or is this a common rookie mistake? Any thoughts from more experienced investors, pros and cons for investing in lower income areas would really appreciate any feedback? It’s a great question and I think a lot of rookie investors get googly-eyed when maybe they see the prices for some of these properties in areas of town where, yeah, maybe there is maybe lower income or higher crime.
They’re like, well man, I can make a ton of money in terms of cashflow on paper from what this deal looks like. And that’s not to say that every area that’s lower income or with higher crime, it’s a bad area to invest in, but I think you’ve really got to know the location to be able to find that balance and strike that balance. As you said quite a few times that some of your deals that look great on paper ended up being some of the hardest to manage. What’s your experience been with great deals on paper, maybe not as great of an area in real life?

Ashley:
Yeah, I mean, I hit the 3% rule at one of these 20,000 duplexes. I was like, this is great. Everyone’s complaining. They can’t even hit the 1% rule of having one month’s rent, be at least 1% of the purchase price of the property. It’s getting 3%. I’m like, this is great. This is a home run deal. It was one of my worst properties. So this property, I think the main point of looking at these properties is first, what are you going to be putting into the property? Are you bringing enough money and does this deal still work if you’re completely renovating the property? Okay, I had two pain points on this property and it was tenant turnover and it was repairs and maintenance. And the thing was that the property was $20,000. It was in decent shape, but it had bandaid after bandaid after bandaid put on the property before I even purchased it.
And so for me to completely renovate these to make it nice, they would’ve been full gut rehabs and if I would’ve put the money into doing that, the numbers would’ve no longer made sense. And I’m like, they’re already rented out. I can do a couple cosmetic things. This is great, let’s go. And that was not the case. There was constantly repairs that needed to be made, capital improvements down the road, and then just the tenant turnover. So just you get into some of these neighborhoods, and this wasn’t in the city, these were small rural towns, but there was way more turnover. It was harder to get a quality tenant. Most of the renters in the area were because they couldn’t afford to purchase a house, not because they chose to rent. And then just the low income where people were stretching it to make ends meet.
So evictions, late payments, just turnover to people constantly moving higher crime. So it didn’t work out for me. So there was too many headaches that it wasn’t worth the money. So I had about five of these duplexes and there was two towns where I had these properties and I’ve sold them all. I’ve got rid of them all. Luckily I was very fortunate to buy them in 2017, 2018, and then I sold them in 2021 and it was like three times what I bought them for. This is great. So it worked out, but timing the market is not something you can predict or count on. But I would say if I could do it differently, I would’ve waited and I would’ve, if it was either I needed to save a bigger down payment or I needed to negotiate a different seller financing deal, I would’ve waited and built my portfolio slower instead of just trying to accumulate units.
And this is how I’m going to get so many units because I’m buying $20,000 duplexes. Instead, I’m going to buy quality properties and really take my time and grow slowly and make sure these are properties that I do want to hold on. So if I could go and do it again, I would do that. But if this is the only way that you’re going to get started, just prepare yourself that you are going to have more repairs and maintenance and vacancies than you expect and make sure those numbers are inflated when you do deal analysis compared to maybe buying in a B class neighborhood.

Tony:
Actually our friend Steve Rosenberg, he shared a story, I think it was at an event that we were at together once where he had a portfolio of a lot of homes that were in call it C or D class neighborhoods, lower income, higher crime, exactly what Anthony described here. And it was the bate of his existence and he ended up selling that portfolio off to another investor and he somehow came across that investor a few years down the road and he was like, dude, how’s that portfolio doing that you bought from me? He was like, oh man, these are my best performing properties ever. Same exact houses, same exact tenant pool, but two totally different experiences. And what Steve shared was that the guy who he sold to, he had the right approach, systems, processes, frameworks to deal with that type of product and that type of tenant pool.
So I think that if you are thinking about going into that type of product, then just make sure that you are equipping yourself with the right tools and resources to do it effectively. I would encourage you to maybe talk to property managers in that area and maybe get their sense of like, Hey, what do you see? What’s working well? What’s not working well? But really, really make sure you’ve got a rock solid process for vetting, for maintenance, for rent collection because I think it can be successful. We know a lot of folks who invest in lower income neighborhoods that do incredibly well, but I think it does come down to the operator and how they work. I think the last thing I’ll say, Ashton, we don’t talk about this a lot and I feel like we should do maybe an expert led episode on this, but going after Section eight tenants might be a great way to mitigate some of those challenges as well.
Now, just like every other tenant, not every section eight tenant’s going to be great, but I think there is maybe a stronger motivation from folks who are on a voucher program to stay in their units longer. And there’s also the government subsidies that allow them to make those rent payments. So maybe that’s an option where you go into that same neighborhood, but as opposed to just opening up to everyone, you really focus on the section A program to try and at least get a little bit of support on making sure those rent payments come in.

Ashley:
Yeah, I’ve had several Section eight tenants, I don’t have any right now, but I found that very true that with them, they would make their payments, their portion because they did not want to lose that. Last time I checked, I think it was like an eight year wait list to get a voucher in my market. So the thing that I did find was I had several tenants go on temporary vouchers from a very local housing authority or things like that, and that’s when it didn’t work out where it wasn’t like this could be something they’re set on for a long time. It was like, okay, they’re going to pay my rent for six months to help me out, and those are the people that ended up just stopped paying. They got too comfortable with having that. And then when the six months was up, they didn’t pay and we had to go through with eviction.
So I found if it’s a set program where someone’s on for long-term seems to work out better than if it’s just a short period of time. So I feel like it almost enabled them and they got kind of used to having that where maybe they weren’t budgeting and saving and expecting when those six months end to start paying again. But that was just in my experience in those markets of the section eight tenants were great. Section eight comes in, the housing authority comes in and does an inspection every year. And not only to make sure you as the landlord are doing everything correctly, but also they’ll make sure that the tenant is keeping the property in good order too. There’s not holes in the wall, things like that. I did sit into a housing authority, had some kind of meeting or whatever one time it was like a free class or something, and I went to it and they had somebody speak and it was like somebody from a homeless organization and they talked about how you can list their units with them and they’ll put homeless people in those units and then they will pay for them.
And one of the things they did was they did a monthly inspection of the property that was provided to the landlord every month. I never did anything with that housing organization, but I guess there’s other ways, other organizations that place people and things like that too, where you can get on their listings just like Section eight and have a housing specialist place someone into your property that’s already approved. So that’s another nice thing about section eight is that you can list your rental with them and if you are one of their providers that work with them, they can easily place a tenant in your property and it can really cut down on having to find a tenant and things like that too. One thing I do think we have to address, and this episode isn’t airing until quite a while from when we’re recording this, it is October 29th that we’re recording this, and this is when the government shutdown is happening, and there’s always been this big sig that Section eight rent is guaranteed during COVID.
No offense that a lot of you Section eight landlords are bragging like, oh, this is guaranteed income section eight, I don’t have to worry about not being paid. But now there’s a lot of talk about what happens when the government runs out of their reserves to actually pay the Section eight vouchers. So in most cases we will most likely, even if they stop payments, that you will receive your back pay when the government opens up again. But what do you do in the meantime? And during COVID, a lot of landlords experience this is like beef up your reserves, make sure you have some kind of safety net if that is to happen. And you can’t take action on any of these tenants. If their vouchers aren’t paid, you cannot evict them because the government is not paying their portion. And I think this is just another warning sign for landlords always have those reserves in place.
You never know what is going to happen. That will be out of your control. We saw that in COVID and we’re seeing that now possibly with the government shutdown. So hopefully by the time this airs, the government is back up and running. This is not a concern at all, but just a prime example of making sure to really beef up your reserves and to not be over-leverage and to not put yourself at so much risk too as a rookie investor. Well, thank you guys so much for joining us today. I’m Ashley. He’s Tony, and we’ll see you guys on the next episode of Real Estate Rookie.

Ashley:
Welcome back to the Real Estate Rookie podcast where we help you get started in real estate investing the right way without the costly rookie mistakes.

Tony:
That’s right. Every week we break down real questions from real investors in the BiggerPockets community, and these are the same things that you’re probably wondering as you look for your first or your next deal,

Ashley:
And today’s lineup is stacked. We’re talking about three topics every investor should think about early on, even if you don’t think they apply to you yet.

Tony:
First up, should you get umbrella insurance? Is it a smart safety net or just another bill that you don’t need?

Ashley:
Then we’ll cover the downsides of an FHA loan. Yes, it helps you buy your first house with less money down, but there’s a few catches you should know before signing.

Tony:
And finally, the age old debate neighborhood versus numbers when the deal looks great on paper, but the block’s a little sketchy, which one actually wins

Ashley:
If you’re brand new and trying to make smarter decisions with your first few properties. This episode is going to save you from a lot of headaches down the road. This is the Real Estate Rookie podcast. I’m Ashley Kehr.

Tony:
And I’m Tony j Robinson. And with that, let’s get into today’s first question, which comes from Taylor in the BiggerPockets forums. Alright, Taylor says, should I get umbrella insurance? I want to explain my situation and I’m curious what you all think if I should get umbrella insurance or not. I have regular insurance on all of my properties and I have two separate LLCs. I have one LLC that I use for properties that I own 100% by me and another LLC that I am using for properties owned 50% by me and the other 50% by someone else. So he’s got two rentals owned 100% by him behind one LLC, one rental owned 50% by him behind a second LLC, and then two rentals owned 50% by him that are not behind any LLCs. These are ones that the lenders would not let me move into an LLC, however, I plan to refi in the future of rates, go down and put them behind an LLC, the other property I’m looking to sell.
Alright, so questions on umbrella insurance and LLCs and liability protection. I guess first let’s just put out a big fat disclaimer that Ashley and I, neither of us pass the bar. We are not attorneys or insurance agents for that matter, so definitely go talk to a qualified professional, but I think we’ll just kind of give our take and you can take it for what it’s worth. I think there’s, and Ashley, you explained this before and I thought it was like a great explanation, but the LLCs and insurance both protect from liability, but they do it in different ways. The LLC or asset protection, whether it’s an LLCA trust or whatever other NC you put your property into, the asset protection’s goal is to hopefully prevent a lawsuit from happening in the first place. We’ve interviewed asset protection attorneys, and you can get super complicated with this, but if you set your entities up in a way, sometimes it just discourages people from even trying to sue you in the first place, right? So that’s the goal of your LLCs and your trust and all the different legal entities you can use to hold ownership and protect your properties, right? The goal is to prevent lawsuits from happening.

Ashley:
Tony, I think to clarify, it doesn’t prevent lawsuits from happening. It prevents them from suing you personally or prevents lawsuits against your other assets that aren’t in the LLC.

Tony:
So yes, but we had a conversation with Brian Bradley who is an asset protection attorney, and I had an off the record conversation with him and he was actually saying that there are certain entity structures that you can set up where when they go to try and sue you, they realize that there’s actually nothing for them to sue because of how complicated the legal structure is. Now that’s probably like the Ferrari of asset protection that a lot of Ricks aren’t going to need, but just know if you’re a super high worth individual and you’ve got a lot of assets before you start investing in real estate that you want to protect, there are ways to really just discourage people because it is such a complicated structure to sue you at all because they realized that maybe it’s not even worth the hassle.

Ashley:
That’s really interesting. I didn’t know that there was the complications. I knew if you have no equity and you’re completely leveraged, and even if they sue you, they get nothing that would deter people, but that’s really interesting. I didn’t know that about the complicating the actual setup can,

Tony:
And again, don’t ask me to repeat how that was set up because I couldn’t tell you because there was something with a foreign trust or something like that or way beyond my scope, but he did educate me on the fact that that is an option. And then the other piece aside from the asset protection is the insurance itself, and that’s more so when something happens and you’re kind of in the thick of it, and insurance will usually cover damages up to a certain amount, right? Maybe it’s 500 K, maybe it’s a million bucks, maybe it’s 2 million bucks. So the umbrella policy is there as an additional layer above and beyond whatever liability protection comes with your landlord insurance. So let’s say that your landlord insurance covers you up to maybe 500 K and you get sued because someone slips and falls and they want to sue you for $1 million. Well, now you’re on the hook for that difference of 500 K. The umbrella policy is what would be that backdrop to give you additional liability protection to cover whatever that shortfall is from your landlord insurance. So doesn’t make sense potentially, but I think it goes back to what you said ash, of how much do you actually have to protect.

Ashley:
Yeah, I recently did a call with a different asset protection attorney just to see what my options are and things like that, and there’s usually this big debate of putting one property into an LLC, so there’s only one property in each LLC. So if you have 10 properties, you have 10 LLCs, which I have not done that. I’ve done it more as partnerships and that’s kind of seems what this person has done in this example. So the idea behind that is if you are putting one property that if something happens with that property, they can’t take any of your other properties because it’s only in that one LLC. So there’s different ways that you can do that. What I recommend is the umbrella policies for your partnerships. I have LLCs with my partnerships, but I also have umbrella policies on top of that because I know what I’m doing, but I don’t always know what kind of liability exposure I have from my partners.
So I’m not the one going out and completing maintenance or doing things like that. So I want to be able to make sure there’s an extra layer of protection in case and still, it could even be me that does something wrong, but I do still do the umbrella policy because it helps me sleep at night, first of all, and it’s just giving me more money to be able to defend myself. The LLC defend itself from losing my assets. So most people I would say they put it in the LLC, they don’t get the umbrella policy on top of that, but I highly, highly recommend that you get an umbrella policy for your personal assets. Even if you don’t have a rental property, you have your primary home, you and your significant other drive cars have an umbrella policy on that, especially if you are starting to build a nice net worth and build some kind of wealth for yourself too, is having that extra money to spend for your attorney fees for a settlement, things like that if something does happen. So I’m a big proponent of umbrella policies for sure. I think one thing to add in to real quick, with an umbrella policies, you have your base insurance, so that will pay out first and then the umbrella policy will pay out after that. So you might not even need to tap into that umbrella policy, but it’s just like an extra coverage. So first would be your landlord policy, and then that would kick in and pay out until that was spent, and then it would go to the umbrella policy too.

Tony:
Last thing I’ll say is that these are not expensive policies, the umbrella policies. I was trying to find a recent quote that I got. I found one from a few years ago and it was like $2 million of coverage and obviously there’s some nuances, there are some carve outs, but it was like 500 bucks for the year. I think that’s like 60 bucks a month to get 2 million in coverage. So it is not a large expense. So if you’re on the fence about it and you feel like you’ve got enough assets to protect, then yeah, I would just say spend the 60 bucks a month and get the umbrella policy.

Ashley:
Plus you can have your LLC pay the policy too if you have an LLC and the policy is for the LLC. It’s a business write off too for the premiums. Well, we have to take a short break, but when we come back we’re going to be talking about the downsides of using an FHA loan. We’ll be right back. Okay, welcome back. Our next question is from Erica, and this question comes from the BiggerPockets forums. Erica’s question is for anyone who has utilized an FHA loan, did you find it hard to find sellers that want to sell to buyers with an FHA loan due to the FHA appraisal? Does the FHA loan make you less competitive when making offers? Thank you in advance for any insight. One little thing I do want to clarify in this question is where she says, buyers with an FHA loan due to the FHA appraisal, it’s usually nothing to do with the appraisal because pretty much every bank financing you’re going to get is going to make you get an appraisal.
It’s more of the FHA inspection. So if you go and you get an inspector to come out, do a home inspection, this is completely different. FHA is sending out their own inspector and they’re going to go through the property and look for things that they care about. I remember my cousin bought a property using her FHA loan and the inspection happened and they made them put up railings and there was no railings in the stairwell or something like that, and the seller refused to. So my uncle went over there and he’s like, can I just put them up so we can get this house to close? And my uncle installed the railings even though they didn’t own the house yet, just to get it to pass the FHA inspection and to move on. So the same with VA loans. They have some extra hurdles and hoops you have to go through too.
So if I’m a seller and I’m reviewing my offers and one is FHA, one is VA and one is conventional, yes, I’m going to be more towards wanting to take the conventional loan because there’s not as many hoops to jump through for the funding to get approved to purchase the property. So yes, it could be a deterrent. Another great option is not using FHA and doing conventional like FHA, you can do three and a half percent down, but conventional you can do 5% down. So if you have that extra little bit of money, you’re adding more equity into your home upfront by putting a little bit bigger down payment and then you can just get the conventional loan and not even use the FHA loan.

Tony:
Yeah, great points. Ashley. I’ve never personally used an FHA loan or sold to someone who has an FHA loan, but I think your points around in apples to apples comparison of offers, one with non FHA debt and the other with FHA, the FHA is probably going to be a little bit getting the short end of the stick, but to that point, I think there are ways that you can make your offer a little bit stronger as well. Purchase price is one. If you just simply offer more money, I think that’s always way to entice the seller your earnest money deposit. If you say, Hey, I’m willing to give a bigger EMD to maybe get this deal done, it’ll show that even though you’re using FHA, maybe you’re a little bit more committed to getting the deal done. Speed is always important, but with an FHA, it’s probably a little bit out of your control If you’re closing with some other form of debt, I think that’d be easier, but those are probably the two things that I would focus on and maybe even just in your contract saying that maybe you’re willing to fund some of those repairs yourself up to a certain amount.
So I think it’s just trying to understand what the seller’s motivations are and doing your best to speak to those specific motivations even if the FHA inspection is a little bit of a headache. Alright guys, we’re going to take our final break while we’re gone. If you haven’t yet subscribed to the Real Estate Rookie YouTube channel, make sure you do that. That way you can see mine and Ashley’s beautiful smiling faces every time you consume the content from the podcast. But we’re at real estate rookie on YouTube, you guys and find us there. We’ll see right after the break. Alright, we’re back here with our final question and this question comes from Anthony in the BiggerPockets forum. So Anthony says, I’ve started looking for properties for a long-term rental investment. I’m in Greenville, North Carolina, a smaller city, about an hour east of Raleigh. Since I’ve started looking, I have come across a few decent options.
I found one property that has a good cash on cash return and a potential 10% cap rate, but it’s in a lower income area and an area with higher crime. The property itself is in decent shape, the numbers line up and I’m thinking about going to put in an offer. However, I have some reservations about the street, the vacancy rate of the neighborhood, and just the overall gut feeling I get when I’m there. Is my concern about the neighborhood justified or is this a common rookie mistake? Any thoughts from more experienced investors, pros and cons for investing in lower income areas would really appreciate any feedback? It’s a great question and I think a lot of rookie investors get googly-eyed when maybe they see the prices for some of these properties in areas of town where, yeah, maybe there is maybe lower income or higher crime.
They’re like, well man, I can make a ton of money in terms of cashflow on paper from what this deal looks like. And that’s not to say that every area that’s lower income or with higher crime, it’s a bad area to invest in, but I think you’ve really got to know the location to be able to find that balance and strike that balance. As you said quite a few times that some of your deals that look great on paper ended up being some of the hardest to manage. What’s your experience been with great deals on paper, maybe not as great of an area in real life?

Ashley:
Yeah, I mean, I hit the 3% rule at one of these 20,000 duplexes. I was like, this is great. Everyone’s complaining. They can’t even hit the 1% rule of having one month’s rent, be at least 1% of the purchase price of the property. It’s getting 3%. I’m like, this is great. This is a home run deal. It was one of my worst properties. So this property, I think the main point of looking at these properties is first, what are you going to be putting into the property? Are you bringing enough money and does this deal still work if you’re completely renovating the property? Okay, I had two pain points on this property and it was tenant turnover and it was repairs and maintenance. And the thing was that the property was $20,000. It was in decent shape, but it had bandaid after bandaid after bandaid put on the property before I even purchased it.
And so for me to completely renovate these to make it nice, they would’ve been full gut rehabs and if I would’ve put the money into doing that, the numbers would’ve no longer made sense. And I’m like, they’re already rented out. I can do a couple cosmetic things. This is great, let’s go. And that was not the case. There was constantly repairs that needed to be made, capital improvements down the road, and then just the tenant turnover. So just you get into some of these neighborhoods, and this wasn’t in the city, these were small rural towns, but there was way more turnover. It was harder to get a quality tenant. Most of the renters in the area were because they couldn’t afford to purchase a house, not because they chose to rent. And then just the low income where people were stretching it to make ends meet.
So evictions, late payments, just turnover to people constantly moving higher crime. So it didn’t work out for me. So there was too many headaches that it wasn’t worth the money. So I had about five of these duplexes and there was two towns where I had these properties and I’ve sold them all. I’ve got rid of them all. Luckily I was very fortunate to buy them in 2017, 2018, and then I sold them in 2021 and it was like three times what I bought them for. This is great. So it worked out, but timing the market is not something you can predict or count on. But I would say if I could do it differently, I would’ve waited and I would’ve, if it was either I needed to save a bigger down payment or I needed to negotiate a different seller financing deal, I would’ve waited and built my portfolio slower instead of just trying to accumulate units.
And this is how I’m going to get so many units because I’m buying $20,000 duplexes. Instead, I’m going to buy quality properties and really take my time and grow slowly and make sure these are properties that I do want to hold on. So if I could go and do it again, I would do that. But if this is the only way that you’re going to get started, just prepare yourself that you are going to have more repairs and maintenance and vacancies than you expect and make sure those numbers are inflated when you do deal analysis compared to maybe buying in a B class neighborhood.

Tony:
Actually our friend Steve Rosenberg, he shared a story, I think it was at an event that we were at together once where he had a portfolio of a lot of homes that were in call it C or D class neighborhoods, lower income, higher crime, exactly what Anthony described here. And it was the bate of his existence and he ended up selling that portfolio off to another investor and he somehow came across that investor a few years down the road and he was like, dude, how’s that portfolio doing that you bought from me? He was like, oh man, these are my best performing properties ever. Same exact houses, same exact tenant pool, but two totally different experiences. And what Steve shared was that the guy who he sold to, he had the right approach, systems, processes, frameworks to deal with that type of product and that type of tenant pool.
So I think that if you are thinking about going into that type of product, then just make sure that you are equipping yourself with the right tools and resources to do it effectively. I would encourage you to maybe talk to property managers in that area and maybe get their sense of like, Hey, what do you see? What’s working well? What’s not working well? But really, really make sure you’ve got a rock solid process for vetting, for maintenance, for rent collection because I think it can be successful. We know a lot of folks who invest in lower income neighborhoods that do incredibly well, but I think it does come down to the operator and how they work. I think the last thing I’ll say, Ashton, we don’t talk about this a lot and I feel like we should do maybe an expert led episode on this, but going after Section eight tenants might be a great way to mitigate some of those challenges as well.
Now, just like every other tenant, not every section eight tenant’s going to be great, but I think there is maybe a stronger motivation from folks who are on a voucher program to stay in their units longer. And there’s also the government subsidies that allow them to make those rent payments. So maybe that’s an option where you go into that same neighborhood, but as opposed to just opening up to everyone, you really focus on the section A program to try and at least get a little bit of support on making sure those rent payments come in.

Ashley:
Yeah, I’ve had several Section eight tenants, I don’t have any right now, but I found that very true that with them, they would make their payments, their portion because they did not want to lose that. Last time I checked, I think it was like an eight year wait list to get a voucher in my market. So the thing that I did find was I had several tenants go on temporary vouchers from a very local housing authority or things like that, and that’s when it didn’t work out where it wasn’t like this could be something they’re set on for a long time. It was like, okay, they’re going to pay my rent for six months to help me out, and those are the people that ended up just stopped paying. They got too comfortable with having that. And then when the six months was up, they didn’t pay and we had to go through with eviction.
So I found if it’s a set program where someone’s on for long-term seems to work out better than if it’s just a short period of time. So I feel like it almost enabled them and they got kind of used to having that where maybe they weren’t budgeting and saving and expecting when those six months end to start paying again. But that was just in my experience in those markets of the section eight tenants were great. Section eight comes in, the housing authority comes in and does an inspection every year. And not only to make sure you as the landlord are doing everything correctly, but also they’ll make sure that the tenant is keeping the property in good order too. There’s not holes in the wall, things like that. I did sit into a housing authority, had some kind of meeting or whatever one time it was like a free class or something, and I went to it and they had somebody speak and it was like somebody from a homeless organization and they talked about how you can list their units with them and they’ll put homeless people in those units and then they will pay for them.
And one of the things they did was they did a monthly inspection of the property that was provided to the landlord every month. I never did anything with that housing organization, but I guess there’s other ways, other organizations that place people and things like that too, where you can get on their listings just like Section eight and have a housing specialist place someone into your property that’s already approved. So that’s another nice thing about section eight is that you can list your rental with them and if you are one of their providers that work with them, they can easily place a tenant in your property and it can really cut down on having to find a tenant and things like that too. One thing I do think we have to address, and this episode isn’t airing until quite a while from when we’re recording this, it is October 29th that we’re recording this, and this is when the government shutdown is happening, and there’s always been this big sig that Section eight rent is guaranteed during COVID.
No offense that a lot of you Section eight landlords are bragging like, oh, this is guaranteed income section eight, I don’t have to worry about not being paid. But now there’s a lot of talk about what happens when the government runs out of their reserves to actually pay the Section eight vouchers. So in most cases we will most likely, even if they stop payments, that you will receive your back pay when the government opens up again. But what do you do in the meantime? And during COVID, a lot of landlords experience this is like beef up your reserves, make sure you have some kind of safety net if that is to happen. And you can’t take action on any of these tenants. If their vouchers aren’t paid, you cannot evict them because the government is not paying their portion. And I think this is just another warning sign for landlords always have those reserves in place.
You never know what is going to happen. That will be out of your control. We saw that in COVID and we’re seeing that now possibly with the government shutdown. So hopefully by the time this airs, the government is back up and running. This is not a concern at all, but just a prime example of making sure to really beef up your reserves and to not be over-leverage and to not put yourself at so much risk too as a rookie investor. Well, thank you guys so much for joining us today. I’m Ashley. He’s Tony, and we’ll see you guys on the next episode of Real Estate Rookie.