There’s nothing that unifies opposing political factions faster than seeing homeless encampments in American cities. That’s why the Housing for the 21st Century Act has cleared the U.S. House of Representatives with an overwhelming 390-9 vote and is now headed to the Senate. 

Within the 200-page bill is a proposal of particular interest to real estate investors. Most significantly, it increases loan limits for small multifamily properties, thereby enabling greater purchasing power and potentially higher returns on investment.

Reps. French Hill (R-AR) and Maxine Waters (D-CA), from opposite ends of the political spectrum, are two of the bill’s main sponsors and worked to ensure it included provisions from both parties, which has been celebrated across the housing and construction industries.

“NAHB commends the House for passing the Housing for the 21st Century Act, bipartisan legislation that will reduce impediments to increasing the housing supply,” said National Association of Home Builders Chairman Buddy Hughes in a press release.

His sentiments were echoed by Shannon McGahn, National Association of Realtors executive vice president and chief advocacy officer, who stated in a press release: “With the nation facing a shortage of roughly 5 million homes and first-time buyers now entering the market at a median age of 40, bold action to expand supply and remove barriers to homeownership has never been more urgent.”

Amongst the broader initiatives that apply to investors are the following.

Modernizing Building Codes (Single-Stair Reform)

Section 103 addresses one of the most significant provisions for small multifamily development: point-access block buildings (also known as single-stairway apartments).

• National guidelines: Requires HUD to establish federal guidelines and best practices for single-stair multifamily buildings up to five stories. Currently, many jurisdictions require double staircases for safety concerns. However, this makes it difficult and expensive to build multifamily buildings on narrow urban lots. This is already under consideration in California and other states.
• Pilot programs: The Act authorizes competitive grants for pilot projects to test the safety and effectiveness of new designs, which could eventually lead to smaller, European-style apartment layouts.

Streamlining Environmental Reviews

The federal National Environmental Policy Act (NEPA) has been criticized for being prohibitively expensive and slow, especially for developers of small-scale projects. In a move similar to California Governor Gavin Newsom’s reform of the California Environmental Quality Act to speed up housing development, new measures aim to reduce the lag by bypassing some review processes.

• Categorical exclusions: The expansion of “categorical exclusions” exempts small-scale construction. Infill development and rehabilitation of residential buildings no longer require full environmental reviews.
• Faster timelines: By reducing federal administrative burdens, the bill aims to reduce construction timelines and lower the per-unit cost for modest multifamily projects.

Incentivizing “Missing Middle” Zoning

The Act uses federal guidance to push local governments toward friendlier zoning for small multifamily units (Section 102):

• By-right development: Encourages localities to fast-track duplexes, triplexes, and quadplexes “by right,” meaning they can be constructed without a lengthy permitting process.
• Pattern books: It provides grants for local governments and tribes to create “pattern books”—preapproved architectural designs for ADUs, duplexes, and townhouses. If a builder uses a preapproved design, the permitting process is accelerated.

Financial and Programmatic Support Updates

• FHA loan limits: Section 106 updates the statutory maximum loan limits for FHA (mortgage insurance) multifamily dwellings. These limits are adjusted to reflect modern construction costs, making it easier for developers of small and mid-sized buildings to secure federal financing.
• HOME program flexibility: The act reforms the HOME Investment Partnerships Program to allow funds to be used for “workforce housing” and infrastructure improvements (like water and sewer) specifically for new housing developments.
• Streamlined inspections: For properties with multiple federal funding sources like Low Income Housing Tax Credit (LIHTC) and Section 8, the bill allows a single passed inspection to automatically meet Housing Choice Voucher (HCV) inspection requirements, reducing the administrative headache for small landlords.

How These Laws Help Small Investors

Although many of these proposals are geared toward developers, some specific aspects will appeal to landlords. Increased FHA loan limits for small multifamily properties can help newbie investors leverage the power of house hacking and rental income to jump-start their investing careers.

An FHA loan, which allows a buyer to put as little as 3.5% down, mandates that a buyer live in one of the units for at least 12 months, which means after the one-year mark, they are free to move out and buy another property, renting out the initial FHA loan property in its entirety. FHA rules state that a buyer can have only one FHA loan at a time (unless the other is in another state); however, investors can refinance the first home into a conventional mortgage, allowing them to buy the second with an FHA loan.

By living in one unit and having the tenant’s rent cover most, if not all, of the mortgage, an owner-investor puts themselves in prime position to save for the down payment on their next investment property. The cash flow from the initial FHA home and the second property could also provide the down payment for a third home, and so on. Eventually, the timeline between property purchases reduces. 

This often-used strategy to build wealth relies on a few basic tenets: meticulous tenant screening and living low to the ground, not splurging on a fancy personal residence until your passive income is considerable.

FHA Multifamily Loan Limits

The current 2026 FHA multifamily loan limits are as follows:

Two-unit (duplex)

• Low-Cost Area: $693,050
• High-Cost Area: $1,599,375

Three-unit (triplex)

• Low-Cost Area: $837,700
• High-Cost Area: $1,933,200

Four-unit (fourplex)

• Low-Cost Area: $1,041,125
• High-Cost Area: $2,402,625

Limits are higher in Alaska, Hawaii, Guam, and the U.S. Virgin Islands.

The Effect on Housing Inspections

For anyone who has ever had the misfortune of dealing with an officious housing inspector, you know that they can make or break your cash flow. The less time you have to interact with them, the better. Thus, the streamlined inspections proposal will come as a massive relief for landlords who are used to standing on eggshells while an inspector looks for hairline cracks in outlet plates or a faucet that drips once every 30 seconds. 

For clarification, here is the 2025 Section 8 inspection checklist.

Final Thoughts

Increasing FHA loan limits means more people will be able to buy more multifamily houses, putting as little as 3.5% down and potentially qualifying for financing with lower credit scores than required for a conventional mortgage. Rinsing and repeating this formula works as long as interest rates and house prices are relatively low and rents are high. Two out of those three no longer apply, which means implementing this strategy invariably means leveraging a lot of borrowed money and hoping your tenants pay their rent on time.

So, if you’re planning to use this to boost your portfolio, be careful. It’s not a technique that will allow you to quit your day job anytime soon. In fact, if you execute correctly, you should keep your day job as a cushion in case things go askew, which they usually do.

FHA loans were invented to make it easier for owner-occupants to buy a house and, in the case of small multifamily homes, to allow homeowners to get a little help from their tenants with their payments. As real estate investors, we tend to think outside the box and have developed the concept of repeat house hacking to game the system. However, in the current high-rate, high-cost era, that’s fraught with risks. Just because the FHA loan limits will increase, allowing you to borrow more, doesn’t mean you should.

Despite stock markets hovering around record highs, investors are feeling jittery. You can see it in consumer confidence collapsing to its lowest level since 2014, as well as in the mass flight into precious metals as a safe haven, with gold up 74% over the last year and silver up 139%. On the other “side of the coin,” high-risk investments like Bitcoin are crashing, with Bitcoin down 46% from its all-time high. 

Meanwhile, recession and inflation risk both remain higher than usual, due to softening labor markets, trade wars, and heightened geopolitical risk. 

Where Billionaires Are Investing

So what are the wealthiest, best-informed investors in the world doing with their money in 2026?

Every year, UBS conducts a survey of billionaires and asks about their investing plans for the coming year. Here’s how billionaires said they plan to shift their investments in 2026:

At first glance, real estate looks like it falls in the middle of the list for increased exposure. But that’s only direct ownership—which is often not how billionaires invest. 

I invest in real estate in many different ways, as do billionaires. Here are the many ways you can invest in real estate over the coming year and beyond, most of them passive, like billionaires do. 

Private Equity Real Estate

Private equity includes privately owned businesses, of course—but it also includes real estate syndications. 

The UBS survey says half (49%) of billionaires plan to increase their exposure to private equity this year, for the largest investment jump. Only one in five plans to decrease exposure. 

“We’re seeing the wealthiest investors shift toward hard assets and income-producing assets that hedge against volatility,” notes Lesley Hurst, president of Penn Charter Abstract, in a conversation with BiggerPockets. “In uncertain cycles, wealth tends to consolidate around tangible assets with long-term utility.”

I myself invest in real estate syndications with relatively small amounts ($5,000) through a co-investing club. I get the cash flow, appreciation, and tax benefits of real estate ownership without the constant wrangling of property managers, contractors, and tenants. 

Because really, do you think billionaires mess around with that? They invest passively and let other people manage assets and properties. 

Equities: REITs

I still own shares in a few REITs, although I no longer invest in the space. 

Sure, they’re liquid and easy to buy and sell in small amounts. But they don’t do what I need my real estate investments to do: provide diversification from the broader stock market. Read more about the uncomfortably close correlation if you don’t believe me. 

Real Estate Funds

You can, of course, also invest in private equity real estate funds. On the plus side, they offer diversification. You get exposure to several properties with a single investment. 

But they often come with high fees, and most only allow accredited investors to participate. You don’t have to be a billionaire—but you do need to be a millionaire. 

I’ve invested a few times in passive real estate funds, such as a land fund that pays 16% in distributions. But in my co-investing club, we prioritize investments that allow middle-class investors, not just millionaires. 

Secured Private Debt

As much as I love owning a big piece of real estate pies, debt investments come with their own advantages. That starts with a steady income, often at a high yield. Our co-investing club has lent notes at 15% interest, secured with a first-lien position at a low LTV ratio.

These often come with a shorter timeline, and one that you know in advance. Sometimes they’re even flexible: I’ve invested in a rolling six-month note that I can exit at any time with six months’ notice. 

Real Estate: Solo or JV Ownership

You can, of course, buy properties directly and make a side hustle (or a full-time business) out of it. I used to do that myself. 

Today, I only invest passively. We often form joint venture (JV) partnerships with active investors, such as partnering on house flips, land flips, or construction projects. 

We provide the money as silent partners and get a cut of the returns. In some cases, we’ve even negotiated a guaranteed floor return. 

“The savviest investors aren’t chasing hype in 2026; they’re positioning for resilience,” observes professional investor Erik Drentlaw of Sell My Dallas House Fast when talking to BiggerPockets. “We’ve seen a shift favoring cash-flowing assets and strategic private investments over frothy public markets.”

Investing in 2026: Risk and Strategy

I don’t chase trends. But I do find it reassuring to see the wealthiest, best-informed investors in the world looking to move more money into the same types of investments that I make every single month. 

And I do mean every month. I practice dollar-cost averaging with my real estate investments, putting relatively small amounts in new investments each month. I no longer play the fool’s game of trying to time the market. I just keep putting one step in front of the other, regardless of whether everyone else is panicking or hoovering up investments. 

I have tried to keep one eye on recession-resilient investments to help protect against downside risk. Nothing’s foolproof, but some investments do protect better than others. 

As for inflation risk, real estate hedges against it better than most investments. Likewise, real estate withstands geopolitical risks better than most as well. 

Some new crisis will come along, whether in five months or five years. It’ll feel scary in the moment, and some investments will likely suffer. But I’d rather keep stacking up small, diverse real estate investments over time and letting them form a bell curve of returns, rather than making a few huge, isolated investments.

Henry:
Should your next investment be a single family home or a multifamily property? It’s a critical question. You want to scale a portfolio and progress toward financial freedom as quickly as possible, but taking on the wrong type of property could leave you overwhelmed and slow down your progress in the long run. The good news, this choice does not need to leave you paralyzed. Today we’re sharing a simple framework to help you pick the right type of property for you. The answer isn’t the same for everyone, but by the end of this episode, you’ll know how to think through big decisions of whether single family or multifamily is right for your experience level, financial situation or investing strategy. Plus we’ll tackle how to balance getting your rents close to fair market value without forcing unnecessary tenant turnovers where new investors should take on burrs or flips and so much more. What’s up, friends? I’m Henry Washington here, the co-host of the BiggerPockets podcast and I am here along with Dave Meyer. Dave, you’re looking a little bundled. Are you wondering why I am dressed like Macklemore right now? Is there something going on at the thrift shop we need to know about?

Dave:
My heat went out two days ago over the weekend on Saturday morning I woke up and my house was like 40 degrees and they actually just left my house and fixed the furnace, but it’s still freezing in here. It’s like literally 42 degrees, but the show’s got to go on, man, so I’m just here dressed in full winter gear.

Henry:
Well, today we’re giving people what they want. We’re answering questions you the audience asked us on the BiggerPockets forums, so let’s jump into it. The first question is from an investor named Christopher and he said, I’m a new investor based in California looking to start my portfolio out of state. My target is the 80,000 to $125,000 range in landlord friendly markets with steady job growth. I’m most interested in burr and buy and hold rentals, and I’m deciding between starting with a single family or a small multifamily. He goes on to say, here’s where I’m stuck. Single family seems easier to manage, less intimidating, but the cashflow might be a little less, whereas Multifamilies could bring stronger cashflow and efficiencies of scale, but I’ve heard they could be tougher to finance and tenant issues could hit harder if I don’t have a solid team yet. So which one should you start with and what do you think the best path is for someone investing out of state for the first time?

Dave:
Alright, I’ll take this one. First off, Christopher, good question and I think a great approach. If you’re based in California, super expensive, you want buy and hold or burrs, they’re harder to find in California, so an out of state is a great option for you. I’m going to start with actually the second question because basically what you said is, which is better? Small multifamily or single family, all things being equal. I don’t know how you feel about this, Henry, but I personally think small multifamily is just the best asset class and I don’t actually think it’s really all that different from a management perspective. You still got one roof, you got one tax bill, you do have multiple tenants, but I think what you’ll learn as almost every investor does over the course of their career is it’s really not that hard once you place tenants.
It’s just reacting and trying to do some repairs proactively. But I personally just think small multi-families are better. I would challenge you, Christopher, on your question saying that you think that they’re harder to finance small multifamilies and that tenant issues could hit harder. I think they’re very similar to finance. Even if you are out of state, not owner occupying, you can get very similar types of loans for small multifamily, anything, four units or fewer is considered a residential mortgage and so you’re still going to have pretty favorable financing. Some you can put five or 10% down so you still have that option. The thing that I would challenge about, yeah, if all of your tenants decide to up and leave at once, that will be an issue or if they all complain at once, that can be an issue, but I actually think that having a small multifamily mitigates risk because if you have a vacancy in one unit, it’s not all of your income for that entire property.
When you buy a single family home, if you can’t find a tenant for two months, you’re losing one six of your entire revenue for the whole year. Whereas if you have two months of vacancy in one of four units, maybe you’re only losing one and a half percent of your revenue for the whole year. So I actually think it helps you mitigate risk, which I really like. That’s just on principle, but I will say buying a multifamily for 80 to 1 25 is probably not realistic in a decent market. I think if you’re looking for a place with job growth, you’re going to be really hard pressed to find a duplex. I invest in the Midwest. Maybe in Detroit you could probably find a duplex for that range, but if I were you at that price point, I actually would focus on buying the best asset I could and not on whether it’s single family home or multifamily. The advice I gave earlier was all things being equal. If you could afford both, I’d say small multifamily, but it sounds like you might want to focus on single family because you’ll be able to get a high quality asset that’s not going to be a pain in your butt.

Henry:
Very well said. When you were sitting there explaining why you liked multifamily as an answer to this question, I started thinking through what are my favorite properties and some of my favorite properties are single families, but when I ask the question differently and say, what are my most profitable and or wealth building properties, I get the most cashflow and I’ve built the most equity in my small multifamilies and it’s not even close

Dave:
Really.

Henry:
Yeah, and so I think you’re right. Small multifamily in terms of financial benefit, cashflow and wealth building seem to be the best asset, but my favorite properties are some of my single families and that’s who cares about what your favorite is, but

Dave:
Why are they your favorite then? Just because you are proud of what you did to them and the

Henry:
Renovations proud of what I did to them. The locations that some of them are in just prime locations, just excellent properties.

Dave:
You get the warm and fuzzies with the single families. You flip a house, it turns out great. If family moves in, they’re happy with it. That’s nice. That’s a good experience. Multifamily, you don’t really get that as much. I agree with that, but I just think if you’re trying to build that long-term portfolio, it’s great, but I just think as a first time investor, the name of the game is don’t lose. You don’t need to win by a lot. You don’t need to hit a home run. The game is to hit a single,
And my fear is that if you take my original advice and say, oh, I’m going to buy a three unit or four unit at 1 25, there’s going to be something wrong with that. Your tenants are going to be sitting there like me with their hat and jacket on because their heat doesn’t work or their toilets don’t work or something like that. This is what you get when you buy assets that are not up to their highest to best use. So I would make it easy on yourself as an out-of-state investor and buy something that’s in good shape. That would be my number one criteria.

Henry:
The other caveat here is Christopher, I would focus some of your time on learning more ways to finance deals. There are so many tools in the tool belt in terms of financing properties, small multifamilies like I think you can get a small multifamily financed pretty easily, no sweat. And given the concerns that you’ve outlined here, I would say my answer to you would be definitely focus on small multifamily if you’re going to up that 80 to 120 5K range, but if not, then I think Dave is w right. Buying a quality single family asset will save you so much headache over going and buying a trash multifamily.

Dave:
Great question, Christopher. Thank you and good luck to you. We have a new question asking about inherited tenants from Nick in upstate New York, but before we answer that, we got to take a quick break. We’ll be right back.

Henry:
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Dave:
Welcome back to the BiggerPockets podcast. Henry and I are here answering your questions. By the way, if you want your question to answer, go to BiggerPockets forums, ask those questions, we pick them there, or you can always send Henry or I a message and we pick a lot of questions from there as well. Our next one though comes from Nick in upstate New York who says, I’m a 19-year-old real estate investor. Impressive getting this done. At 19 years old, I just closed on my first duplex last and I’m house hacking. The tenant I’m inheriting has been here for 12 years and is on a month to month lease. She pays $635 a month and comps show that the market rent is about 1200. Wow. She has been a fantastic tenant for the previous owners. Rent is always on time. She’s quiet and takes care of her unit. Well, I have no problem with her paying slightly under market rent in hopes of retaining a great tenant, but I know it is irresponsible as a business owner to sell myself short. My other hesitation is that the previous owners are very good family friends. They started renting to her 12 years ago for 6 0 5 and just last summer increase it to 6 35. How would you handle a rent increase, Henry, what do you think?

Henry:
I love this question first of all, and second of all, 19 years old investing in real estate on the forms, asking these questions

Dave:
Crushing,

Henry:
Man, what a headstart you had. I wish I was as smart as you were when I was 19. Unfortunately, I was

Dave:
Not. I don’t think I could have typed this sentence when I was 19th,

Henry:
So kudos to you, Nick. I have had this situation a few times, maybe not as nuanced as this, where it’s family friends and it’s in a house hack, but I have inherited tenants paying very low rents and I’ve had to work with them to figure out how to get the rents where they need to be. And so first and foremost is you need to realize that you’re a human being dealing with human beings, and it sounds like based on the way you phrase phrased this question, you’re already in that mindset. And so what I have learned managing my own properties as a landlord and trying to do it in a way that both balances being human and being a business owner, most people will work with you if you give them the opportunity to. And so I’ve always tried to approach these situations where I’m just open and honest with people,

Dave:
Transparent,

Henry:
Transparent,
And I let them know. And so if this was a situation I was dealing with, I would go to the tenant and I would try to work out a situation where I could get them to stair step their rent up to where you want them to be and realizing that yes, I think you’re also in the right mindset of saying, Hey, I’m willing to take a little less than market rents because she’s a great tenant. That is the absolute right mindset because the first thing I tell people who ask me this question is, is the tenant a good tenant? Because if they’re not a good tenant, right, you need to focus on getting that out of there. Anyway, different question. Yeah, completely different process, but if they’re a good tenant, they take care of the place they pay on time, they don’t bother you. That’s perfect.
That’s ideal. The second key is getting them involved in the decision making process. So typically what I do is I pull comps for market rents and I sit down with them and I say, Hey, look, these are the comps that I have. This is what’s available for rent close by similar amenities, and I let them see for themselves, if you were to move and get something equal, this is the price point that it would be at. I understand that if you can’t pay that amount yet, but I do need to get you somewhere closer to market rents,
What would you feel comfortable paying as a rent for you to stay here and want to stay here? And a lot of the times they’ll tell me, look, I can’t do 12, but I could probably get to a thousand. Okay, cool. And then you have to decide, can I work with that number? And if the answer is yes, then you figure out, well, do I raise the rent next month or do you stair step, right? You’ll be able to tell through the course of the conversation and what they’re saying and how they’re saying it if things are reasonable. Because if you go to them and they say, look, I can’t pay anything over 6 35 period. I’m done. That’s it. That’s all I can do. Well then you can’t. It’s not reasonable. It’s not reasonable. You can’t reason with that person and you have to figure out, okay, what are my next steps Now that I know they won’t pay anything else, but when you’re showing them the comps and you’re trying to work with them and you’re involving them in the decision making process, I found that that typically always works well.
Then you can determine based on what they say, do I need to stair step? Because you can do things where you say, okay, if we agree in a thousand, how soon do you think it could get to a thousand? I ask them that. If they say, Hey, I could probably get there over the course of the next six months, if that works for me, then we just work on stair stepping. Then every month until we get there, their rent goes up a little bit until they’re at that thousand, maybe they say a year. If you can work with that, then you sta step ’em a year. You get to determine what works for you and your tenant, but involving them in the decision-making process and being transparent with them because they understand if you bought a property, you have a new mortgage, you’ve got things to pay. People know these things, but where I think landlords fail is they dictate things to their tenants versus including them in the decision making. Hundred percent. And so if you treat them like human beings, try to include them, and I’m not saying because you include them, you have to do what they ask. What I am saying is it makes an easier way for you to transition to something meaningful if you include them.

Dave:
I completely agree. I think that’s the absolute right approach. When I was self-managing, used to just give this speech to everyone who was one of my tenants, I would just be like, I want our entire basis of a relationship just to be reasonable. Just talk to me like you would ask a friend or a family member for a situation and I’ll do what I can and I’m going to be ask you to be reasonable about things, to let contractors in to be reasonable. And that has worked for me a hundred percent of the time. I’ve really never had an issue with that approach. I love what you said about involving them in the decision. People just generally it’s just human psychology. They want agency, they want control, and even though you’re not giving up actual control, giving people a say is really powerful and meaningful and will matter for your relationship going forward.
If you’ve listened to any of the episodes with Dion McNeely, he sort of patented the binder strategy. Have you heard that? Yes. What he calls the binder strategy, yeah, it’s the same idea, but he basically shows his tenants what rents are in the area. He pulls comps and prints them out and shows ’em to them. I think in a situation like this, you can, even if you wanted to show what rent was 12 years ago and how rents have changed over the last 12 years recently, if you want to, you don’t have to beat people over the head with data, but you could show how much taxes have gone up over the 12 years. There are real reasons why rent goes up. There has been enormous inflation across this country in the last 12 years and not changing rents is not a tenable option for real estate investors. Now, you don’t have to maximize and squeeze every drop out of a tenant. I highly recommend against doing that. I don’t think that’s the human thing to do, nor do I think it’s good business and I think that what Henry suggested is absolutely the right way to do it. I think the numbers you gave Henry are a perfect example. Would you personally take a thousand over 1200

Henry:
Absolutely for the right tenant?

Dave:
A hundred percent. If they move out and you have two months of vacancy, that’s pretty much a wash, right? So wouldn’t you rather keep a great tenant for a wash? It’s a no brainer. People get obsessed with their absolute people really, I think in general get obsessed about their rent numbers. When every experience investors know it’s your net cashflow that matters. The gross rent number doesn’t matter. If you have vacancy, it’s going to eat away at that and that crushes your deal every month of vacancy. Just keep this in mind. That’s 8% of revenue you lose. You lose two months, that’s 16% of your revenue. That’s enough to take almost any deal from cashflowing to negative. So just keep that stuff in mind.

Henry:
This is why we harp so hard about underwriting conservatively. I think what happens when people get in this situation is they underwrote buying that deal assuming they’re going to get the highest best rent number possible, and that’s how the numbers worked. And then you get into a situation like this and you realize, I’m not going to get that, or if I do, it’s going to take me a year before I can get there and I’m going to lose a lot of money in between then. So if you underwrite conservatively where you underwrite based on a lower rent number, the midtier of the rent price range, maybe even the low end of the rent range, and then you buy a deal that pencils, you have room to be able to take care of people like this.

Dave:
This is playing out for me all the time right now. I don’t know about you, but I’m not getting top market rents these days. When I have renewals, I’m usually able to keep rent, but there have been a couple units where I’ve had to lower rent, especially in Denver, if you guys follow the news, Denver is not doing great on rent growth, which is fine because I underwrote them this way. I have great property managers, I have great agents. They say, Hey, you’re going to get 1500, 1600 bucks. When I underwrite it, I say 1350. I’m like 10% below what they tell

Henry:
Me

Dave:
Because I want that flexibility. I don’t want to be strapped. I love being in a position where the property manager comes to me. Actually, I can only get 1450. I’m like, great. I underrated a 1350. This is excellent. I’m not worried about that. But when you set yourself up to only succeed if things go perfect, that is just a recipe for failure all the time. So to Nick, I think you know what to do. Hopefully this is a good answer and let us know what happens. I actually, I bet if you follow Henry’s advice, you’re going to find a mutually beneficial situation, which is what Henry and I are always talking about. Find mutual benefit. It’s the best thing for business, it’s the best thing for you. Alright, let’s move on to question number three, which comes from Morgan in Houston where we just were by the way, we ate at this great barbecue place. I just saw it made top 10 barbecue in the country.

Henry:
Best ribs I’ve had in a long time.

Dave:
Anyway, go to Pendleton’s Morgan in Houston wants to talk about real estate, not barbecue though. Morgan says, I want to get started with real estate in Texas and I’m going back and forth between the burr or a fix and flip. I have a good amount of cash, a hundred K or more to invest and I want to take a risk, but not a huge loss. Don’t we all? And I don’t want to rent a property or deal with tenants, but I am open to the idea if it is advantageous. What are your thoughts for a rookie?

Henry:
Yeah, this is an interesting one based on what was said in the question because it says, I don’t want to rent a property or deal with tenants, but I’m open to the idea if it’s advantageous. Well, first of all, being a landlord is very financially advantageous. I think that’s why a lot of us are here, and so I think that that’s the question you need to get comfortable with first because if you go into this not wanting to be a landlord and trying to get yourself sold on being a landlord by taking on your first property, I mean you’re going to get punched in the mouth. Being a landlord is tough. There’s a lot of problems that come with it and the benefits are more long term than short term. Getting into this business and expecting to buy a property that’s just going to go perfectly, you’re going to be making all this cashflow from day one. It doesn’t work like that. You have to have a long-term mindset. So if you aren’t mentally prepared to be a landlord, take on some short-term pain and get the gain in the longterm, then you probably shouldn’t be looking into burrs at all.

Dave:
Totally. I think you basically have a choice to make Morgan one you said, I want to take a risk, but not a huge loss. Those things aren’t a hundred percent compatible risk and reward work going to continuum. The higher the risk you take, the bigger the potential reward. So if you’re saying that you want to take a risk, you have to be open to the idea of loss. That is just investing in general. People who invest in Bitcoin have had amazing returns. People have also lost fortunes in Bitcoin. If you want to just safe investment, go buy bonds, you’ll earn a 4% return and you’ll be fine. But if you want to take a risk, you have to be comfortable with the loss. So I really think you need to figure out where you want to fall on this risk continuum because if you’re comfortable with risk and loss, go flip houses. I think that’s probably the right answer for you because you seem to not want to deal with tenants. In my opinion, Burr is a lower risk strategy than flipping, and so if you instead want to focus on not taking big losses and can warm up to the idea of having tenants, then I would say bur,
Because with a bur, you don’t have the same time pressure as a flip. You still want to do it as quickly as possible, but if you finish your renovation at a bad time to sell, you just keep it and rent it out. You lose that pressure for disposition. So I think you need to sort of make a decision here because you can’t have it all.

Henry:
Yeah, I agree. And you need to figure out are you looking for short-term money or long-term money, right? If you want to do a fix and flip, you’ll get money faster, right? You’ll get paid hopefully in six to eight months. A bur is probably going to take you longer. You’ll pull out some of your cash, but the likelihood of you finding a deal that pencils as a burr in a short term timeframe, that’s going to allow you to pull all of your cash back out and some additional profit. That’s a tough sell right now.
Can it be done? Yeah. Yes, it can be done, but it takes work. You’re going to have to be searching for off market deals or putting in a ton of extremely low offers on our market deals, and it’s just going to take a long time to find that. So it sounds like you need to A figure out what kind of risk reward you want, and B, when is that timeframe that you’re looking to get paid? Because a burr is going to take a longer period of time. A flip can be a whole lot shorter, but a flip is going to be a bit riskier, so you’ve got some decisions to make for sure.

Dave:
Honestly, once you figure out the goal, I know it sounds boring and no one really wants to think about it, but I promise you it sort of just makes every question after that easy, you’re like, okay, should I buy this? You have this frame of reference that you can analyze any question through. It’s like, should I buy this deal? No, it doesn’t meet my goal. Should I buy this deal? Yes, of course. It gets you over analysis paralysis, it gets you over that overwhelm feeling, so just take the time and think through what you really want to accomplish here.

Henry:
Alright, well, we’ve got time for one more question, but before we get there, we’ve got to take a quick break. All right. We are back on the BiggerPockets podcast answering your questions from the forums, and we’ve got one more question and it comes from an investor named James in Seattle. James says he’s looking to buy his first house hack in the Seattle area and is finding it incredibly hard to find a property that will cashflow positive when he moves out. He says, I’ve had agents and lenders tell me that’s a pretty great deal when I would be getting negative $1,400 a month in cashflow. How am I supposed to continue buying a house hack every year or two if I’m racking up more and more payments? Am I supposed to buy the house and hope that I can eventually rent and refinance, help me make a deal in this expensive market?

Dave:
Well, first of all, I love that this comes from someone named James in Seattle. I love the idea of this just being James Dnar submitting questions to us many. What’s this whole cashflow thing?

Henry:
There’s no juice in the cashflow, guys.

Dave:
There’s no juice, but seriously, James, I live in the Seattle area and I sympathize. My short answer to this question is, this does not sound like a good deal. I wouldn’t do it if I were you. I don’t know what else to say. Henry and I actually recorded a show last week talking about house hacking popular topic five, 10 years ago. There was almost no situation or no market. I would advise against house hacking. It was just a no-brainer. Check the box, go do it. But in the expensive, the truly expensive markets in the country right now, these are Seattle, California, New York, Austin, Miami, these kinds of markets, it does not make sense. I have literally done the math and it does not make sense to buy house hacks. I know BiggerPockets is partially responsible for this mindset where we’ve been telling people the house hack for 15 years
And still for 80% of the population. That is true, but if you’re in one of these uber expensive markets, it doesn’t make sense. You have two options in my opinion. You either do heavy value add strategy, which is what I have resorted to since moving to Seattle. This is why I started flipping houses for the first time because you absolutely can make money in Seattle doing that strategy or you have to invest out of state. This is why I do both. I invest out of state for cashflow and for long-term rentals. I am trying my hand. I wouldn’t say I’m a flipper yet, but I am dabbling in flipping a little bit because I do like, I enjoy real estate. I want to be doing deals where I live, and so the only way that that makes sense for me right now is to do heavy value add in the form of flipping. I’m also starting to look at value add rental properties like buying stuff that really needs a lot of work and doing that, but house hacking here, it just doesn’t work. It doesn’t make sense right now.

Henry:
Here’s the framework that I kind of look at in terms of should you house hack or not. If you’re looking at house hack deals, especially just consider a duplex. If you’re living in a place where you’re looking at a duplex and if you buy it, live in it, rent out the other unit, and your remaining mortgage payment is still as much as it would cost you just to go rent a place by yourself, you should not house hack. It’s not going to

Dave:
Work well. I wish rent here for a single bedroom was only 1400 bucks a month. It’s probably more than that, but you can rent a nice apartment in Seattle for two grand, 2,500 bucks a month, especially in the neighborhoods that James is talking about. So it’s a lot of risk and a lot of work and a lot of capital, frankly, that if you’re going to go even listed some neighborhoods here, we won’t read them to you, but you’re still going to have to, if you’re putting 20% down on these properties is over a hundred grand for sure. If I were me, I would rent and I would go find a duplex in a growing city in the Midwest and just bite the bullet. It’s not that bad. I do it and everyone can figure it out. We put out a lot of resources on BiggerPockets about how you can do this as well.
I offer this freely on biggerpockets.com/resources. I made a free calculator. It’s a house hack rent or buy calculator. Go play around with it. It will confirm what I’ve said and anyone else who’s thinking about these different options, just go play around with it. You will see that you’re putting 80, $90,000 into this deal. Even if you put that in a bond, you’re going to be making more money than this house hack deal. You should just think about the opportunity costs that you’re giving up with this. I know we talk about house hacking all the time. It does make sense, but there are situations where it doesn’t make sense. This is why no matter what you do, you have to just run the numbers and see for yourself if the math pencils out, and for most people in Seattle or LA or New York or Miami, it just doesn’t pencil right now and it’s frustrating, but there are other ways that you can win as an investor, so go focus on those.

Henry:
Absolutely. You’re right. It is our fault. We talk about house hacking all the time. It is amazing. Yeah, that’s

Dave:
Awesome. Blame us,

Henry:
But we’re being honest with you about what situations it does work and what situations it doesn’t work. So if you want to learn more about house hacking, you can check out a couple of previous episodes that Dave and I did, number 1236 from a couple of weeks ago that was all about how to analyze these specific rent versus buy decisions that we talked about today. Or you can check out episode 1182 where I talked about several ways you can add value to your house hacks and your rental properties to help you be more profitable,

Dave:
And if you want to learn how to add value in Seattle specifically, we’re literally doing a value add conference in Seattle because this is such an important question. This is a question, James, that we hear all the time, and that’s why James Dard one of the best value add investors out there and who does it in Seattle makes more money than Henry and I combined is teaching us how to do this. So it’s March 28th. You can get your ticket at biggerpockets.com/seattle. Henry and I will both be there. Henry will be teaching. I’ll be in attendance learning and hope to see you guys there as well. I personally am going to go start enjoying the benefits of indoor heating and shed a couple layers. But thank you all so much for listening to this episode of the BiggerPockets Podcast. We’ll see you next time.

“Follow the money” is cogent advice for investors deciding which Sunbelt state to invest in. Unlike in previous years, however, the money trail leads not to Florida or Texas but to North Carolina, where millennials are flocking for tech and finance jobs and a lower cost of living. While cash flow is tight for landlords in the main hubs here, by picking the right neighborhood, those who buy smart and move fast can enjoy the spoils of a state on the move.

From July 2024 to July 2025, North Carolina attracted 84,000 new residents, according to Census data, more than any other state, and is consequently the third-fastest-growing state in the nation. While North Carolina has plenty to offer in terms of climate, geography, and jobs, the two Southern powerhouses that have grabbed the headlines over the past few years for attracting remote workers and job seekers—Florida and Texas—have handed North Carolina an immigration victory lap due to the rapid cost of housing and soaring insurance costs in the two states.

“The cost of housing, in particular, is driving young people and retirees to other states,” University of Florida research demographer Richard Doty told the Associated Press. “Also, insurance is higher in Florida than in most other states.”

Rival States Hit the Brakes

The post-pandemic tech boom in Texas appears to have hit the brakes recently, as major companies have laid off workers, while traditional coastal employment hubs such as New York and San Francisco have picked up.

Isabelle Bousquette, a tech reporter for the Wall Street Journal, said on Texas Standard, a Texas Public Radio station:

“There was a recent report from SignalFire, which is a venture capital firm, and that was showing that in 2024, employment in big tech companies declined 1.6% in Austin, and employment in tech start-ups declined 4.9%. We also saw declines in cities like Dallas, Houston, Denver, and Toronto. But then, you know, increases actually in New York and the Bay Area….A lot of the companies that moved to Texas have done layoffs since.”

Escalating rents and home prices have also contributed to the exodus. “I think a lot of people were frustrated and disappointed when the housing costs went up or fluctuated. And yeah, I think that was also one of the reasons that they may have headed out,” Bousquette added.

Smaller Cities Make for a Better Quality of Life

Also playing into North Carolina’s hands are the generally smaller, less bustling metros compared to Florida and Texas, where families can live closer to their jobs or work remotely while being in a scenic environment.

“North Carolina is attracting younger folks because we have so many nice areas in North Carolina—the mountains and beaches and lakes in between—that we’re benefiting from younger people who decided they can work from anywhere and would rather be in a nice area,” North Carolina state demographer Michael Cline told the Associated Press. “One of the things about North Carolina, our cities are not huge, and that may be attractive to folks, too.”

These factors have helped employment hubs such as Raleigh, Durham, and Charlotte evolve into diversified centers rather than single-industry boomtowns. 

This is why Ralph DiBugnara, founder and president of real estate investment platform Home Qualified, recommended Raleigh as the prime place to invest in 2026.

“A great strategy for 2026 would be to look into any cities that are growing population because of workforce,” he told GoBankingRates. “This can be a major needle mover in higher prices for real estate.”

Employment Diversity

In addition to its core employment drivers in tech and finance, North Carolina has been broadening its employment reach in manufacturing and life sciences through Swiss drugmakers Roche and Novartis, as reported by Reuters. Construction for the buildout, along with the creation of permanent new positions, will result in thousands of new jobs.

The Landlord Play

For smaller landlords, the play is straightforward: More high-paying, stable jobs result in stronger rent rolls and deeper tenant pools over time. The real decision is choosing where to invest.

For all-cash buyers who are looking for a solid place to park their money and enjoy strong returns, Raleigh, Durham, and Charlotte in B and B+ neighborhoods close to the main employment area are a no-brainer. Research is needed, though, on the types of wages being paid so that rent does not take up the majority of a tenant’s paycheck.

High on a millennial’s list of must-haves will likely be a walkable neighborhood, with easy access to parks, trails, restaurants, and an adequate supply of housing to invest in with numbers that make sense. That means targeting submarkets with commuting distance to their jobs.

Important Stats

Raleigh, Charlotte, and Durham

Charlotte is a prime target for investors, according to lender Equitycheck, and has recently posted a 12% appreciation rate. It’s competitive and pricey. Prime investment areas include Uptown (City Center), NoDa and Plaza Midwood, Optimist Park, and Villa Heights, while more affordable suburban markets such as Huntersville, Matthews, and Indian Trail appeal to families.

Granitepark.co, a real estate investment blog, recommends University City, Steele Creek, and Concord in Charlotte as places to attract young professionals without premium pricing.

With a thriving tech industry, Raleigh has seen an influx of workers with higher-paying jobs in recent years, driving demand for housing. However, they come with higher price points.

In addition to Charlotte (Chapel Hill), Raleigh and Durham—the Research Triangle—Asheville, and Carolina Beach are strong short-term rental enclaves. There is also high student housing demand, especially in Chapel Hill, which has over 32,000 students and is home to the University of North Carolina. Raleigh is home to North Carolina State University (NC State), with 36,000 students. Duke University is based in Durham, with students paying high rents.

Greensboro

No mention of investing in North Carolina would be complete without mentioning Greensboro, which is generally affordable, with a median price of $257,450, according to Zillow, and strong cash flow potential in manufacturing, tech, and logistics.

Wilmington

The laid-back coastal city of Wilmington offers a small-town vibe with big-city amenities, attracting many well-heeled investors. The average home price of $406,726 means rental prices need to be high to turn a profit. However, for investors who can afford it, it’s a solid place to buy due to expected appreciation, consistent demand, and a steady short-term rental business.

“Wilmington should continue to grow, and because most of the land within the city limits is developed, we’ll continue to see more redevelopment of existing properties,” developer Jason Swain, of Wilmington-based Swain & Associates, told Wilmington Biz. “At the same time, much new growth will likely occur on the periphery of the city…With interest rates falling, we expect some projects that have been on hold to start moving forward as development fundamentals stabilize and expectations adjust to new market norms.”

Rent prices

Compared to the state average rent of $1,895, Raleigh’s average rent of $1,574 is on the lower side, especially considering the average home price of $424,924. Durham is also fairly expensive for rental income, with cap rates around 4.4%. Greensboro is around the same, but the lower-priced housing makes this far more attractive for investors from a cash flow perspective.

Final Thoughts

What North Carolina has going for it is momentum. It’s growing fast, with vibrant employment and education hubs, and people are moving there in droves, so it’s hard to put a foot wrong if you plan to buy. The main question for an investor is whether to buy for appreciation or cash flow, because the coveted job-heavy cities are pricier and, with current interest rates, won’t cash flow for leveraged buyers.

The smaller pockets in and around areas like Greensboro will, however, and with prices still around $250,000, even a break-even scenario with a view to tax breaks, debt paydown, and refinancing to a lower rate in the future could be a prudent move.

Everyone hears “five Airbnbs in five years” and immediately pictures some kind of motivational speaker montage. You know the one:

• Scrolling Zillow at midnight with one eye open.
• Signing five mortgages while pretending you understand what “debt service coverage ratio” means. 
• Buying 37 throw pillows from HomeGoods because apparently that’s what makes a house “Instagrammable.” 
• Chugging cold brew like it’s a performance-enhancing drug. 
• Yelling “CASH FLOW” into the void and hoping the universe manifests a check.

And then year two hits:

• The hot tub breaks and costs more to fix than your first car. 
• Your cleaner quits via text at 9 p.m. on a Friday before a check-in. 
• The city changes the STR rules, and suddenly, you need a permit that requires a blood sample and your firstborn child. 
• You’re on your third “emergency” Home Depot trip this week, wearing the same hoodie you slept in, and you’re pretty sure the cashier recognizes you now.

So, no. Getting to five short-term rentals is absolutely not “buy five houses as quickly as humanly possible and figure it out later.”

That’s how people burn out, overleverage themselves into oblivion, and start posting desperate questions in Facebook groups at 2 a.m., asking if anyone has a “miracle pricing spreadsheet” that also fixes existential dread and poor life choices.

The real path to five short-term rentals in five years is calmer, smarter, and honestly way more repeatable than the Instagram version. It’s a mix of ownership, co-hosting, and economies of scale that don’t require you to sell a kidney or develop a caffeine dependency.

Here’s the step-by-step plan that actually works—without destroying your mental health in the process.

Why Your First Airbnb Should Feel Like Tuition (Not Your Retirement Plan)

Your first short-term rental is not your forever property, your brand, or the thing you’re going to feature in a glossy magazine article about your “real estate empire.”

It’s tuition. Expensive, sometimes painful, absolutely necessary tuition.

You’re paying to learn how guest expectations really work, which is to say they’re both completely reasonable and wildly unhinged at the same time. You’ll learn what breaks the most (spoiler alert: It’s always the thing you thought was “nice to have” but “probably fine”). 

You’ll figure out how pricing actually moves, and why your gut feeling is usually wrong by at least 20%. And you’ll discover what a good cleaner is worth, which is more than your ego wants to admit but less than therapy would cost if you tried doing it yourself.

Most importantly, you’re learning how to build systems you can actually reuse later without wanting to throw your laptop out a window.

Most people fail their first STR because they treat it like a retirement plan instead of a learning experience. They stretch to buy the prettiest property with the biggest mortgage payment, then try to operate it like a legitimate business with the budget of a kid’s lemonade stand. It’s a recipe for disaster—or at least a recipe for spending every Saturday at Home Depot looking for the right lightbulb while questioning every decision that led you to this moment.

The goal of the first STR isn’t to maximize profit and retire to Bali. It’s to build a playbook that works. A boring, repeatable, “I’ve done this before, and I know it works” playbook.

Because once you have a playbook, scaling becomes boring. And boring is massively underrated in business. Boring means you’re not constantly improvising. It means you can sleep at night. Boring means you might actually take a vacation without checking your phone every 11 minutes.

Year 1: Build Something Simple That Prints Money—Without Printing Stress

In year one, your job is not to create the Taj Mahal of short-term rentals or some boutique hotel experience that requires a staff of 12. It’s to build the simplest possible machine that prints money, without printing ulcers.

Here’s the actual recipe: Pick a market in demand, even when your listing isn’t perfect. You want a place where people are actively traveling, not one where you’re the only thing keeping the local economy alive.

Buy a property that’s easy to clean and maintain. This is not the time to buy the historic Victorian with original hardwood floors that need to be refinished every six months. You want the boring house that doesn’t fall apart when someone uses the shower.

Keep your design simple, memorable, and durable. You’re not designing it for Instagram. It’s for real humans who will spill wine on your couch and not tell you about it.

Set up your systems from day one: messaging templates, pricing rules, cleaning schedules, and maintenance checklists. Build these now or hate yourself later.

Learn the guest journey obsessively. What do they actually care about? Where do they get confused? What questions do they ask 47 times that you should just put in the listing?

If you do this right, you’ll end up with consistent reviews, occupancy, and confidence that you’re not completely winging it, as well as a repeatable setup you can literally copy and paste when you’re ready to scale.

And you’ll also have the one thing most investors never get: proof that you can run this business without being physically present for every single decision, which is the whole point unless you enjoy never sleeping or taking a day off.

The “tuition mindset” makes everything else possible. Skip this part, and you’re just collecting houses, not building a business.

Year 2: Co-Hosting Is the Cheat Code Nobody Wants to Admit Actually Works

Here’s where we take a hard left turn from the “normal” advice you’ll find in every other real estate blog, written by someone who read three books and bought one rental.

If you want five short-term rentals in five years, you need cash flow that doesn’t require buying more houses immediately and taking on more debt that makes your accountant nervous.

That’s where co-hosting comes in. Co-hosting is hands down the easiest way to scale your income in this space without taking on more debt, risking more capital, or convincing a bank that yes, you really do need another mortgage.

And I know exactly what you’re thinking right now: “I’m not trying to be a property manager. That sounds terrible, and I already have enough problems.”

Totally fair. I get it.

But co-hosting (when done right) is not traditional property management, where you’re fielding calls about broken garbage disposals at 11 p.m. and mediating neighbor disputes about parking.

If you do it right, it’s more like running an operating system. You build the messaging system, pricing system, cleaner and maintenance network, guest experience standards, and reporting cadence. And then you apply that exact system to other people’s properties.

You get paid to practice scaling, refine your systems, and figure out what works and what doesn’t before you risk your own money on property No. 2.

Most people skip this step because they think it’s beneath them, or they’re obsessed with “owning doors” like it’s some kind of status symbol. Those same people are also the ones posting in Facebook groups six months later asking how to afford their second down payment while their first property is bleeding cash.

Co-hosting can fund your growth in a way that buying another house simply can’t. And it teaches you the single most valuable skill in this entire game: how to run short-term rentals that you don’t physically babysit 24/7, like they’re a toddler who just learned how to open the fridge.

What co-hosting actually does for your five-year plan (besides make you money)

Here’s the real point most people miss: If you can co-host three to 10 properties while owning one, you start stacking benefits that compound way faster than just buying another property:

• Extra income that doesn’t require a down payment or a mortgage 
• Operational reps that make you better at this faster 
• Vendor leverage, because now you’re worth their time and attention 
• System refinements, because you’re seeing what works across multiple properties, not just your one special snowflake 
• Confidence in your numbers, because you’re not guessing anymore

Your first Airbnb taught you how the game works. Co-hosting teaches you how to run the game at scale without losing your mind or your savings account.

Also, your cleaners start actually liking you because you feed them more consistent work. Your handyman starts answering your texts faster because you’re not just “that one guy with one property.” And your pricing decisions get dramatically better because you’re seeing patterns across multiple listings in real time, instead of just staring at your own calendar wondering why nobody’s booking.

Economies of scale show up way earlier than most people realize. And they make everything easier, cheaper, and less stressful.

Year 3: Buy Your Second Property Later, Not Sooner (Yes, Really)

Most people rush their second purchase because they’re completely addicted to the idea of “owning doors,” and they want to tell people at parties that they have “multiple properties,” like it makes them sound sophisticated.

Then they end up owning two doors and exactly zero hours of sleep while wondering why their bank account looks like a crime scene.

Buying the second property later can genuinely be better than buying it sooner. Here’s why: 

• You’ll have more cash saved because you weren’t throwing everything at another down payment before you were ready. 
• Your systems will be tighter because you’ve had time to actually test and refine them, instead of just making stuff up as you go.
• Your vendor network is stronger because you’ve been working with them long enough that they actually return your calls.
• You’ll underwrite properties better because you know which numbers are real and which are fantasy.
• You’ll know what actually drives revenue in your specific niche, instead of guessing based on some pro forma you found on BiggerPockets.
• Your co-hosting income can help cover slow months on your owned property, which means you’re not panicking every time occupancy dips.

This is the boring truth that nobody wants to hear: The second purchase is dramatically easier when you’ve already proven you can operate at scale, even if that scale is co-hosting other people’s properties. It’s the difference between “I really hope this works, and I’m not making a huge mistake” and “I’ve literally seen this exact playbook work on 10 other properties, so I know exactly what I’m doing.”

That confidence is worth actual money. It helps you negotiate better, avoid bad deals, and sleep at night.

Year 4: Stack Smart, Not Fast (Because Fast Is How People Go Broke)

At this stage, you’re not “starting” anymore. You’re repeating a process that you already know works.

This is where growth stops feeling like complete chaos and starts feeling like an actual business, with systems and processes and maybe even some predictability.

In year four, your only job is to do two things:

1. Buy one more property. Now you’re at three owned, which is enough to feel legitimate, but not enough to drown.
2. Keep co-hosting, or transition into partial management if you want less day-to-day involvement and more strategic oversight.

This is also where you’ll feel the first real benefit of scale that makes you realize why you did all this work in the first place. You can:

• Bulk-buy supplies and actually save money. 
• Standardize amenities across properties so you’re not reinventing the wheel every time. 
• Reuse your guidebook and messaging templates without changing a single word. 
• Train cleaners once, and then copy that exact standard to every other property. 
• Negotiate better pricing with vendors, because now you’re actually worth their time. 
• Move faster on deals, because you already know what matters and what’s just noise.

You’re basically building a tiny hotel brand—without a lobby or matching uniforms or any emotional stability. But you do have a business that actually works.

Year 5: The Jump to Five Is a Systems Question, Not a Money Question

By year five, getting to five rentals is no longer about “can you find the next deal?” or “can you convince a bank to give you another loan?” It’s about three much more important questions:

1. Do you have the cash flow to support down payments without stretching so thin you can’t handle a single surprise expense?
2. Do you have the team to support more listings without you personally answering every guest message at 10 p.m.?
3. Do you have systems tight enough that adding another property feels like an addition, not a complete lifestyle change that requires you to quit your job and become a full-time Airbnb babysitter?

At this point, you can hit five properties in a few different ways, and honestly, they’re all valid:

• Option A: Own five properties outright. This is traditional, straightforward, and requires the most capital, but gives you the most control.
• Option B: Own three to four properties and co-host 10 to 20 for other owners. You still have “five STRs” in terms of operational experience and income, but they’re just not all sitting on your personal balance sheet, making your debt-to-income ratio look terrifying.
• Option C: Own two to three properties, but build a brand that’s actually worth more than the properties themselves through direct booking, repeat guests, content, partnerships, and systems that other people would pay for.

Most people obsess over “How many properties do I own?” like it’s a scorecard at a networking event. Real operators obsess over “How much infrastructure have I built?” Infrastructure is what makes five feel easy and makes 10 feel possible instead of insane.

The Real Secret: Scaling STRs Is Not a Buying Strategy. It’s an Operating Strategy.

If you take exactly one thing from this entire article, make it this: Buying properties is the fun part. It’s exciting, gives you something to post about on LinkedIn, and makes you feel like you’re making progress. However:

• Operating properties is the part that actually gets you paid and determines whether you succeed or fail spectacularly while drowning in debt and regret.
• The first Airbnb is tuition. It teaches you the game.
• Co-hosting is cash flow without debt. It teaches you scale.
• Waiting on the second purchase is discipline. It teaches you patience.
• Scale is systems, not hustle. It teaches you leverage.

And if you build it that way, five properties in five years doesn’t feel like a sprint where you’re constantly on the edge of disaster. It feels like a plan. A boring, repeatable, actually sustainable plan that doesn’t require you to sacrifice your sanity, relationships, or ability to sleep through the night without checking your phone.

And honestly? That’s the version worth building.

Ashley Kehr:
Today’s rookie reply is a great one because it hits three different fears that rookie investors have when they’re ready to move on from learning into execution.

Tony Robinson:
Yeah, we’ve got someone worried about how to rinse and repeat after their first rental. Another rookie panicking mid deal because insurance blew up their numbers. And a W2 investor trying to use short-term rentals for tax savings without getting crushed by regulations.

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

Tony Robinson:
And I’m Tony j Robinson. And with that, let’s get into today’s first question. So this question comes from the BiggerPockets Forum and it says, after spending four months reading and listening, I’m close to finally taking that first step, enough talk time for execution, but I still find myself questioning what do I do after I purchase my first rental? I’m focused on long-term rentals and cosmetic burrs, but I struggle with grasping creative ways to finance and rinse and repeat. While I’m fine dropping 40, 70 K as a down payment, I feel stuck in a holding pattern wondering if I need to wait and save another 40, 70 K to do the next deal. I’m excited about Cleveland, Cincinnati, Pittsburgh, and Dayton. Any nuggets of wisdom would be appreciated. Alright, so this question is really about how to scale your portfolio beyond the capital that you currently have access to.
I think there are maybe a few approaches that you can take. The first approach is to do probably the simplest way is just to take the 40 70 K that you have right now, put that down as a down payment on a deal, and then save up under the 40 70 K and just repeat that process over and over again. It’s slower, but it’s significantly less work and requires less creativity and it’s just a really kind of tried and true approach to build a portfolio. The second path is that you find a way to recycle that initial set of capital. So you can do things like the burrs that you mentioned where you’re buying a property, you’re renovating it, you’re rehabbing it, then you’re refinancing to get back some or potentially all of the capital that you put back into that deal, right? So the burrs strategy is the second way, and then another way is then partnering with other people to help fund your deals.
So if you’ve taken down this first deal, you’ve got a bit of a track record, you’ve proven that you know how to find deals, execute, and so on and so forth, maybe then you start leveraging partners and their capital to take down more deals. And then maybe probably the more complicated path is going after something like more creative financing. If you can do seller financing where you’re finding properties that are owned free and clear and then you’re negotiating directly with the seller to have them loan you the money is another way to scale beyond your original capital. But in my mind, Astros are probably the four big buckets, but curious what your thoughts are.

Ashley Kehr:
Yeah, I think the last part of this question as to should I wait and save up more money or should I go ahead and try and find another creative way to purchase a property without waiting and saving up money? But I think the answer is really to do this simultaneously. Start saving again, but also looking for deals where you can do some creative financing. So whether that’s a bur where you’re using hard money and then you’re going to refinance out of it and pull your money back out, whether it’s going to be finding a deal where the person will do seller financing. If you go to, I think it’s called landwatch.com I think is what it is, you can literally click a toggle or a filter that is for seller finance deals that are available that people are already saying they’ll do seller financing and you can submit offers and put the offer as seller financing.
One thing that I’ve always done is when I get to go face to face with a seller or I try to have my real estate agent communicate this, if I’m going to submit an offer that’s seller financing, I always like to say, have you talked to your accountant or your CPA about the tax advantages of doing seller financing? And that usually piques a little bit of interest and it sounds more reputable to somebody having it come from their own personal CPA rather than from somebody who’s trying to buy their property. If I try and tell them like, oh, here’s all the advantages and the reasons why it’s more likely they’ll listen to their CPA than me who’s trying to haggle them for a deal.

Tony Robinson:
Just last thing I’ll say asra, I do think that there’s value in thinking about deals number two, five and 10 before deal number one, but I think it’s a bit of a fine line because oftentimes I see people get so caught up and well, how do I scale and how do I get property number two and how do I get property number five that they lose focus on the fact that they don’t even have deal number one yet. So I think the majority of your focus right now should be on how do I make deal number one work? And then from there you can start making pivots and adjustments to go on to deal number two, number five, number 10. But don’t get caught in that loop of thinking so far ahead that you forget to take that first step.

Ashley Kehr:
That’s totally a great point. So we’re going to take a quick break, but when we come back, we’re going to understand when you should walk away from a deal or stick it out. We’ll be right back. Okay. Welcome back. So this next question comes from the BiggerPockets forums and it says, hi, I am a new investor to real estate. I’m 22 and looking to do a house hack using an FHA loan with three and a half percent down. I’ve got under contract on a property in Baytown, Texas, but during underwriting we found insurance costs were 6,000 to 8,000 per year plus flood insurance. The deal no longer cash flows even long-term, and I’m past my option fee. I feel stupid backing out but don’t know what to do. Is my earnest money gone? Please help. Ouch. That does hurt. And it doesn’t say how much the earnest money was, but I will say I’ve lost earnest money.
There was a deal, it was a cabin and I found out some things, title issues and all this stuff after my due diligence period was over and I think it was $2,000 and they told the sellers, keep the money. I’m backing out of the deal. And looking back now, I would’ve rather have lost that $2,000 than be stuck in a deal where I’m losing even more money. And I think that would probably be the case in this situation. If I mean just six to 8,000 per year plus the flood insurance, I don’t think I have a single property right now that is that much an insurance per year.

Tony Robinson:
Yeah, that is wild. Six to eight grand plus flood insurance and flood insurance is not cheap. You have to go out and go out and get special flood insurance. Yeah, I agree with your point, Ashley. Whatever the EMD is, you have to weigh that cost against the ongoing cost of owning this property year after year after year after year to see if it actually makes sense to move forward with purchasing this property. I think a lot of this goes back to what Ash and I talk about a lot is that it’s easy to get emotionally attached to a deal and feel like you’ve already put so much time, effort, and in this case money into a deal. But sometime the smartest thing to do is to walk away. And if your deal does not work because of these new finances, then just go back to the settler and be honest.
Say, look, I had every intention of purchasing this property, but the flood insurance quotes that came back and the insurance quotes that came back are significantly higher than what I had originally anticipated. So I would ask that you release my EMD because this is not within my control. It’s not me trying to back out of the deal. Like here are the cold hard facts. Hey look, if you have an insurance agent that can give me a better price, I would love to talk to them, but if not, please work with me to make sure that we can walk away amicably. So I’m with you, Ash. I think I’m walking away from this deal because it’s not worth stepping into

Ashley Kehr:
Wait 100%. That should be the first step is trying to renegotiate with the seller. You might as well ask, they probably don’t want to have to start all over in the process of selling the property. So maybe they do have some wiggle room to continue to make it work. But that’s where I would start.

Tony Robinson:
And kudos to you for being 22 and locking down your first house hack, right? And then it’s a great way to start. We’re going to take a quick break, but while we’re gone, if you haven’t yet followed the podcast on Instagram at BiggerPockets rookie, then you can follow Ashley at Wealth and Rentals and me at Tony j Robinson and we’ll be right back after a quick break. Alright guys, we’re back and we’re here with our final question. This one’s about short-term rentals, taxes, and regulations. So the question is, I currently invest in long-term rentals but cannot take advantage of real estate professional status due to my W2 job using the short-term rental tax loophole to offset my W2 income with supercharge my investments. But I’m afraid of buying a property denied, but I’m afraid of buying a property and getting denied a short-term rental license.
Can anyone recommend beginner friendly STR markets, preferably within three to four hours of NYC? Alright, so a few things to unpack here. I think the first piece is that we need to break down what the short-term rental tax loophole is. I’ll try and do this in a way that’s super clear for everyone to understand. Real estate investing offers the ability to take losses, whether those are real losses like you actually lost money on that property or paper losses, things like depreciation, which is not a real expense, but it’s a paper loss. You can take those losses and apply them against other forms of income that you collect. Now, in order to take those paper losses and apply them against your W2 income, you have to be what’s called a real estate professional or qualify for what’s called the real estate professional status. For most people with a day job, it’s virtually impossible because you have to show that you put more hours into your real estate business than you do into your day job.
Most people can’t prove that. But with short term rentals, because they are classified as a business in the eyes of the IRS, not necessarily passive income like a long-term rental, you don’t have to qualify for real estate professional status. There’s something called material participation. And as long as you can show that you materially participate in your short-term rental, that then unlocks your ability to take the passive losses from your short-term rental and apply them against your W2 income. So I know that’s a mouthful, but if you just look up short-term rental tax loop, you’ll get some more insights there. So that’s this person’s motivation. And I know a lot of people who invest in short-term rentals primarily for the tax benefits associated with it, and it truly does give you the ability to largely reduce or sometimes even eliminate your tax bill altogether. Okay, so that’s the first piece.
Now, what this person is worried about is the regulatory landscape of the short-term rental industry. And while it’s shrewd that the regulations across the country have changed, shifted, evolved, some have gotten significantly more strict, it doesn’t mean that every single market is this huge regulatory risk when it comes to short-term rentals. There are really a few core things I look at to gauge the regulatory risk in a market. The first thing I look at is what is the current ordinance in that market? Can I legally rent a short-term rental? Is there a cap? Can I only do it in certain parts of town? Does it have to be a certain property? Is there a limit on occupancy? Is there a limit on usage? Just understanding what that current ordinance is to make sure that it allows me today to profitably run this property as a short-term rental because there are some markets where you can run it as a short-term rental, but you’re capped at only using it for 30 days out of the year.
Who cares if I can use it in any way, shape, or form if I only get one month from that property? It doesn’t make sense as a short-term rental. So just understanding the current ordinance. And then the second element is understanding the risk of that ordinance changing in the future. And the core thing that I focus on when I think about answering that question, Ash, is how economically dependent is that city on the revenue generated by short-term rentals? I’m going to pick on your home state of new, and in New York City, they effectively banned short-term rentals a few years ago. But if you think about why NYC was able and willing to do that, it’s because they didn’t care about the money that short-term rentals generated for that city, right? Like NYC is one of the, if not the most populous city in the United States, it generates revenues from literally every single industry.
It has no economic dependency on Ashley and Tony’s little Airbnb. But if you think about true vacation destinations, places where people only go to vacation, those are cities that are truly dependent on the money generated by short-term rentals in the form of transient occupancy taxes in the form of property taxes, in the form of people coming in saying a few nights and spending money in the local businesses where if those short-term rentals were to shut down that local economy would be severely impacted, maybe even collapse. So we want to look for cities that have that element of economic dependency and not so much the big cities that have a lot of things driving that economy. So that is my brief masterclass on the short-term rental tax food poll and regulations and how to avoid them. Ash, any questions or what do you have to add to that?

Ashley Kehr:
Any value that I can provide is I know the New York area and destination, so I can add two places that I think would be a good short-term rental areas to invest in. I did a quick Google search and tried to look real quickly if they’re short-term rental friendly. And it really depends on the specific area, but within that three to four hours of New York City is the Poconos tons of things, skiing in the Winter Lakes in the summer, and then also Lake George. It’s one of the cleanest lakes across the us I think in a great destination area. It’s close to I think Saratoga, where they have horse r ising and different things like that. But yeah, so those would be the two markets I would look into and just searching real quick, you have to get permits, things like that. And the laws vary depending on the specific area that you’re in and things like that. But those would be the two places that I would go and stay in a short-term rental.

Tony Robinson:
And I think the other thing I’d add to that question too, Ash, and this is not true for short-term rentals, but for all strategies is ask yourself what your motivation is for staying within three to four hours of New York City. Is it because there’s just this comfort factor of being able to go and check in on the property yourself and in case something happens, you’re there to kind of be present? Or is it because maybe you want to use it yourself if it’s more so the personal use, that makes sense. But if you’re leaning towards this tighter radius simply for comfort reasons, I would encourage you to understand that whether the property is four hours away or eight hours away, you’re probably not going to be the person cleaning the Airbnb. You’re probably not going to be the person fixing maintenance issues. You’re not going to be the person restocking supplies, you’re going to hire all of those things out anyway.
So if you can find a deal in a property that’s in Bozeman, Montana or Des Moines, Iowa, or name the city in the random place on the west coast, if that is a better deal for your specific situation, I wouldn’t say that you should necessarily avoid that just because it’s not as close as you want it to be. There are tons and tons of people every single day who are buying properties remotely and are successfully managing them as long as they have the right systems and processes in place and likely for you. You’re already listening to this podcast and we share a lot of the different ways you can do that remotely.

Ashley Kehr:
And one thing I would add too is if you want to use it for yourself personally, make sure you’re aware of what the rule is for that. Isn’t it a pretty gray area though, Tony, as to how many days you can actually use it if you’re writing it off as a short-term rental?

Tony Robinson:
Yeah, there was a lot of discussion on this, but yeah, I mean, usually what most lenders say is that somewhere around seven to 14 days is a good baseline of personal use. So there’s actually two different things we’re talking about here. One is a lending requirement, and then the other is how the IRS views it. So from the IRS perspective, your average state duration for the year has to be seven days or less. So as long as your average guests stay, when you look at all your reservations is seven days or less, then you’re still able to quantify this as a business. Once you get over seven days, they start to treat it more like a traditional long-term rental and you lose that ability to qualify for material participation. But if you’re seven days or less, you get that ability. So midterm rentals wouldn’t qualify for material participation because most of your saves are 30 days or more on the lending side.
The only real requirement is if you’re using a second home loan to purchase the property, and if you’re using the second home loan, there’s a personal use carve out where you have to use a property yourself in order to qualify for that specific loan. And I’ve heard different figures from different lenders, but seven to 14 days is like a usual good benchmark, but you just got to have the intention to use it yourself at some point during the year. So luckily, those two things are not connected. So I can get whatever kind of debt I want. I can get hard money, private money, conventional debt, not FHA, because you got to live there, but I can do any kind of debt that I want, and as long as I’m seven days or less, I can still qualify for material participation.

Ashley Kehr:
Yeah, I think another point I wanted to make on that too is just if their motivation is three to four hours is because they want to use it for personal use, knowing that they can’t spend, depending which way they go, they can’t spend their whole summer staying there, going every single week up there for the whole summer if they are going to use it for the short-term rental tax loophole or whatever too. So I thought I would use my A-frame all the time, the day I was so sad to rent it out the day I rented out, I was like, oh, don’t worry, kids are going to come here all the time. We haven’t stayed the night once. Maybe one time we went since we started booking it out, but it’s like, yeah, don’t make that a huge deciding factor, I would say, as to deciding on a market if you don’t know for sure if you’ll actually use it or not. Anyways, thank you guys so much for listening to this episode of Real Estate Rookie. I’m Ashley. He’s Tony, and we’ll see you guys on the next episode.

Dave:
If you skip this episode, you could be leaving thousands of dollars on the table. They say there’s only two things guaranteed in life, death, and taxes. And since you’re alive watching this right now, today we’re going to focus on the latter how real estate investors can legally pay less tax. And things have changed a lot this year. Big time. The big beautiful bill tax provisions are going into effect for this April’s tax deadline, and it has huge implications for real estate investors, and that’s true whether you own one rental or an entire portfolio. The strategies we’re sharing today, they could save you hundreds, thousands, or even tens of thousands of dollars over the lifetime of your investments. In this episode, we’re also going to share under the radar tax strategy that 99% of investors are missing out on. And we’ll have a CPA tell us what you need to do today so you’re never scrambling during tax time again.
Hey, what’s up everyone? I’m Dave Meyer, chief Investment Officer at BiggerPockets. Today’s guest on the show is Amanda Hahn. If you haven’t heard Amanda before, she’s been on the show a lot, but she’s an expert. She’s a CPA tax strategist, and she’s a real estate investor herself. She specializes in helping investors pay the least amount of possible taxes legally. And since April 15th is coming sooner than any of us hope or think. Let’s bring out Amanda and learn together how to save some money this year. Amanda Hahn, welcome back to the BiggerPockets podcast. Thanks so much for being here.

Amanda:
Yeah, thanks for having me, Dave. I’m super excited to be back.

Dave:
Well, we’ve had you on the show many times, but some in our audience may not know who you are yet, so can you just introduce yourself for us?

Amanda:
Of course. Hi everyone. My name is Amanda Hahn, and what I always tell people is that I am a CPA by day and by nighttime I am like many of you a real estate investor. My husband and I co-authored the two BiggerPockets textbooks, so if you haven’t checked those out, make sure to do so. One of my passions is really in helping to educate people on all the different things they can do to use real estate, to not just build wealth, but also to save a significant amount in taxes if you do things correctly. So really excited to be here. It’s that time of the year when taxes are top of mind.

Dave:
It is. Well, thanks for joining us today, and if you haven’t read Amanda’s book and you want to save money on taxes, it’s the single best thing that you could do. Self-admittedly, Amanda, this about me am terrible at this stuff. I’m not good at tax strategy, but I’ve gotten better because of reading Amanda’s books and getting to know her. So definitely check that out, but hopefully we’ll give you a little taste of the kind of stuff that you can learn here in this episode. So Amanda, maybe just break it down for us, for people who might be new to investing or for those who are just scaling their portfolio, I think a lot of us, it takes a little time to realize that you should be thinking about taxes. What sort of the big buckets of tax strategy that investors should be thinking about?

Amanda:
Yeah, well, we will start at the basics, which is that it’s important to understand when you invest in real estate, you are actually a business owner in the eyes of the IRS. And so we hear people talk a lot about how tax law favors business owners when it comes to write-offs, deductions, depreciation. And so it’s really important to understand that as a real estate investor, I am now able to take advantage of a lot of those same tax benefits and deductions that the traditional business owner has access to. And this is true regardless of whether we own our rentals in our individual name or in our trust or in an LLC,

Dave:
We call it real estate investing. But it really is just entrepreneurship. You’re starting a small business to own real estate just like any other service business or business that you create. And that is good. That’s a good thing for real estate investing. That’s why you get better tax benefits than if you were to go out and buy stock or cryptocurrency or anything like that. That’s why real estate has so many advantages. So what are the big things that people should be thinking about as they enter tax season right now?

Amanda:
What’s really interesting is when we work with investors all over the US on proactive tax planning, about 40% of tax returns that we review from previous years are not optimized for tax savings. And I can share some of the most common mistakes I see. And I think these are kind of the things that we should all keep in mind
As we get ready for tax season. And we’ll start with just capturing expenses as real estate investors. I think we’re all really good at making sure we write off our mortgage interest and property taxes and management fees. But some of those common mis deductions, even insurance, property insurance is one that we see missed pretty frequently. Really, and it’s really strange because we all have property insurance, but just some of the overhead things. Home office, most real estate investors manage their rentals from their home. Very few people actually go out and rent an office space. So if you have an eligible office, make sure you are claiming it because it does help you to save on taxes either today or sometime in the future depending on your facts and circumstances, but just overhead expenses, going to BiggerPockets conference, your BiggerPockets membership, buying a textbook, for example, using your car for business, right?

Dave:
Yeah, absolutely. For sure. I always wonder about travel. Is that something that you can deduct? I invest out of state, and so sometimes I’m going to visit the Midwest and I’m staying at hotels. That’s something I can deduct, right?

Amanda:
Yeah, for sure. And you actually, it’s not a requirement that you own rental properties in a state in order to take a tax deduction. What is required is that you’re able to demonstrate the main reason for that travel is related to real estate activities. So for example, if I didn’t own any properties in Orlando, but I’m going to Orlando for a BiggerPockets conference, that travel itself should be tax deductible, right? The flights, the hotels, the food when I’m there. And same thing, if I happen to have a trip planned to go to Ohio to look for rental properties, even though I don’t end up buying any properties, my travel costs could be deductible as long as I can show I went there for the purpose of looking for real estate touring properties and things like that.

Dave:
So I want everyone to listen to that. This is something that comes out a lot when we talk about outstate investing. People don’t go and visit markets that they’re considering investing in. And I always encourage people to do it. It’s a big expense, I understand that, but it is tax deductible in most situations. So that does take the sting out of it a little bit. It is a business expense and encourage you to think about it. So that’s one big thing people should be thinking about the returns, right, expenses. What else is there?

Amanda:
Well, along this kind of a similar line, oftentimes when we review tax returns, obviously one of the big things we look at is depreciation, right? Our ability to take a paper loss on the purchase price of the rental building we purchased, and we frequently we’ll see the depreciation as a very round number. So $500,000 for Main Street or $200,000 for Fremont Street. And that usually jumps out to me as not really capturing all of our costs associated with the acquisition of a property. Because we all know when we buy a property, we’re not just paying the purchase price of it, we are also paying closing costs. And there is different allocated or prorated property taxes, insurance and all those. So one thing we can do for any of you who’ve purchased a property during the year, sold the property, refinanced on a property, make sure you send your closing disclosure to your accountant as you get ready to meet them because then they can take the closing disclosure and pull out all of those associated expenses beyond just you telling them what the purchase price is.

Dave:
Okay, that’s a very good tip. And how big of a difference does it make? If you have an average rental property, it’s $400,000, you’re making some cashflow off of it, how big of a difference in your tax is it when you prepare the tax, right? And when you do it sort of just haphazardly?

Amanda:
Oh, the answer really depends from person to person, right? Because one question is going to be what is your tax rate? If you’re someone who is in a high tax bracket because you make a lot of income from other sources, then even a thousand dollars of a deduction could save you $500 in actual cash. And for some people that’s, it’s a decent amount. I think for anyone, I would never throw away $500 for no good reason. No. But if you have a good system to track your expenses, those items add up over time. So if you’re able to utilize it this year to offset your taxes, great. If you can’t because of passive activity limitations in the tax world, I always encourage clients, still track them, send it to your accountant because you want to make sure it’s reported. Because even the expenses that you can utilize today, you never lose them. You get to utilize them some point in the future.

Dave:
In an era of real estate investing where it’s super hard to find cashflow, this is cashflow. We often treat taxes as this separate income source or something different to think about in real estate. But as Amanda just said, she used a modest example of if you can save 500 bucks, that’s reasonable. If you could save 1200 bucks and that’s a hundred dollars a month in cashflow, that could change your cash on cash return from 3% to 6% in a given year if you’re actually just doing this right? And it’s one of the ways I think you could just keep more money in your pocket and that really has measurable differences in your actual overall return profile.

Amanda:
Yeah, I used a very small example, but if we go to the other extreme and say, well, how impactful could that be in real life? If we’re talking about somebody who invested in a rental property where the building was $400,000 with the current law where we have a hundred percent bonus depreciation, that could be what? $120,000 of a deduction just in the first year. If you’re in a 50% tax bracket, that could be $60,000 in tax saving. So we’re saying, okay, save 500 or save 60,000. I love both of those.

Dave:
Yeah, sign me up a hundred percent. Alright, so those are some great basics that everyone, whether you’re just starting or have a big portfolio should be listening to. Of course this year we have some exciting tax stuff, I think from a real estate investing perspective where many of the provisions that were passed last year in the one big beautiful bill act are starting to go in effect. So I want to pick your brain on that a little bit. Amanda, we do have to take one quick break. We’ll be right back. Welcome back to the BiggerPockets podcast. I’m here with Amanda Hahn talking about tax strategy. It’s the beginning of the year, it’s time that we all start thinking about this. Amanda enlightened us before the break just on how you should be thinking about capturing your expenses on a property level and how to maximize your deduction so you can keep more money in your pocket. A lot of things are changing though, Amanda. It’s not just the same old, same old in tax world for real estate investors. So maybe you can give us a high level overview of what has changed and what’s in the big beautiful bill act that is relevant for real estate investors.

Amanda:
Yes. Well, I mean not surprisingly with the current administration, the one big beautiful bill included a ton of very amazing benefits for real estate investors. One that I think everybody was really excited for was the return of 100% bonus depreciation.
Previous to that, we can always take depreciation on our rental properties, but under the old law, if there hasn’t been changes this year, bonus depreciation would’ve only been at 20%. So with the change of the law, now bonus depreciation for 2026 is at a hundred percent, which effectively means if you bought a property after January 19th, 2025 or anytime in 2026 and the foreseeable future, not only do we get to take depreciation on our rental properties, but that amount is supercharged, meaning we can take a very significant tax benefit upfront rather than the traditional rule of having to wait over a significant number of years to take a tax write off for it.

Dave:
And maybe you could just help us understand what is the benefit of frontloading depreciation and what are some instances or circumstances where you recommend that for real estate investors?

Amanda:
For sure, the purpose or the benefit of accelerated depreciation, basically saying rather than waiting over time to take a tax benefit on the purchase price of my rental building, I’m going to do what’s called a cost segregation study. And what that does is it allows me to then take faster depreciation this year and maybe the next few years rather than having to wait. So effectively we’re looking at the time value of money of

Speaker 3:
Savings.

Amanda:
In other words, I know I have to pay taxes to the IRS, I can either pay it now or I can pay it slowly over the next 27 or 39 years. And if I choose to pay my taxes later, that means I’m able to keep my cash longer with me today and reinvest and grow that money today rather than just giving it to the IRS. So that’s where the concept of it. Now, I will say it is not for everyone. So don’t run out and start taking accelerated depreciation just because you hear it here. The ideal profile of when you want to take accelerated depreciation are in years where you can actually benefit from it. So that would be years where you have high taxable income and or years where you can actually utilize rental losses to offset that different set of income that you’re generating, whether it’s from a W2 or a business that you operate. And so conversely, who should not do a cost segregation? Well, you should not accelerate depreciation if you’re not able to utilize it this year.

Dave:
For someone like me or maybe for someone else who has a W2 job is bonus depreciation and doing the cost even worth it.

Amanda:
Another great time to do cost segregation is if you have a gain. So let’s say I have a portfolio, but I sold one rental for a huge gain and I didn’t want to 10 31 exchange or use other strategies. I could also consider a cost segregation on one of the properties in my existing portfolio and try to offset one with the other.

Dave:
So you can actually take the depreciation from one portfolio property and apply it to another one even if you’re not a real estate professional.

Amanda:
Yep, exactly. Exactly.

Dave:
Love that.

Amanda:
And I will say one other thing since we’re on the topic of someone who is not a real estate professional, you may have been told by your accountant that there is no tax benefit to you investing in real estate because either you work full time or you make too much money. And when you hear that from an accountant, they’re doing what I called tunnel visioning because all they’re saying is, for example, Dave, you are not going to see a huge benefit this year in owning rental real estate. You’re still going to pay taxes on your W2 income. But what they’re not factoring in are the different benefits, which is I generated rental cash flow that I’m not paying taxes on. And also in the future when I generate future cashflow, I may not have to pay taxes on. And also the most important part, which is at the end of my investment with this specific property, if I were to sell it at that point, I can actually use all of the accumulated losses from that property to reduce not just the capital gains from the sale, but also W2 and all other income as well. So there’s absolutely benefit to being a real estate investor. It’s just a timing of when somebody actually sees that.

Dave:
One of the things I struggled with early in my investing career is you look at these things, you say, oh, I’m going to pay this tax eventually if I just defer it. And at least for me, I didn’t really appreciate the time value of money element. I can keep more principle in my pocket and use that to go buy other investment properties to make renovations on my properties. And in addition to just delaying that, this is getting nerdy about it, but you also wind up paying your taxes in inflated devalued dollars over time too. So you’re purchasing power. Part of the idea of the time value is money is your money is worth today more than it’s worth in the future. And so if you can hold onto it and use it to build your portfolio currently, then it’s better to invest a hundred dollars today than it’s a hundred dollars several years from now.
And so that’s one of the main things about tax strategy that real estate allows you to do. And that’s kind of the same idea behind a 10 31 too, right? You eventually in theory at least have to pay that tax, but if you can defer that and go out and save the 20% on capital gains and just go buy another property, it means you just have more purchasing power, which is so powerful, especially early in your investing career. So anyway, long conversation here about bonus depreciation, depreciation in general. Anything else from the one big beautiful Bill act that our audience should know about?

Amanda:
Yeah, well beyond bonus depreciation, one of the good things about the one big beautiful bill is that we were able to retain the tax that’s called qualified business income deduction, QBI for short. So that was something that was available that was then extended as part of the one big beautiful bill. And basically the reason we care about that is real estate investors is QBI basically allows certain types of business income to have tax-free treatment up to 20%. So an example could be if I’ve owned my rentals for many years and even after using depreciation and cost segregation, I have to pay taxes. There’s taxable income. Well, under QBI, if I had a hundred dollars worth of taxable income, I may only have to pay taxes on $80 of it, which means $20 of my taxable rental income could be completely tax free. And this doesn’t just apply to rental income, it applies to all different types of income, specifically in real estate as well. So for those of you who are flipping properties, doing wholesale, or if you’re property manager co-hosting all of the different types, up to 20% of that taxable income could potentially be tax free under QBI deduction. And that is something we enjoy for 2025 as well as 2026.

Dave:
Amazing. Finally, a tax win for flippers at wholesalers. Honestly, as you’re listening to Amanda, most of the benefits for real estate investors come with buy and hold styles of investing. It doesn’t need to be rentals. A lot of them still apply for short-term rentals or midterm rentals, but it’s kind of a buy and hold. The transactional kind of real estate doesn’t always get the same treatment. But QBI is a great example,

Amanda:
Although I will say that for some reason a lot of tax returns we review that are prepared by other firms are often missing that QBI deduction. So one of the things as you’re getting ready to meet with your accountant to file last year’s taxes, that’s another question you can add to the list is just to have them double check, make sure I’m getting my qualified business income deduction. And it very well could be that, hey, it doesn’t apply to you because you have rental losses, right? So when we have losses, it doesn’t apply because we’re already not paying taxes on it. But to the extent you have taxable income from real estate or even a non-real estate business, it’s super, super significant when it comes to savings. We see this mostly with our clients who do fix and flips and our clients who are on the active real estate side, brokers, realtors, has been a very significant tax saving in the past couple of years.

Dave:
All right, well everyone, make sure that you have QBI or at least think about QBI and see if you qualify for this QBI deduction this year. Sounds like that could be a huge savings. Alright, we got to take a quick break, but when we come back, we’re going to talk to Amanda about how to set yourself up for a stress-free and hopefully very profitable tax prep season this year. Stay with us. We’ll be right back. Welcome back to the BiggerPockets podcast. I’m Dave Meyer here with Amanda Hahn talking tax prep and tax strategy for 2026. We’ve talked about what things you should be looking for in your tax prep this year. Talked about the new changes in the one big beautiful bill act that investors should be paying attention to. But Amanda, I just want to talk about the stress that comes with tax prep. It’s not fun for most people, so how do you systematically recommend people go about doing this so that they can capture the most benefit, but that’s not driving them crazy?

Amanda:
I’ll tell you what I feel are the two main reasons people hate tax season. I mean outside of just the fact that they have to pay taxes. I think one is record keeping. Okay, if you’re someone who has not done good record keeping last year, this is sort of the end of the road where you’re like, man, now I got to go through my bank statements and my receipts and try to categorize all the stuff that I don’t remember what I did or didn’t do. And really the best way to change that is just to have systems in place, right systems for your bookkeeping and accounting. If you have the budget to outsource it, great, take that off of your hands If you don’t, it’s really just a matter of setting time aside on a monthly basis to make sure you do all of that.
Because if you’re like me, it’s difficult for me to remember what I did a week ago. So for me to have to think about a year ago, that’s the stress of like, oh my gosh, it’s like a mountain of paperwork and we know it’s coming every year, tax time comes. So I think just taking the time set up a system that works for you, whether it’s QuickBooks or SSA or an Excel spreadsheet, whatever that happens to be, but getting the system set up so you are doing it on a month-to-month basis really will help alleviate a lot of the stress at tax time. I think the second reason people don’t like tax season is the surprise. So the surprise of

Dave:
So true,

Amanda:
The anxiety of like, am I any refund? Am I going to owe a lot? The best way to alleviate or prevent that is with proactive tax planning. So for a lot of our clients, and that’s why we focus so much on the planning because your tax bills should never be a surprise. If you’re planning during the year, if you’re meeting with your accountant throughout the year, before you buy properties, before you sell properties, before you open a new LLC or partner with a friend of yours, to always kind of have at least touch points on, okay, what’s our income, what’s our deductions? So that by the end of the year in December, we have a pretty good idea whether we owe or we’re going to get a refund. But I will say you can only have effective tax planning if you have good financial records. So that also goes back to just having clean bookkeeping. So we know

Dave:
That’s a good point.

Amanda:
We can monitor year round.

Dave:
Well, I want to talk to you more about tax planning. I think that’s a super important thing. But when you talk about bookkeeping, are there any tools? You mentioned QuickBooks, tesa, both good tools. Are there any new ones? I’ve been getting a lot of ads honestly for AI bookkeeping. I don’t know if that’s just people who want to say everything is AI right now, but it’s really just the same product. It’s always been. But are there any specific things that you think people should be looking for when they’re setting up a system

Amanda:
From a tax perspective? The main thing you want to look for is the ability to track income and expenses by property. That is what’s required for IRS reporting. And also just for you as a property owner, if you have multiple properties, I want to know how each property is doing. And I think a quick tip I would say is to have a separate bank account that you use exclusively for real estate things.

Dave:
A hundred percent, yes.

Amanda:
If you have an LLC for your rental properties, use that account. If there’s no money in there, you transfer money from your personal account into the LLC account and then pay for the expenses. That I think helps to cut people’s bookkeeping headache by maybe 80 or 90%.

Dave:
Yes, there is a no brainer for doing that. That’s a great quick tip. So let’s talk a little bit about tax planning proactively. I like this idea. So can you give us an example? I’m going out to buy a new property this year. I call you and say, how do I plan for this in the most taxed optimal way? What are some of the things you’re thinking about or some of the things I should be thinking about?

Amanda:
And I think, again, it kind of depends a little bit on the different facts and profiles of a specific taxpayer. So if we’re saying, oh, well Dave is not a real estate professional, a household with dual income W2, nobody is really able to claim real estate professional status, then maybe a recommendation could be, can we consider a rental property or the next one you buy to be a short-term rental?
Why? Because short-term rentals, we can use the short-term rental loophole where you don’t have to quit your job. Real estate could be a side hustle. You could potentially use the short-term rental losses against W2 and other types of income provided that you meet all of the requirements that still being hands-on and all those things. And so that part of the conversation then maybe kind of veers into where should the property be? Should it be close enough where you can be more hands-on, or are you comfortable with using apps to be able to semi manage or self-manage remotely as well? And then what kind of entity who should be on it? Is it one person, both spouses? So that’s the fun part, right? The initial question is, I want to buy more real estate this year. And then it turns into a lot of different decision makings on, well, have you considered this or that also to get the optimal tax benefit too.

Dave:
Yeah, and I would imagine we started this section of show just talking about stress, that when you plan this upfront, that basically takes away what you were saying, the stress of the unknown at the end of the year. When you add a new property, it’s only incrementally making your taxes more complicated, not like doubling it. If you’re going from one to two properties, now you have double the amount of work you have to do for taxes

Amanda:
For sure. I mean, just having even a system could be, I have a checklist whenever I buy new properties, here are the things I need to put in a folder, the closing disclosure, the appraisal form. I also probably want to make sure I have an entity set up, or at least I’m going to call my CPA, let them know these things happened. So just having that already. So every time I am expanding my portfolio, these are the things I’m going to keep here together. And that tax time is just a matter of sharing all those things in that folder with your accountant or with your bookkeeper even on a monthly basis.

Dave:
Awesome. Well, this is great advice and I really recommend people doing this. Again, I know I keep saying this, but I just think in general, people get really excited about buying properties when they’re first starting, which is right. And then two years into your investing career, you’re like, oh my God, I could have been doing this so much better from a tax perspective, but take it from me, take it from Amanda. Just try and do this stuff upfront. I promise you it will be worth your time and money. It is always worth your time and money to start doing these things upfront.

Amanda:
And I will say I unfortunately do meet people who historically are very model citizens when it comes to tax filing. If they just have a W2 job, they own their home and it’s like always filed on time, filed by February or March, and then, oh, I bought rental properties and then I got overwhelmed and I just basically stopped filing tax returns because I didn’t know what to do. But I think it’s really important to understand if I’m describing you as a listener, it’s really important to understand that taxes don’t go away, so you will have to file your tax return. And again, the sooner you do it, the better you’re going to feel. I promise you.

Dave:
All right. One last question for you, Amanda, before you get out of here. You said you’re also a real estate investor. What are you investing in these days?

Amanda:
Oh, well, actually I live in California, but I grew up in Las Vegas and I went to college there. So a big part of our portfolio has been in Las Vegas, so we continue to expand in Vegas. But I think our latest acquisition was in Florida, and I talk about this with clients as well. In the last couple of years, we’ve gotten more and more into passive investments through syndications and things like that all over the us. And for us, it’s just a change in priorities. And our focus, we’re in a season of life where we have two young boys that require a lot of attention with sports and all the things. So it wasn’t like before when we were starting out, it was a lot of Burr properties. We have the time, we didn’t have the money, we had the time, and now we’re in a different place where we have more of the resources but not as much time to go after the properties ourselves. And we might change when the kids leave us and go off to college, then we might go back to doing burrs or maybe doing our own apartment buildings.

Dave:
A hundred percent. I’ve done the same thing, done a lot more passive investing over the last couple of years. And that’s the benefit. You get to a place where you’ve put in the hard work and then you get to choose. You get to choose if you want to do investing passive. I moved back to the States now I’ve kind of missed doing some active investing. So I’m doing that more for fun than just not needing to. But that’s the goal. So congratulations on getting to that stage in your investing career.

Amanda:
Yeah, thank you. And are you considering house hacking with your new home?

Dave:
I’m calling it a live-in flip because we’re not renting out any part of it, but we bought an under, it’s a 1968 build and it feels like it’s 1968, I’ll tell you that. We got popcorn ceilings. We still have those intercoms that people used to have super old school. They still work. It’s pretty fun to use

Amanda:
Only in the expensive homes though, when they have those, right?

Dave:
I think back in the day, yeah, it was nice, but it’s still perfectly comfortable. But the idea is we’re going to start renovating it and hopefully spend probably in somewhere in the 200, 250 grand range, but we think it will increase the value like 400,000. This is in Seattle, very expensive market. But that’s kind of the idea. But I’m calling it a live in flip, but I don’t know if we’ll actually sell it after two years. We might live in it for longer, but we’ll see. But we’re going to do a value add to it.

Amanda:
Yeah, I love that. And I think a lot of clients, I mean a lot of newer investors think that primary home investment strategies are for people who are just starting out in real estate, but I think people will be shocked to know how many of our clients that are doing very large deals also try to optimize their primary home a hundred percent to the nth degree. So I love that.

Dave:
Yeah. The other place we were considering buying was a house hack. It was like an up down duplex, and we were going to rent out the bottom basement. Personally, my dream home is like a primary that has an A DU above a garage that I could rent out. That would be the perfect situation. But Henry and I actually just did a show about this yesterday. We recorded it talking about how at every phase of your investing career, thinking about your primary residence as an investment makes sense. You don’t have to for your lifestyle, but there are always things you can do to make your primary home a money maker for you if you’re willing to make what I think are pretty small sacrifices to get those gains.

Amanda:
And the tax benefits are just typically pretty amazing when we’re talking about primary homes. Absolutely.

Dave:
Well, Amanda, thank you so much as always for being here. We really appreciate it.

Amanda:
Yeah, thanks for having me.

Dave:
And if you want to learn more from Amanda, you should go check out her two books that she’s written. You can get them on biggerpockets.com or you can always find them on Amazon. And I’m happy to say Amanda will be back at BP Con this year speaking and leading a tax workshop. As she always does, BP Con tickets are now available. Early bird tickets are for sale to the cheapest they will ever be. So if you want to get in there and get some hands-on advice from Amanda and her husband Matt, come to BP Con in Orlando this year, biggerpockets.com/conference. And if you to hear the episode I was just talking about with Henry and I talking about primary residents, it’s episode 1236. It came out on February 6th. Go check that out. Thanks again, Amanda, and thank you all so much for listening to this episode of the BiggerPockets podcast. We’ll see you next time.