Dave:
Happy New Year, everyone. Welcome to the BiggerPockets Podcast. I’m Dave Meyer, head of real estate investing at BiggerPockets. I hope you all had a great holiday and are excited as I am to grow your portfolios this year. Today, we’re kicking off the year with New Year’s resolutions. And for that, I’m joined by my on- the-market co-host, Kathy Fettke and Henry Washington. We’re going to share our goals for the year, the strategies we’re planning to achieve those goals and the risks we’re avoiding in a changing market. A heads up that this show will also be published on the On the Market podcast feed over this New Year’s break, and make sure to tune in next week for my annual state of real estate investing show and a huge announcement for the BiggerPockets podcast you’re not going to want to miss. With that, let’s jump in. Kathy, Henry, how are you?
Happy New Year. Happy New Year to you.

Henry:
Happy New Year.

Dave:
I am not going to lie and pretend that we’re recording this in the new year. It’s not really the New Year, but proactively to everyone. We’re recording this in December, but happy New Year to all of you. Kathy, you have some great holiday plans. Tell everyone what you’re up to. You’re always somewhere fun.

Kathy:
Well, yes, I’m in Paris recording this from a cave.

Dave:
You literally look like you’re in a medieval wide seller right

Kathy:
Now. I’m pretty sure I am. I’m in the oldest part of Paris, but I am here for the Christmas markets and mainly because my daughter is getting married in France. So I had to come see the venue with her. Had

Dave:
To.

Kathy:
And then it’s also-

Dave:
You had to.

Kathy:
I had to, and it’s the last year of the northern lights being really intense. So we’re going to take a little trip up to the North Pole, to the North of Norway.

Dave:
Oh, that’s so great. Wow. What a fun trip. Henry, what were you up to in the holidays?

Henry:
Food.

Dave:
Enough set,

Henry:
Really. Absolutely. I mean, I have little kids, so I do get to enjoy the joy of Christmas still, so that’s fun, but mostly I’m eating my way through the holidays.

Dave:
Yeah. Good for you. All right. Well, let’s jump into today’s episode because I really want to just start looking forward. Last year was a interesting … I wouldn’t call it a great year. I was going to say it’s a great year. I would not have called 2025 a great year. That would’ve been a straight up lie. I am feeling optimistic going into 2026 and just about real estate in general. So let’s talk about this in terms of what our New Year’s resolutions are. We’ll start with real estate, but if you want to throw a non-real estate one in, I would love to hear them. But Kathy, what’s your real estate New Year’s resolution?

Kathy:
Well, I have a few, but one is to really dive into AI because
Rich actually bought a really expensive program and he’s finished it and I have not. I’m not even close. But I know it’s so powerful. I mean, one of the things that Rich did is he uploaded everything. Our bank statements, the cash flow, our system knows everything about us. And when we upload it, we could know which properties are performing well, which are not. I mean, we should be knowing that anyway, but I feel like sometimes it’s easy to get lazy or you’ve just owned properties for a while and haven’t really taken a look. Is this still a good performer? So using AI to optimize our portfolio is my goal for real estate.

Dave:
I like that a lot. I like this as a goal. It’s not like, oh, I have to buy this property by this date. This is more like a growth mindset kind of goal. How do you just evolve as an investor generally so that you can make better decisions going forward? Is that program, is that real estate specific?

Kathy:
No, no, it was just a bunch of business owners. But I mean, it’s like he’s got a business consultant now. All of our business financials are in there and we had every employee detail what they do, not in a dog kind of way, but I guess kind of like what do you do all day? And so AI knows each employee and knows how to optimize for them. It’s really been phenomenal.

Speaker 4:
Wow.

Kathy:
And we had one of the best months ever for our company last month. I don’t know if it has to do with that or not, but that’s strange, right? At a time when real estate has been so slow, sales have been slow, we had a really good

Dave:
Month. That’s awesome. So it sounds like you’re using AI not just to identify properties or deals, but work on and in your business as well.

Kathy:
Yeah. I mean, how many times do you really know what your insurance covers?

Dave:
Literally never.

Kathy:
So with, I’ll say Claude, for example, we can upload our entire insurance thing. There’s a word for it.

Henry:
Your insurance binder? Yeah.

Kathy:
Yeah, that thing, the binder. To just really know the details of your insurance policy and even ask it, “Hey, is this covering me for everything I need for this investment property in this particular state?” It’s really phenomenal with what’s available to us and it’s only going to get better, so why not be on the cutting edge of it?

Dave:
I love it. Henry, are you using AI regularly?

Henry:
The short answer is yes, but I’d be lying to you if I told you I was using it on a much deeper level than just the surface level asking for help with certain items. Now, I did try to build something similar to what Kathy was talking about about two months ago where I was uploading transaction data and information from my property manager because I wanted to see if AI could give me a sense of how well certain properties are performing. And I thought if I could upload the actual bank statements and marry that against the data from your property manager who’s actually going out to the properties, doing the actual repairs. And then I wanted to marry that against what I’m spending with contractors on certain properties to get just a bird’s eye view of my portfolio. And it was very challenging in ChatGPT. And so I’m wondering if I should try Claude or Gemini or one of those.

Kathy:
Claude is so good for business.

Dave:
Oh, really? I got to check that out because Henry and I were just in Seattle and people were raving about Gemini.

Kathy:
Yeah.

Dave:
I feel like it’s a horse race right now. One releases a new one and it gets a little bit better and then the other one gets a little bit better, but there’s not a clear winner. I just have to tell you guys, I got a little bit of a behind the scenes look at a big real estate company’s new AI tool. It’s not BiggerPockets, but there’s another one that’s going to release one soon. I got to do the beta. It is so freaking cool. It’s unbelievable how good the analysis and information about properties and markets. For a data analyst, this thing is so cool. I am super excited to start using these kinds of tools in my own analysis. But I have to ask you guys, maybe I’m just a complete control freak, but I use this for research, but I double check everything

Kathy:
That

Dave:
I do still, right? Okay,

Kathy:
Good. Because it still makes lots of errors. It’s not there yet, but it will be. It will be. So learning the things that we’re learning. And bottom line, the goal for me for doing all this is I want to see if I can … Wait, let me say that in a more powerful way. I’m going to increase cashflow by 10% by optimizing our portfolio, whether that means taking some older properties that aren’t really performing and 1031 exchanging them into better ones or just looking at things like we bought a lot 10 years ago because we were living at a house where someone was going to build this mega box property that block our view. And so we bought the lot and they wouldn’t do it and now we don’t live there anymore and we just kind of haven’t done anything with it. We tried to sell it.
Nobody wanted just a lot. So that’s one thing. It’s like, how do I optimize this piece of land that’s just been sitting there and we’re paying taxes on? And so I’ve been working with a manufactured housing company and we’re going to put manufactured housing on that lot. And so when I’m doing a whole new thing and it’s actually going to cash flow in CaliforniaCalifornia.
Yeah. And if my daughter ever decides she wants to move down the street from us, there’ll be a house there for her. Intent. But yeah, it’s kind of just stuff like that. Just kind of looking at what we have, the theme is more isn’t always better. Look at what you have and make it better.

Dave:
That’s great. Well, I think this is an awesome New Year’s resolution. I really like this idea of getting better at AI because I will admit, I am simultaneously excited by AI and very, very scared of it and terribly tired of it. And so sometimes I just choose to ignore it because I’ll see these deep fake videos online and I’m like, “AI is evil.” But then you talk about all these things that AI is amazing for. I just need to figure out the right way to use it for my business that makes sense and not be overwhelmed by the societal implications that might be coming with AI at the same time.

Kathy:
For sure. I mean, an example is just, I’ve been working a lot with Claude, that’s what I use and asking for LA County, what do I need to know about manufactured housing? Tell me this step-by-step process. And it’s not 100%, it’s not easy, but it helps it feel not as daunting.

Dave:
All right. Well, I love this. This is a great New Year’s resolution. Thanks for bringing this one, Kathy. We got to take a quick break, but we’ll be back with Henry’s New Year’s resolution right after this. Welcome back. I’m here with Kathy and Henry sharing our goals, New Year’s resolutions for 2026. We heard Kathy’s, which I love about getting better at using AI. Henry, what is your New Year’s resolution even though you don’t like them?

Henry:
No, I don’t like them. And I always feel awkward when people ask questions like this because of the kind of investor I am. I just do old, boring real estate, Dave. I buy distressed properties, I fix them up and then I rent them out or I sell them. And I think when people ask about resolutions, they expect to hear some super ambitious, creative thing that you’re doing. Like a big pivot,

Dave:
Like you’re making some change. Yeah. Yeah.

Henry:
And my goals are very similar each year because I just want to continue to do what works and what’s worked for generations, which is another iteration of the same thing. But now that I’ve placed that caveat, essentially I think of investing in three buckets where you’re either growing, you’re stabilizing or you’re protecting.
And we as investors operate in typically two of those buckets at a time, heavily weighted more so on one than the other. And so as I started in 2017, I’ve been a lot more focused on growth. So my goals each year were always around how many more assets do I need to acquire? How many more projects do I need to flip to give me the funding to acquire those assets? But now I’m in a place where I’m more focused on stabilization and protection. And to me, protection is paying off. And so my goals for 2026 or my resolution, if you want to call it that, is more focused around stabilization, optimization similar to Kathy, and paying off debt. So I have a stretch goal of paying off two properties in 2026. And I know two doesn’t sound like a lot, but we’re talking about completely clearing the debt on two assets, which I think is a big deal.
So I want to pay off two of my assets and there’s about four assets that I need to stabilize because I’m bleeding money in them right now.
Some of them my own fault, some of them, no fault of my own. One in particular, I bought a duplex, not in a flood zone, and we had a crazy flash flood and it tore through both units of the duplex. And then on top of that, a big mistake happened with one of the remediation companies where they did some work unauthorized to the tune of $40,000. So I have about a $40,000 bill that we’re fighting because they weren’t supposed to do the work. And I have about a $50,000 renovation I’m going to have to fund out of pocket. So these are big ticket items. They don’t just come very easy. So that property right now is a duplex that I pay monthly all the expenses on, but has no income. So stabilization is a big deal for me in 2026. I also have some multifamily assets I bought in 2023.
Again, no fault of my own. The city has come in and is requiring me to do some work that we didn’t plan on doing that where you can’t really fight. So there’s a lot that happens in a real estate portfolio that I think requires you to take a step back and evaluate. So 2026, stabilizing the assets that are bleeding money and paying off two properties. And so those lead me to my other goals, which is I need money to do those things. So that guides me to how many projects I need to take on throughout the year to generate the income I need to solve those problems, live my life. Make sense?

Dave:
It does make sense. I love the way of thinking backwards. A lot of people would be like, how many flips can I do, maximize, and then take that money and be like, what am I going to do with it? But I really like thinking about it like, what do I need to do? And then sort of backing into the minimum amount of work that you can do. That doesn’t mean you might not take on more deals if you find opportunity, but just having a good sense like, okay, I need to do two a quarter or one a year. I need to do that, make sure I’m hustling on that and then I’ll take everything else that comes from there.

Henry:
Yep. I average probably around like $45,000 net profit on a flip and I would estimate that I need to do about 15 projects to be able to pay off the properties that I’m looking to pay off and to be able to have the income necessary to continue to live and be able to stabilize the four assets I need to stabilize. So that’s my goals.

Dave:
I love it. I guess I understand maybe why you don’t love a New Year’s resolution because this sounds like it’s a multi-year project too. It’s not like this is something you do in 2026. This is a piece of a larger goal that you have been working for and will probably need to keep working towards beyond 2026.

Henry:
Yeah. My larger goal, ideally, this is … Now they say your goals are supposed to be big and scary, right? And in corporate world, they called them stretch goals. The big, scary stretch goal is to have a third of my portfolio paid off 10 years from now. I

Dave:
Like that.

Henry:
That’s a lot. It’s a lot of money. Yeah. Yeah. But I feel like if you don’t set a big scare … Shoot for the moon land on the stars, right? If I end up with half of that paid off, that’s still going to put me in an extremely strong financial position in 10 years. So the larger goal is that. And then what I do each year is tying into that. And then I have to adjust each year because yeah, I have a goal of two this year, but what if I only get one? So then I need to take what happens in 2026 in terms of the economic outlook and make new goals. Maybe 10 might be too far out. Maybe I need to change it. So I think I’m not afraid to reevaluate my goals based on what’s happening, but I try to make it all tie together.

Kathy:
I love that. It sounds like you’re also looking at the protection side of it because as you start paying off properties, oh, there’s such relief knowing that if anything goes wrong and you just can’t predict, you can’t predict things like 2020 coming along that turned out not to be bad for real estate at all. Ended up being a pretty good time for real estate bought, could have gone the other direction. And when you’ve got paid off properties, boy, all you have to do is sell a couple and it’ll help pay for the other ones that you’ve maybe over leveraged. And I know that you have way over leverage to get to where you are now and that has worked. But at some point you’re like, okay, it’s time to turn the ship and pay some of this off. That’s great.

Dave:
It’s interesting to hear both of you are focusing on optimization instead of growth. Is that a reflection of the market or just where you are in your personal investing journey?

Kathy:
That’s a good question. It was just the first thing that came to mind because it’s what I’ve been doing and excited about. Just taking a look at some of these properties that bought 10 or 15 years ago, I really haven’t paid any attention to them. For example, one, it just vacated and I talked to the property manager and she goes, “If you update this by about $20,000, you’ll get about 100,000 extra in equity.” I hadn’t even thought

Speaker 4:
About it. Easy.

Kathy:
So that’s exciting. And if I do that, then we can sell that or keep it, take the money out. And so it’s almost like an after the fact bur,

Speaker 4:
10

Kathy:
Years later down the road, bur.

Dave:
It’s a slow burn. A slow bur. It just doesn’t matter. Just keep optimizing things over the long run. This is the way to do it. It’s absolutely right. I love that.

Henry:
For me, Dave, it is more a function of where I am as an investor because I’m a deal junkie and I love the process of finding deals. I love buying a great deal and I love operating assets in great parts of the community. It all is so fun for me, but at some point I have to get to a place where I am protecting the assets I have so that I have paid off assets to pass on to my children. The overarching goal for my real estate business is for my children to be able to be the people they’re called to be and not the people they have to be for money. So if they need or want to do something that isn’t going to pay them a ton of money, at least I have these assets that will be paid off that can provide income for them.
And so to get there, I have to pay off properties. And so I have to draw a line in the sand somewhere and start paying down these assets. And so that’s why I have the 10-year goal trying to get some of these paid off so that I have those to pass. Now, when I get to that point, Dave, I may just start doing more deals again, but I will always have- You will. You will.
And I’ll probably still do deals that are like home run deals along the way. I’m not saying I’ll never buy another rental property between now and 10 years from now. I’m just saying I’m not in aggressive growth mode. So optimization is more important to me right now than growth was. And growth was more important to me when I first got started. It’s just a shift in where I am as an investor.

Dave:
All right. Well, these are great resolutions. Thank you. I really think these are, obviously they’re not just resolutions, but just goals and good perspective on where you both are in your investing journey. We are going to take a quick break, but we’ll come back with my New Year’s resolution right after this. The Cashflow Roadshow is back. Me, Henry, and other BiggerPockets personalities are coming to the Texas area from January 13th to 16th. We’re going to be in Dallas, we’re going to be in Austin, we’re going to Houston, and we have a whole slate of events. We’re definitely going to have meetups. We’re doing our first ever live podcast recording of the BiggerPockets Podcast, and we’re also doing our first ever one-day workshop where Henry and I and other experts are going to be giving you hands-on advice on your personalized strategy. So if you want to join us, which I hope you will, go to biggerpockets.com/texas.
You can get all the information and tickets there.
Welcome back. I am here with Henry and Kathy talking about our New Year’s resolution. Kathy shared that she’s looking to optimize her portfolio and learn more about AI. Henry is going to be trying to pay down some of his debt and stabilize some of his assets. My New Year’s resolution for 2026, and I’m with you on this, Henry, this is something I’ve been thinking about for at least six months and is going to take me 10 years. But my plan right now and the thing that I’m focusing on is enacting what I’m calling my end game.
Hopefully not going anywhere, but I’ve been investing for 15 years now and I feel like I’ve had these two different eras of my own investing. My first 10 years, I bought rental properties, I self-managed them, all of them locally in Denver. Those were the first 10 years. The last five years, then I moved abroad. I was living in Europe. I sold some rentals. I got pretty into passive investing. I got into lending. I do syndications. I still own rental properties, but I’ve kind of had this second era. And now I want to move. I’m back in the United States. I want to move into my third act as a real estate investor. And I call it my end game because I want to spend the next 10 to 15 years putting myself into retirement. I am in a fortunate position where I do feel like I have enough capital to do it, but I need to rearrange my portfolio into an optimized way so that 10, 15 years from now, I’m going to have a portfolio that is just rock solid.
It’s only assets that I really like. Ideally, they’re paid off or have very low debt on my overall portfolio. And I actually think it’s a good time to start acquiring rental properties right now. And so I’m seeing opportunities trade out of some of my more passive options or lending and start acquiring the assets that I want to own ideally for the rest of my life.That’s kind of what I’m starting to think about. And I’m even considering, Henry and I were just together in Seattle. We were talking about this, thinking about putting things on 15-year notes, for example, instead of going to the 30-year fix that I’ve always really used and just start thinking, I’m 38 years old. At 53, I probably still won’t retire, but I want the portfolio that I can retire off of and that I wouldn’t need to touch if I didn’t want to for the rest of my life to be in place.
That’s not going to happen in 2026. This is going to take me probably at least five years to reposition things, do some different projects, learn a little bit, but that’s my goal. That’s the thing I’m really working on.

Speaker 4:
Love it.

Henry:
Yeah, no, I think that that’s just smart financial planning. It’s similar to what I’m thinking about because I enjoy what I do now. I like chasing deals. I like flipping houses. It’s still fun and exciting. And is there annoying parts of it? Sure, but I enjoy it. But will I still enjoy it in 10 years? Will I just be tired of the chase? I’ve talked to a lot of seasoned investors in their 50s, 60s, and 70s, and the one theme across all of them is at some point they got tired of chasing deals. They got tired of churning houses and flipping houses. And so if I can get myself to a point where I don’t ever have to flip another house if I don’t want to, but I can still choose to, that’s ideal. And it sounds like that’s what you’re trying to get to.
How do I get to the point where if I just want to sit down and do nothing, I can. I’m taken care of, my family’s taken care of, my legacy’s taken care of, but if I want to go do some cockamamie crazy deal, I can also go do that. Definitely.
Getting yourself to retirement doesn’t mean you have to retire.

Dave:
First of all, I got tired of flipping houses before I even got started. So good for you. I did one. That’s all I needed. I’m at two right now and I’m tired. And I didn’t even do the GC. You

Henry:
Didn’t do the

Dave:
Hard part. I didn’t even do the hard part. I’m tired of it. No, I signed last night though and getting this thing done. So that’s great. No, that’s exactly right. For me, it’s not even the flipping. I’m always tinkering. I’m just like an optimizer. I’m always moving money from here to there. And I got to stop doing that too. I will do some of it. I will keep some of my money for fun because for me, that’s fun. Like you were talking about, Henry, you like looking at deals. For me, I like investing in passive deals. I like underwriting deals and figuring them out and looking for different opportunities, but I need to put the rock solid thing back in place because I had a lot of great rentals. I don’t regret selling any of them, but I have not rebuilt my active portfolio in the way I want to yet.
And so that’s really what I’m going to be focusing on. And like I said, there’s better and better deals. It’s not even that prices have gone down that much. It’s just the asset quality is so much better, in my opinion. And you’re seeing high quality properties come on the market. I think multifamily is looking more and more attractive right now. And so that’s the plan for 2026. My other resolution, just so you know, as always, is to go on as many vacations as humanly possible.
How do I travel all the time?

Henry:
Can we go on record, Dave, and set a stretch resolution? You and I?

Dave:
Uh-oh.

Henry:
Can we set a resolution that within five years we land an Anthony Bourdain style TV show where we travel around, eat food

Dave:
And

Henry:
Talk about real estate?

Dave:
This is our dream in life. Yes. We need a new vision board, you and I. All right. Well, this was a lot of fun. Thank you guys. I would love to hear your New Year’s resolutions, right? We want to hear them. Share them with us in the comments. We want to hear what your New Year’s resolutions are real estate-wise, fun-wise, lifestyle-wise, because at the end of the day in real estate, we’re doing this usually not because we just want to own or acquire assets for something, because it frees up something else in our lives, spending more times with our friends, family, traveling, eating disgusting amounts of food. This is why we’re actually here. So tell us what your resolutions are. Kathy, happy New Year. Thanks for being here.

Kathy:
Thank you. You too.

Dave:
Henry, happy new year. Excited for another year doing on the market with you both. And James, of course, when he decides to grace us with his present.

Kathy:
Yes. Absolutely. Thank

Dave:
You. Thanks everyone. We’ll see you next time.

Dave:
Will home prices go up or down in 2026? We have seen a historic run of home price appreciation with values rising year after year, even as mortgage rates have remained high. But will that continue next year or will we see prices flatten or even decrease in the year to come? Today, I’m giving you my 2026 home price forecast. Hey everyone. I’m Dave Meyer. Excited to have you here for what is simultaneously both my favorite and least favorite show of the year, predictions about the next year. I genuinely enjoy and love the data analysis and research that goes into making these predictions. And since I started doing this back in 2022, I’ve been pretty accurately in calling the direction of the housing market. But at the same time, it’s a little nerve-wracking and difficult to put these predictions out in public, especially this year when there’s less data available due to the recent government shutdown.
But despite those limitations, I choose to make these predictions for you every year because having an idea of where the market is heading, even if it’s not 100% accurate as no forecast is, this is still crucial as an investor because you invest differently in a rapidly appreciating market than you do in a flat or a correcting market. And don’t get me wrong, you can invest in any kind of market, but you do need to plan accordingly. And that’s what I’ll help you do today. By the end of this episode, you’ll know where the market is likely to go, what things to watch for in case things start to change and how to build your portfolio accordingly in 2026. Let’s do it. So making predictions about the housing market is difficult because the housing market is driven by so many different variables. On one side, you have all these things that impact demand.
How many people want to buy homes? These are things like demographics, immigration, cultural shifts, domestic migration, investor activity and so on. Then you have this whole other set of variables that impact the supply side, like the lock-in effect, construction trends, a longstanding shortage in homes in the United States and so on. But to me, and I’ve been on this trend for a while now, affordability is the number one variable driving the market these days. Now, why this variable among all the other ones out there? Well, we have hit an absolute wall in terms of affordability. We are near 40 year lows. And by the way, if you haven’t heard this term before, in context of the housing market, it just means how easily the average American can buy the average priced home. And that’s at 40 year lows. It hasn’t been since the early 1980s that has been this difficult for the average American to buy homes.
Now this is really crucial because what has not changed is that people do want to buy homes. There is still desire to buy homes. But when you look at demand, this economic term, demand, it’s not just desire, it’s desire and the ability to pay for it. We still have the desire side. The issue is that most Americans just cannot afford it. And in my view, if that doesn’t change, if affordability doesn’t move, not much is going to change in the housing market. But if affordability improves, so will the market. So affordability, this key thing is actually made up of three individual variables. We have home prices. How much do homes actually cost? That should make sense. We have mortgage rates because the majority of homes are purchased with a mortgage, and so this matters a lot. And we also have wages. How much are people earning?
So those are the three things, and we’re going to break each of them down one by one. So the first factor in affordability is mortgage rates. I did a whole episode about that, but the TLDR was that although I think they could come down a little on average, next year I don’t think they’re going to move that much. So I think it could modestly help affordability, but it’s probably not going to be the thing that really changes the housing market. The second one is wages and real wage growth can improve affordability. Real wages, if you haven’t heard this term, it’s basically just a question of are incomes rising faster than inflation? If the answer to that is yes, you have positive real wage growth. The answer to that is no, you have negative real wage growth. But luckily right now, one of the bright spots for the economy in recent years since 2022 or so is that we have had real wage growth.
Wages in America, incomes are growing faster than inflation, which means your purchasing power is going up. I hope that will stay up, but I think it’s going to slow in the next year. We’ve seen inflation up to about 3%. The job market is definitely weakening. That reduces leverage and salary negotiations. And I think wage growth will slow. But the thing about the housing market and how this relates to our strategy as investors is that even in the best times, wage growth takes time to really impact affordability. So although wage growth does really matter, it’s probably not a big factor in 26. So if rates aren’t going to change that much in my mind in our base case, and real wages are not going to impact affordability that much, does that mean that the housing market is doomed to have another year like we had this year where things are pretty slow and stuck?
Maybe, but we still have one more variable, which is housing prices, which is why my base case for next year is for home prices to be flat or maybe down just modestly. If you want some actual numbers, I like to predict a range and a direction because I think as real estate investors, it actually hurts us to obsess about is it up 1% or 2%? I think we actually should just say, “Hey, it’s up modestly. It’s down modestly. It’s flat this year. It’s going to go up a lot. There’s going to be a crash.” Those kinds of directional indicators I think are what’s really important. And what I see is that home prices in 2026 are going to be between negative 4% and positive 2%. You could call this flat if you want. I am personally leaning more towards the negative side right now. Again, we don’t have data from the last couple of months, but the way the trends are going, I think if I had to pick where we’ll be a year from now, I’d say negative one, negative 2% year over year growth.
So you might be surprised hearing me say this because all previous years I’ve said we’ve been flat or up because I genuinely believe that and that was what actually came to be. But this year I see that changing. And I just want to say having these kinds of declines, this isn’t crazy. Seeing modest declines in prices isn’t a crash. It’s not even unusual. It is a normal correction, and I should probably mention a buying opportunity. And that said, I am a little more pessimistic I think than other forecasters. I see Zillow at plus 1%, some others are near flat, but most of them are modestly positive. But we’re all still generally in the same range. Honestly, being plus 1%, minus 1%, it’s kind of flat. So that’s what most people are saying. And I think the takeaway here, whether you think it’s plus 1% or minus 2% is the same.
Appreciation is going to be slow at best. It might be negative. We can’t know right now with the little data that we have, but we have to not count on appreciation. I think that’s the main takeaway for us as real estate investors. Maybe we’ll get 1%. That would be great. Maybe it’ll be negative 1%. Honestly, whatever. If you’re counting for flat or you are not counting on appreciation when you’re underwriting your deals, you can still invest in this market, but that’s the main takeaway I want you all to have right now is that you should not assume you are going to get appreciation in 2026. So that’s my belief about what’s going on in terms of nominal prices. This is going to get a little wonky, but stay with me. Nominal prices means not inflation adjusted. This is the price that you see on paper.
This is the price that you see on Zillow. People are split on whether that’s going to be up a little bit, down a little bit, but what almost every forecast that I believe in that I think is reputable, all of them agree that real prices are going to be negative. And again, real in economic terms just means inflation adjusted. So every forecast I see believes that compared to inflation, home prices are going to go down. So even if prices on paper go up 1%, but inflation stays at 3%, then real home prices have declined 2%. Real prices are down. And even though I’m saying, I think the most likely scenarios that nominal prices are down next year, I feel much more confident that real prices will be down in 2026. That much seems pretty clear to me. So that’s my base case. It’s what I’ve called the great stall in recent months as you’ve listened to the podcast, and it’s still what I think is the highest probability of happening next year because affordability is too low.
Rates will come down a little bit, I think, but not that much. Wages aren’t really going to help us one way or another. And prices, if they flatten or modestly decline, that’s how we get into the stall period where affordability gradually gets restored to the housing market. That is the base case. But I should say that when I make these forecasts, I like to be honest about my confidence level. And I just want to say that this year it is lower than previous years. Last year, I felt really confident about what I said was going to happen. I was pretty accurate. This year, I think the great stall is probably a 50-ish, maybe 60% probability, which means that we have a 40 or 50% chance that something else could happen. And I’ll give you some alternative forecasts and predictions right after this break.
Before the break, I shared with you my base case. It’s what I think is the most likely scenario to happen next year, and that’s having pretty flat or maybe modestly declining nominal home prices next year. And I think pretty confident that real home prices are going to go down unless one of these other X factors happen, which is what we’re about to talk about. So what else could happen in the housing market? To me, it still all comes down to affordability. As you’ll remember, my base case is saying affordability not going to change that much. It’s just going to gradually improve. But what happens if it goes up a ton? What if affordability gets way better? What if it goes down and actually gets worse? Are there scenarios where affordability really does move more than my base case? Yes, absolutely. That is possible. I don’t think it’s the most likely thing to happen, but I want you to understand all of the different scenarios that could play out next year.
And to me, there is one really big X factor that I am going to be keeping a very close eye on next year because it could cause what is known as a meltup, basically a huge surge in home pricing. So when I’m asking, could affordability get much better and send prices up? Yes, there are a few routes to that, but to me, the most compelling one, the thing I’m going to watch most closely is something called quantitative easing. I went into this a lot in the episode predicting mortgage rates. So you can listen to that again, but if you missed it, it’s basically the Fed using one of its emergency tools to get mortgage rates down into the mid or low fives, maybe even lower. We don’t know. Quantitative easing, it’s basically they go out and frankly print money to create demand for mortgage-backed securities and bonds.
This pushes down yields, that pushes down mortgage rates, and that could increase the demand in the housing market a lot, which could potentially push up prices. Hopefully that makes sense, right? Because I don’t believe regardless of what happens, the Fed cuts rates a bunch of times. I still don’t think without quantitative easing, we are getting to the magic mortgage rate that we need in the United States to unlock the housing market. Research by Zillow, John Burns Real Estate, a couple different economics firms have all gone into this, and they say that the magic number you need to get to to get people off the sidelines to free up inventory, to restore transaction volume to the market is like somewhere between five and five and a half percent. I just don’t see that happening next year without quantitative easing. So the big question for 2026 in the housing market to me is, will there be quantitative easing?
And frankly, I think the chances of it happening are going up like every single week right now. The Trump administration has continued to prioritize affordability, particularly in the housing market. And as we’ve seen other parts of the economy start to falter and weaken like the labor market, I think the chance that the Fed dips into its toolbox to stimulate the economy continues to go up. Now, I don’t think this will happen right away in 2026. I think the earliest it will probably happen is in May because President Trump, he actually the other day said he already knows who he wants to name Fed chair, but he can’t do that until Jerome Powell’s term is up in May of 2026. So that’s when we would probably seriously start looking for this to happen. I don’t know if it’ll happen on day one, but it might happen sometime after May.
So if that does happen, and I call this the upside case, I know you have your base case, which is what you think is most likely. Is there a more positive case? That’s usually called an upside case. So my upside case for is we get quantitative easing, affordability improves, and then what? In that case, I think we see prices go up somewhere maybe between two and 6%, maybe up to seven if they really get rates down into the fives, maybe up to 7% if they get mortgage rates down in the fours, but that seems unlikely. And that’s what I see happening. Now, I know a lot of people are saying if there’s quantitative easing, if the Fed cuts rates, we’re going to see explosion in appreciation. They’re going to go up 10% again during COVID. I don’t buy that personally because we know that when rates went up, not only did it drive down demand, but it drove down supply as well, right?
That’s the lock in effect. That’s why prices haven’t fallen because low affordability doesn’t just impact demand, it impacts supply at the same time. Both of them are low right now. So in my opinion, if rates come down, yeah, it’s going to bring back demand, but it is also going to bring back supply, right? This will break the lock in effect. So more people will be listing their properties for sale, more people will be looking to move. And so in this quantitative easing scenario that we’re talking about, I think the real winner is going to be transaction volume. We are going to see more homes bought and sold. That will help. And there will likely be upward pressure on prices, but not like COVID. That is unusual. Seeing 10% appreciation might be a once in a lifetime thing that we don’t see again for generations. Of course, if they drop rates down to 2% or 3%, maybe that will happen, but I think that is not the case even if there’s quantitative easing.
So I would expect positive appreciation in this scenario, good appreciation, really good for investors, but nothing crazy like COVID. The other thing I should mention is that if this happens, it will probably happen amongst a backdrop of a slower economy. So people may not want to make huge economic decisions like buying a house when they’re fearful about their jobs. So we have to temper our expectations for what might happen if there is quantitative easing. Now, I told you my base case, I think that’s about a 50, 60% chance of happening. When we talk about the upside case is quantitative easing, I think it’s getting more likely. I actually think it’s about a 30% chance that this happens, and we’ll talk about how to account for that in your own investing in just a minute, but I also want to talk about downside because yes, there is a chance that affordability gets better.
There is also a chance that affordability gets worse, right? How does that happen? Well, it probably happens if inflation stays high. If inflation goes up, it’s been going up four months in a row. It is nowhere near where we were in 2021, 2022. So people overuse the word hyperinflation a lot in this country. 3% is not hyperinflation. Four months in a row of growth is not hyperinflation. We are nowhere near that. But if inflation continues to creep up and mortgage rates go back up, I think there is more downside. I’m not saying that’s going to be a full on crash, but I think there’s more downside below one to 2%, right? Could a crash happen and it really get bad? Sure. But on top of rates staying high, what we need to see is to force selling. We’ve talked about this on the show, but the thing that takes a correction to a crash is when homeowners are no longer able to afford their mortgages and they are forced to put their homes on the market to avoid foreclosure or as part of a foreclosure.
Now, right now, delinquencies, they’re up a little bit, but they’re still very low by historic standards. They’re below pre-pandemic levels. But what I am saying is that there is no evidence that a crash is likely at this point. If people’s predictions about AI just destroying the labor market come true and we see unemployment go up to 10%, yeah, there is a chance that there is a real estate crash, but that still remains unlikely. I think even in this scenario, maybe prices drop five to 10%. I have a really hard time, even in a downside case imagining more than a 10% drop in 2026. It seems just extremely unlikely to me, but the chance that we see 5% declines, 7% declines, low, but I’d say it’s maybe a 10% chance because we just don’t know. There could be some Black Swan event that we don’t see coming that negatively impacts the housing market.
We always have to remember, even though we can’t predict them, we have to remember that these things exist. That is part of being an investor. And we can’t just ignore them and pretend that they don’t happen, they are out there. So the question then is, what do you do? How do you use this information where I’ve just said, yeah, I have a base case, but it’s maybe 50, 60% likelihood. There’s a 40% chance that something totally different happens. How do you invest in that kind of market? I’ll tell you how right after this break.
So far, I’ve told you about my base case, which is the great stall, the potential for quantitative easing to bring us into an upside case and a scenario where the labor market really breaks and inflation stays high where maybe we have more downside. These are obviously three pretty different scenarios. So the question is, how do you invest in an era of uncertainty and low confidence? How do we invest when there are multiple likely outcomes? There’s no right answer to this, but I will tell you how I am doing it. I am first and foremost preparing for the great stall. I think that is the most likely scenario. And the whole idea of making forecast is to not get paralyzed by all the different outcomes, but to have a plan, but to remain somewhat flexible. So I’m going to plan for the great stall because I know this might seem counterintuitive, but I actually think it could be a great time to buy, right?
If we are in a scenario where prices are flat or going down on average, that means you can get great assets at a discount. Now, of course, in these kind of scenarios, there’s also the risk that you might buy a property and the value of that property goes down more once you buy it, but in the great stall, the downside risk of that is not so great. And if you use tactics like buying deep or value add investing, you can mitigate that risk. Now, seeing this opportunity and wanting to pursue that, at the same time, I’m protecting myself against those possible declines in values. Like I said, I am going to underwrite super conservatively. I am being very, very picky right now. I am being patient. I will only buy sure things, only buy excellent assets, things I would want to own even if prices went down for a year or two after I bought them.
Those things absolutely exist 100% and they will become easier to find and buy during the great stall. That is one of the benefits of this market is that more opportunity will exist. And by doing this, by pursuing great assets that I can get at a discount, but while simultaneously protecting myself against downside risk, I am also positioning myself to take advantage if that melt up happens, right? This is the way that you are actually planning for all three scenarios, right? You plan for flat, you protect against downside, but at the same time, you need to make sure that you are in the market in case the upside case happens to take advantage of the growth that could come from that. This, to me, covers all the bases and it’s entirely possible. So let’s talk a little bit more just specifics about what this looks like.
I am going to focus only on assets that I want to hold for a long time. I want to take a long-term mindset. When I look at a property right now, I’m thinking, do I want to own this five years from now? Do I want to own it 10 years from now? And if the answer to that is no, I’m not really interested in it. Even if I think it’s going to go up in the next couple years, maybe there’s something great happening in the neighborhood or you’re buying it below comps. For me, I only want to buy things that I’m going to hold onto for a long time. That’s like the number one thing. Number two, I want cashflow within a year to make sure I can hold onto it for five or 10 years. Now, we’ve done a bunch of episodes about this recently.
I really recommend you listen to them, but you need cashflow positive within the first year. One year is really not some magical number, but I basically mean at stabilization. A lot of times now when you go out and buy a property with current rents, the current condition of the property, it’s not going to cashflow. Well, if you’re going to do value add, if you’re going to upgrade them, if you’re going to big rents up to market rate, that’s when you need positive cashflow. If you can’t get to positive cash flow after stabililization, do not buy it. I know some people say appreciation’s more important. I don’t think so in this market. I just told you, I don’t think appreciation’s coming next year. So make sure you get cashflow so you can hold onto that property so that when appreciation does come, because it will come back.
When it comes back that you’re in the market, you’re already making cash flow, you’re getting those tax benefits, you’re getting that amortization, you’re in the market and you’re comfortably holding onto them. That’s what cashflow does for you. Next, I am adjusting my mindset to care less about short-term returns. Some people might disagree with this, that’s fine, but I am saying I still need cashflow. I still need the tax benefits. I still need amortization. So I’m not saying I’m getting no short-term returns. Those three things alone should probably beat the average of the S&P 500 by themselves without appreciation. So you can still get seven, 10, 12% without appreciation, not to mention value add. You should still be able to do that. But by expectation for appreciation, market appreciation where macroeconomic forces push up the price of housing, I have very low expectations for that for the next few years.
I have low expectations for rent growth over the next few years. I could be wrong about that, but I don’t want to account on that. I don’t want to assume that because no one knows. It’s super uncertain. I’m sorry. I know some people are going to say it’s going to go up. It’s coming back next year. We don’t know, and that’s okay. If you buy according to the way, I’m telling you, by being patient, by being picky, by having conservative estimates when you underwrite your deals, you can still find great deals, but you have to follow an approach similar to this. I’m not saying you have to do everything exactly the same as me, but having this kind of mindset will help you in this era of investing. This is the approach that I am going to pursue. Now, I understand that some people are thinking now, why not wait?
If there is this flat period that we’re going to be in, why not wait? I mean, you could, but what if that upside case happens and you miss out on it? That wouldn’t be good, right? The value of real estate is being in the market for a long time. So if there are good deals that produce cashflow that are going to produce a seven, eight, 10, 12% return as good as the average in the stock market in a bad year. If you’re going to get that in a bad year and you can buy properties that you want to own for 10 plus years, why would you not buy it now? You’ll still get cashflow. You’ll get amortization and tax benefits. You’ll be able to do value add and all of that, even if appreciation is slow. You’ll also start paying down your mortgage, which means that your benefits of amortization get better year after year after year and you’ll be learning and growing.
So to me, this approach gives you a little bit of everything. That’s how personally I am going to approach a year where there is frankly a lot of uncertainty. As I’ve shared with you, I think the most probable outcome is the great stall. That’s what I’m planning for, but I just want to be honest with you. I don’t want to pretend I know everything. I want to be honest that there’s probably a 40% chance that something else happens, that there is a melt up or 30% chance is my rough estimate of that or a more significant client. I think that’s really only about a 10% chance, but it is still absolutely there. Even with all of that uncertainty, there are very proven ways to invest in real estate and to continue moving yourself along the path towards financial freedom if you are willing to set your expectations appropriately, to be patient, to be conservative in your investing that will benefit you over the long run and even in the next year.
So that’s my approach, and hopefully this helps you as you start formulating your own strategy and tactics heading into 2026. That’s what we got for you guys today. I would love to hear your forecast. What do you think is most likely to happen in 2026? Please let me know in the comments. Thank you all so much for listening. We’ll see you next time.

Dave:
Hey everyone. This is it, the last BiggerPockets podcast episode of 2025. We released 153 episodes this year and I hope you found them inspiring, educational and entertaining. I know I had a great time making each and every one of them. We will have a new episode Friday to kick off 2026. And then the following week, we’re going to do my state of real estate investing, which you’re going to want to listen to. And we have a very fun, very exciting announcement coming next week as well. To close out the year, we are republishing one of your favorite episodes of 2025. This is a conversation I had with Henry Washington, Kathy Fettke, and James Dainard back in April about properties that we had each recently purchased. It was a lot of fun, and I think it showed that you can make real estate investing work for you in almost any market at almost any price point.
So enjoy it. Have a happy new year, and thank you all for listening. Here’s my conversation with Henry, Kathy, and James.
Hey, everyone. I’m Dave Meyer, head of real estate investing at BiggerPockets, where we teach you how to achieve financial freedom through real estate. And today on the podcast, I am joined by three expert investors who are my co-hosts on the On The Market Podcast, James Daynerd, Kathy Fecke, and Henry Washington. James, Kathy and Henry are each going to tell us about an investment property that they’ve bought within the last few months with purchase prices ranging from 55 grand, so sort of at the low end of the spectrum, all the way up to 600 grand at the high end of the spectrum. Well, thank you guys for being here. Kathy, great to see you.

Kathy:
Great to see you. Can’t wait to hear what these guys are up to now.

Dave:
Are you nervous? I mean, not that this is a competition, but we always make it one.

Kathy:
It’s going to be a competition. It always is, even if it’s unsaid.

Dave:
Okay. Well, you usually hang pretty well in these competitions, so we’ll see. James, how are you doing? I’m good.

James:
And it doesn’t need to be said. It’s always a competition.

Dave:
Henry, good to see you, man.

Henry:
Hey, glad to be here. This is always a competition and I want to win this time.

Dave:
All right. Well, I’ll give you guys a little bit of a spoiler because I’ve read a little bit about the deals. We know that so far that Henry’s house that he’s bringing to trying to win apparently with a house full of spiders when he closed, but it will be a part-time vacation home for his family. Kathy found an incredible upside opportunity in one of the US largest and fastest growing cities, and James is getting super creative with a multi-part strategy to create profit other investors may have overlooked. So whether you’re a new investor, you’ve been in real estate for a long time, today’s show will have some great ideas to get the wheels turning on your own next property. Let’s get into it. All right, Henry, I’m going to pick on you. You have to go first and share the deal that you’re doing.

Henry:
Yeah, we’ve got a single family home that we purchased. It is coincidentally across the street from a lake and it’s arguably the second nastiest house I’ve ever bought. It was so riddled with brown recluse spiders and webs. You got me there. So first of all, when you walked in, you walk into a sunroom. The sunroom, literally three inches thick on the ground of just cigarette butts. Like this guy would just smoke his cigarettes and then throw his butts out in the sunroom. And then when you get into the house, I took one step in and I was like, nah, I’m good. So you had to get a stick of some kind and then you just had to wave it around in front of you from all the cobwebs.

Dave:
Oh, it’s like when they make cotton candy, they take that little thing and roll it around.

Henry:
Yeah. It was literally just like a thick stick of cotton candy except spiderwebs. And then the subfloors were so rotted away that we just had to put two by fours down so that we have something sturdy to walk on because I thought I was just going to fall through the floor.

James:
You know what though? I like that Henry said that this is the most realistic deal. Who wants to buy a house where you’re going to fall down and get killed by spiders within the first 30 seconds? It’s realistic though, Henry.

Henry:
It is realistic because our listeners can afford it. We haven’t talked to yours yet.

Dave:
What did you like about it? I’ve heard some things that would turn me off, but what was attractive about this

Henry:
Deal? I liked that it was across the street from the lake. I liked that I could buy it for $55,000, I think we paid for it.

Dave:
Oh yeah, that’s something to like.

Henry:
I mean, it needed more put into it than I paid for it. So we’re putting 90 grand into it, but the ARV on the house is 265 conservatively, probably closer to 275, 285. And if we want to long-term rent it, we could easily get $1,800 a month, mostly because as we bought it, it was a three bed, one and a half bath, but we were able to steal some room from a couple of closets and we made it a full three bed, two bath. So $1,800 a month long-term rent, but we’re going to actually short-term rent it because it’s across the street from the lake and I just want to be able to take my family there and do lake stuff. I don’t really know what lake stuff means because I’m not an outdoorsy person, but we’re going to figure it out.

Dave:
You will find out soon.

Henry:
Yeah.

Kathy:
I got to ask you about this lake though, because there’s different, there’s bougie lakes, there’s redneck lakes, and there’s lakes you don’t want to go near. What are we talking?

Henry:
I’m going to say one word and then you tell me what kind of lake it is. Arkansas. No, no. It is a pretty lake. There’s actually a deck and pier that you can walk up to and fish off of. They even have a fishing house. So when it’s cold outside, you can go inside the little house and fish down into the lake from the little house and there’s a boat dock and all kinds of stuff. So it’s actually, there’s really nice

Kathy:
Amazing

Henry:
Lakes in this community.

Kathy:
Oh, nice.

Henry:
And so I like the price point. I like that I have multiple exit strategies. I can sell this one if I wanted to and make a pretty decent profit because like I said, ARV is pretty high. I could long-term rent it for $1,800 a month and cashflow the property, or I can short-term rent it, which is what we’re going to do. And we’re estimating to make about $3,000 a month on the short-term rent. But the real reason I want to short-term rent it is because I haven’t been able to get my wife to agree to let me put a golf simulator in my personal home, but if it’s for a short-term rental and it’s going to bring us more income, I have gotten her agree to let me put it in the short-term rental, which is only like a 20-minute drive from my house. It’s basically like my own personal talk.
Is

Kathy:
Henry

Henry:
Working

Kathy:
On that house again?

Dave:
What could possibly be wrong

Kathy:
With it now?

Dave:
Wait, I have to ask you about this because I was going to put one in my short-term rental because I have this detached garage that I don’t use for anything right now, but I was worried that people are going to break it because it’s like you need a computer and a software. Are you worried about that at all?

Henry:
There’s cases that you can get for your launch monitor that can secure your launch monitor to the ground so that no one can take it. And then you can also lock your computer up in a case so that no one can take that, just a key to entry case. So yeah.

Dave:
Oh, maybe I have to come visit you in person and see how you created this just so I can replicate it.

Henry:
If you want to come and do some market research, or I can come out there and consult and tell you exactly how to set all this up. It’s a writeup. Yeah, easy

James:
Piece. But Henry, so you bought this house, it’s got no floors, it’s got lots of spiders.What does the permitting take? Because for us, if we have to wait nine months for a permit, it can be all the profit in the deal.

Henry:
Yeah, no, that’s a great question. Actually, the permitting process was really easy, actually. I just went to the permit office and told them what I was going to do and then they made me draw it out for them and I did. And then you pay for the permit and they issue it to you pretty much on the spot. As long as you’re not asking to do something that doesn’t conform to their normal standards. So I’m wanting to build a deck over the driveway of this property because the elevation is so steep that I don’t want anybody to park at the top of the driveway. And so I actually want to build a deck over the steepest part, but the rules in this community say that every house has to have either a carport or a garage. And so when I asked them to do that, they said I’d have to come to the meeting and present and get approval, and then they’d give me a permit.
So as long as what you’re asking for is within their normal standards, you can get a permit pretty quick. If it’s not, then you’ve got to go present.

Dave:
And how did you finance this, Henry? Because I imagine this deal you could not get a conventional loan on. So how’d you make this one work? No,

Henry:
This was similar to a hard money loan. I financed almost 100%. I think I had to put about $5,000 down at a mile money, but they financed the majority of the purchase and all of the renovation. And then once we finished the renovation, we will refinance it out into a 30-year fixed on a

Dave:
DSCR. So you financed your own golf simulator, just to be clear.

Henry:
Yeah. For business purposes, yes. Yes, of

Dave:
Course.

Henry:
Purely

Dave:
Business.

Henry:
I will get no personal joy out of this.

Dave:
And how long are you expecting this renovation to take? Sounds pretty serious.

Henry:
By the time we’re done, it’ll be about five months. Yeah,

Dave:
It seems pretty reasonable. So as you said, this is the most relatable deal. Is this a deal you think an average real estate investor could find and pull off?

Henry:
Absolutely. I think there are markets like this all over the country where you can buy houses for a reasonable price point and you can figure out a way to monetize them. I’m not saying it’s easy. I am saying it’s repeatable.

Dave:
Well, what’s hard about it? Tell me. It looks easy

Henry:
Because I just get to get on here and talk about the deal that I have. But what we don’t hear me talking about is how long or how much marketing I had to do in order to find an opportunity like this. There’s a level of consistently looking for opportunities and then when we find one, we’re able to capitalize on it. So it’s not like I just found this one property sitting out there, nobody wanted and bought it. It took a lot of legwork on the front end to find this opportunity. I mean,

James:
I love this deal. When the rehab’s bigger than the purchase price, it typically means- You’re making money. Yeah, you’re making some money on this thing. You

Kathy:
Better be making some money.

James:
But you still have to control those costs, right? And I think you have to be careful about buying the cheapest thing because the cost can’t explode. I mean, what do you think for somebody that was brand new, what’s their rehab number going to be?

Henry:
You could easily run this about 1125 to 150. It’s not just controlling your costs. It’s also not over renovating. But I have this contractor doing four jobs for me right now, and so he’s able to source materials all at the same time, and I’m able to get a discounted rate because we’re doing so many jobs with this one contractor.

Dave:
But even you said 125, right? So Henry, just as a reminder, he said his renovation cost him 90. So even if you went up to 125, which is like a 30, 35% increase over what Henry’s paying, you’re still into this deal for 180 and the ARV is 265. It’s still a good deal.

Henry:
It’s a stupid deal.

Dave:
Yeah, right.

Kathy:
You could mess it up left and right.

Dave:
Exactly. So yes, there are inevitably efficiencies that come with doing the volume of deals, Henry Doe, having a business for several years, being great at building these relationships, that definitely helps. But even if you’re starting, there’s so much cushion in a deal like this that it gives you a lot of flexibility and allows for some of those inefficiencies that just exist for anyone when they’re first getting started.

Henry:
Absolutely.

Dave:
All right. Well, that is Henry’s deal. We are going to take a quick break, but when we come back, we’re going to hear about Kathy’s new property and we’ll see if it’s as relatable as Henry’s deal that’s filled with spiders and has no floors. We’ll be right back. Running your real estate business doesn’t have to feel like juggling five different tools. With Reese Simply, you could pull motivated seller lists. You can skip trace them instantly for free and reach out with calls or texts all from one streamlined platform. And the real magic AI agents that answer inbound calls, they follow up with prospects and even grade your conversations so you know where you stand. That means less time on busy work and more time closing deals. Start your free trial and lock in 50% off your first month at resimply.com/biggerpockets. That’s R-E-S-I-M-P-L-I.com/biggerpockets. The Cashflow Roadshow is back.
Me, Henry, and other BiggerPockets personalities are coming to the Texas area from January 13th to 16th. We’re going to be in Dallas, we’re going to be in Austin, we’re going to Houston, and we have a whole slate of events. We’re definitely going to have meetups. We’re doing our first ever live podcast recording of the BiggerPockets Podcast, and we’re also doing our first ever one-day workshop where Henry and I and other experts are going to be giving you hands-on advice on your personalized strategy. So if you want to join us, which I hope you will, go to biggerpockets.com/texas. You can get all the information and tickets there. Welcome back to the BiggerPockets Podcast. I’m here with Kathy Becky, James Dadard, and Henry Washington talking about deals that we are all working on right now. We heard about Henry’s frightening deal with a lot of upside. Kathy, tell us about something you’re working on.

Kathy:
Well, this is a classic Kathy deal, and it is quite opposite from Henry’s and probably James as well. Shouldn’t be any spiders in this one, but actually it is me helping my daughter get her first investment property because first of all, I don’t know about my youngest yet, but my oldest, Karina, listens to me and she bought a house instead of a car right out of college. Because she didn’t get a car, her debt to income ratios were better. She was driving an old car. She didn’t need a new one, and that house helped her buy a house in Southern California. And just recently, the bank contacted her and said, “We can give you an equity line. All you have to do is just sign.” And she called me, she’s like, “Mom, what do I do? ” And I said, “Honey, you buy an investment property.
That’s what you do. ” And it’s a pretty substantial equity line that they’re giving her. So it’s scary. She’s very busy, busy professional. She’s got her own business and she lives in Southern California. So to find what Henry just described in her neighborhood would be about a million dollars for that. So I wanted to show her how I’ve been investing and how we’ve been teaching people invest who don’t live in areas where it makes more sense to do the types of things that Henry’s doing and James is doing. So how do you have a full-time job, two young kids, try to take care of your life, your home, all the things, and try to buy an old house and fix it up. It’s really hard. So an alternative is to buy a new house that doesn’t need any work and that still cash flows and is in a growth area where you today can negotiate to have the rate bought down.
So Dallas has been hitting the news a lot as an area where prices are going down or there’s just a lot of inventory, but they’re not really talking about the outskirts. And if you go to North Dallas, it’s a very different story, very low inventory versus higher inventory. Places like the McKinney area and even further north where you can still get tremendous deals and they still cash flow and it’s still in the path of progress. And it’s all the things I love for buy and hold investing for busy professionals who just aren’t in a situation to buy a spider house. It’s just not going to work for them. So this deal is in an area in North Dallas, kind of near McKinney. There’s so much development coming in in this area. The purchase price is $214,000 for brand new.

Henry:
That’s really good. Wow.

Kathy:
Crazy. The median price in that area is almost double that, 395,000. So getting it well under median price, I love that. It’s a three bedroom, two and a half bath. We’re negotiating the interest rate down. We’re trying to get it under 6% by negotiating with the builder. And the rent looks to be around $1,825. So again, not the numbers you’re going to see with Henry, but also that’s really hard to do when you live in Southern California. You’re not going to find
A $50,000 house and be able to put 100,000 into it, make it work. So again, this particular area has, days on market is 65, months of inventory, 3.9. So kind of normalizing, not what you hear in the news, which is a flood of inventory in Dallas. You have to know that with the Case Schiller Index and a lot of these areas where they mentioned cities, they’re not always talking about the metro area. And the metro area is very different than the city itself. Cities operate very differently than suburbs. So you’ve just got to know your suburb really well and know where the growth is headed because if we want something that cash flows, if we want something more affordable, so do businesses. Businesses want to get out of expensive areas and into more affordable areas where they can get the land for cheaper, where they can pay their employees a little bit less than they might have to in a city.
So you’ve got to always be looking at where our business is moving and where is housing needed as a result of that. So I’m super proud of her. She’s going to be able to pull this deal off. It’s her first investment, and I like it so much I’m going to get one too.

James:
Oh, wow.

Dave:
Just double dipping.

James:
I love that.

Kathy:
Yeah, you know

James:
It. You know what I love about this deal right now though? You’re catching the builders in the middle.
Right now, it’s a little bit harder to sell inventory, so they’re now selling to you at a discount. You’re able to negotiate the rate buy down, which is a benefit to you. I mean, essentially you’re getting the property for cheaper by getting that rate buy down. And also we have tariffs coming that supposedly is going to raise construction costs 10 to 15%, and you’re locking in on today’s bill cost where the builder is also working with you to get the inventory off. And that’s what we’re always chasing as investors is what’s in the middle no man’s land. And that’s how you can kind of crush that deal. When you can get that rate negotiated down and you’re buying below replacement costs, because if construction cost is up 10, 15% in 12 months, you’re buying below replacement cost. And that’s what I really do love about that deal.
It’s the right price, it’s the right affordability, and it should naturally go up in value just by the bill cost alone.

Henry:
There’s a couple of things I love about this deal. First of all, brand new construction home in an area of the country that is going to continue to grow. There’s a lot of landmass in Texas. They’re not just going to stop growing. So 214,000 for a purchase price for a brand new home-

Speaker 5:
Yeah,

Henry:
It’s crazy. The home’s not going to go down in value. Even in the short term, if it does, over the long term, this property’s going to appreciate. And I know there’s people listening to this and looking at the numbers and going, oh, 214,000, only 1,825 in rent. But you have to consider that this property is brand new construction, which means you are not going to have the maintenance expenses and the capital expenses maybe that I am going to have with my property that’s a much older property. And so that is going to help you with the cashflow in the short term. And in the long term, you’re going to have equity and appreciation plus the tax benefits on a property like this. This is almost a no-brainer if 214,018.25 rent in a market that’s going to appreciate. Sometimes where you find new construction at these price points, you’re probably not going to get the growth or the appreciation over time.
So I think being able to buy something like this at that price point near a metro area like Dallas is pretty amazing.

Kathy:
And then like you said, just not to get nickel and dimed. It’s like buying a new car versus an old car. You’re going to get a better deal on the old car, but you might have to … More fix it costs than a new car, hopefully.

Dave:
Yeah. And lower vacancy, right? I think when you go into these communities where it’s more family oriented, you might have longer term tenants too. I mean, this makes a lot of sense to me. Kathy, this might be a more relatable deal. It was. I think for an average investor who, especially who lives in a high price market, this is a good option. Henry, your deal has a lot of juice in it to borrow James’s term, but it’s a little bit more work and it’s going to be a little bit harder to do. So I think you might be competing here on relatability, Kathy.

Kathy:
All right.

Dave:
All right. Well, thank you for sharing with us, Kathy. Sounds like a really good deal. Good example of something that you can buy anywhere in the country if you have the capital to afford something like that. All right, we’re going to take a quick break, but we’ll be right back. Welcome back to the BiggerPockets Podcast. I’m here with James Danard, Kathy Fecke, Henry Washington, talking about deals everyone is working on right now. We’ve heard about Henry’s Spiderhost, Kathy’s new construction deal outside of Dallas. James, I’m guessing yours is probably worth more than both of theirs combined. What are we talking about here?

James:
Yeah, my earnest money was double Henry’s purchase price on this one.

Dave:
He’s like, “That’s pretty cute. 55 grand,

James:
214.” That’s great. No, and it doesn’t matter the size of the deal. You got to play with the cards you get dealt, right? And we’re in Seattle. It’s expensive. I would love to buy myself a $55,000 lake house. And Henry, I did just get a wakeboard boat, so maybe we head out that way. My deal though, for the market we’re in, we have to get pretty creative to come up with cashflow and build out your rental portfolio. Things are expensive. And the reason I love my deal is because they only make so much land and I’m getting the land for almost free-

Henry:
I love

James:
It. … on this one and how we’re setting up.

Henry:
Love that.

James:
What we have is I found a property, which is the equivalent to 55,000 in Arkansas. I found a two bedroom, one bath property in the Central District of Seattle. So this is an expensive neighborhood. It’s constantly growing on a 4,000 square foot lot, and we paid 600 grand for this property. And 600 grand in Seattle is cheap. So the reason I love this deal is there’s potential in the backyard. It sits on a two-sided street. There’s access on the back and the front house is on the front of the lot. We can renovate that house and put in about 1120,000, 125,000, and that house will be able to be sold for about 900,000. In addition to, this property is zoned LR3, low rise residential, to where we can build a row house in the back.
And I can build a 2100 to 2200 square foot house in the backyard and subdivide it off and sell that property for about $1.2 million. Wow. So the plan on this is we’re going to renovate the house, put 12,535,000 in. We’re going to sell it for 899,000, which is then going to give us the back lot on that property. There’s going to be about $35,000 in profit after we flip the house. So we’re going to get our backyard for $35,000 cash to us, and we’re able to build that house out at a cost of about 700 to 720,000 to build a house that’s worth 1.2 million. That property then has now created over 350 to $400,000 in equity, but it’s not going to pay for itself. I’m going to have to write a check to either pay for it or leave some money in. And so that’s why I love this deal.
It takes a long time to build these things out so I can start collecting rent, start putting renters in, and I can 1031 exchange this in one year. And so I’m going to flip off the front house, get the lot for essentially free in the back, build a house for 720,000, sell it for 1.2, create $300,000 in equity and profit, and then I’m going to take that 300,000 and I’m going to go buy a fourplex with no money out of my own pocket. And so the reason I do love this deal is you have to look at creative ways and expensive markets, whether you’re in LA, Chicago, Miami, New York. The numbers don’t pencil if you want to buy a rental.
And so for us, it’s a lot of work. This is going to take us about 12 to 15 months, but in two years, I’m going to be able to get into a fourplex with no money out of my own pocket. And that’s how you start creating the wealth. And that’s how we built out our whole portfolio. Again, I would much rather buy a deal like Henry. If I had those in my backyard, I would buy them. But in my neighborhood, I got to cut off my backyard to make any kind of money on the three.

Kathy:
This is how you do it in a high priced market. In California, you can do things like that with ADUs. There’s such a push. The California legislation is all about building these ADUs in the back and increasing value. And I love what you said. You can have income coming in while you’re working through the permitting process and so forth. You still can rent the main house and then be able to build and improve the back part. Love it. We’re always looking for deals like this.

Henry:
So you’re still able to sell these properties, one for 950 and another one for what, 1.2, even though they don’t have the yards anymore?

James:
Yeah. And so we’ve deducted that value down. So 899, if I build it in the back, if I actually don’t build anything in the back, the property could be worth up to 999. But that comes down to the plan. So as I was permitting and start working on permitting that back unit, you want to make sure that you’re not putting too many negative factors on that house. So things that we planned out is as we did our design, we made sure that this house still had a little bit of a backyard as a front yard, but we also got parking on it. And that was key to make the numbers work. If we couldn’t have got parking, that house could go down to about $799,000 in value. And so these deals, they get a little complex and you have to look at all the comps and what the impacts are.
And they take a little bit of time to work through. And that’s why it’s really important to work with the right professionals that can give you the right values because if we don’t have that parking stall, instead of making money on it, I’m actually going to be paying 100,000 to 150,000 for the deal. And so it’s all about that plan and how you lay it out. And just because you can build it in the back doesn’t mean you should either. And so you want to work with an architect, an engineer, a surveyor, and to figure out exactly what you can do. This is not guessing. This is all done in our feasibility when we bought the property. And the reason I love this deal is for some reason, if bill costs shoot up 30% because of tariffs in the next six to nine months and my numbers change, I can still pivot my deal and sell the house for in the 900s, high 900s, and still make a profit and just cancel it.
And the only risk I’m taking is the waste of plans.

Dave:
James, I’m curious, how many different ways did you look at making this deal work before you settled on this particular strategy?

James:
I looked at this deal five or six times. I said no the first three times. And then I just kept coming back to it because it was affordable. And I’m going, okay, I love a no man’s land deal when everyone doesn’t want it. It’s like, well, how can we make this work? And so I probably looked at this six different times over a 45-day period. And even when I locked it up, I was like, man, this might not work. And then finally after talking to my surveyor and architect, we came up with the right plan.

Dave:
Yeah. I mean, I think that shows getting creative in not just expensive markets, but just in the kind of housing market where we’re in where there’s not that much inventory. This is something that a lot of people probably had a chance to buy, but because you were disciplined about it and got creative with it, you were the one who figured out through that hard work that you did, how to make this what other people couldn’t make pencil into a really profitable deal for yourself.

James:
Yeah, it’s all about the plan that you’re putting on things. And if you look at a straight over tackle a lot of times, it won’t pencil because everybody’s looking at it straight over tackle, so they’re rushing in on that deal. I like the ones where it doesn’t make sense, straight over tackle, and you got to get a little creative, and that’s how you can create big pops. Even on this deal, I might keep it as a rental, but I still might tweak it at the end because I can 1031 that front house, and for some reason if bill costs go up, I know I can sell that lot in the back for 15 to 20% of value. So that tells me that lot’s worth 150 to 200 grand, and I can combine it and then 1030 want it out that way too. And so there’s multiple different options in where I’m not going to get stuck having to build the house if I don’t want to.

Dave:
Awesome. Well, this sounds like another great deal, James. Thank you so much. And I know the prices may seem out there, but a lot of the lessons that James is talking about on how to approach this kind of challenge, I think is applicable to really any market. So thanks so much for bringing it to us. All right. Well, thank you all so much for bringing these deals. Since we tend to always just make these things competitive for absolutely no reason, I think we often vote for one deal that we would do, you can’t vote for yourself. So James, what’s your vote?

James:
Well, even if I could vote for myself, I’d pick Henry’s deal all day long. I love a massive fixer, cheap, high equity growth, straight over tackle rental. I’m jealous. That is my kind of deal.

Dave:
I like it. All right, Kathy, what’s yours?

Kathy:
So I would pick James because I love opportunities like that where you have multiple exits. 600,000 might sound high to some people, but I know that is a good deal and then all the options that you could do with it. And then I would just want to borrow James and his team for just a year or so, and I’ll take that deal.

Dave:
Yes. Okay. So you’re not buying just the property, you’re buying the whole

Kathy:
Opportunity.

Dave:
Okay. I like that. All right. Henry, what’s yours?

Henry:
Well, even though Kathy’s hating on my deal, I would buy hers.

Dave:
Oh, okay. Oh, I have to be the tie breaker now, but tell us why, Henry.

Henry:
I just think those numbers are pretty amazing for a new construction. And we have to remember that real estate is a long-term wealth game. And the more that I am into this space and the more that I’m looking at my rental portfolio, I’m most excited when I look at the newer properties that I’ve bought in the past couple of years. I’ve bought a few new construction rental properties. Those are the legacy properties. Those are the ones that you’re going to be able to hand off to your kids and they’ll still be in pretty decent shape versus if I bought a 50-year-old property and then I’m handing that one off to my kids. There’s a lot of problems that could come with those. Here

Dave:
You deal with this.

Henry:
So the idea of being able to Buy something brand new at that low of a price point and knowing that appreciation’s going to go up, rents are going to go up over time. We didn’t talk about that with Kathy’s deal, but that’s another upside to hers. It’s 18.50 a month now. But if you’re going to get appreciation over time and rent growth over time, that gap of wealth just continues to get bigger. I think that’s a great option for people who probably have 15 to 20% sitting on the sidelines that they’d be willing to throw in a deal.

Dave:
Well, I get to be the tiebreaker now.This is fun. You all voted for each other. Oh boy. And normally, I think I would actually pick your deal, Kathy, because those are the type of more passive long-term deals I like. But Henry got me a golf simulator. You thrown a golf signature on Andy deal. I’m taking it, so I’m picking Henry. All right. Well, thank you guys so much. This was a lot of fun, Henry, James, Kathy. We appreciate you being here and hopefully we’ll have you guys back on again soon. And thank you all so much for listening to this episode of the BiggerPocketsPodcast. We’ll see you next time.

Ashley:
Hey rookies, are you tired of watching your money sit stagnant and low yield savings accounts or giving your money away in rent every month? In 2025, real estate investing could be your path to financial freedom.

Tony:
And in today’s episode, we’ll break down the current market landscape and give you a step-by-step roadmap to help you start your real estate investing journey.

Ashley:
We will give you the knowledge and confidence to get started in real estate. I’m Ashley Kehr.

Tony:
And I’m Tony J. Robinson, and welcome to the Real Estate Rookie Podcast.

Ashley:
Okay, Tony, before we actually jump into the action steps you need to take to get your first deal or even your next deal, let’s talk about why you should invest in real estate right now. Tony, are you seeing any market indicators or economic indicators as to why someone should invest right now in real estate?

Tony:
Yeah, I mean, I think the biggest thing that we’re seeing is that even with all of the kind of fluctuations in real estate, we’re still seeing that over the long term, property values are continuing to go up and people are still building wealth. And as we continue to see, I think the supply of housing be constrained. That’s been a big talk for quite some time now is that there just isn’t enough housing to absorb all the demand. For the people that hold that limited supply, it typically is going to put you in a really good position, especially if you look out over a longer time horizon of five years, 10 years, 20 years, because you’re going to get a lot of appreciation on top of the cash flow that you’re continuing to generate. So I think just the fact that there’s this big imbalance between supply and demand is going to play in our favor.
And then irrespective of your kind of political beliefs, I think having a president in office who’s a real estate investor, there’ll probably be some good things that come our way as well. I saw a clip, I don’t know where he was speaking at, but he said that, hey, bringing back 100% bonus depreciation, very much something that he wants to do and all of us as real estate investors benefit from that. So I think there’s a lot of things kind of working in the favor of real estate investors today. What about you, Ash? What are you seeing?

Ashley:
Yeah, I think right now that if you’re going to start investing in real estate, it should be a long-term play. This isn’t going to be a get rich, quick scheme. You’re not in most cases going to see amazing cash flow because you’re getting a property at such a low interest rate, your mortgage payment is lower, rents are super high, so you have that cashflow buffer that maybe you got a couple years ago. That’s definitely going to be harder to find now. But I think if you are putting in long-term goals for real estate to actually build wealth, then I think definitely now is still a great time to invest in real estate.

Tony:
I think the other thing too, Ashley, to add to that is that we’re in this kind of weird spot and we’ve been here for a little while now and we’ll probably be here at least through a good portion of this year. But I think we’re in this weird spot where the demand, the number of people who are looking to purchase properties is nowhere near what it was in 2021 and 2022. So there’s fewer people looking for properties. Now, supply is also lighter than it was because there are a lot of people locked into these lower interest rates, 4% and below that don’t necessarily want to sell. But for the properties that are listed, I think we’re in a really unique opportunity right now because since there is less competition, it means that you as a buyer have slightly more leverage. And it means that if a property’s on the market and it’s been sitting for 30, 60, 90 days, you’ve got the ability to go there and go in there and start negotiating on things like price, negotiating on things like credits, negotiating on things like whatever other terms are important to you.
So if you are a rookie who’s sitting on the sideline and you don’t want to have to get in when rates are back to 5% and maybe you’re … It was crazy buying real estate at one point. It was so hard. And if you want to avoid that kind of bloodbath of so many people fighting over the same deal, this might be a great time where you as a buyer have a little bit more leverage.

Ashley:
Now, if you’re considering your first deal or maybe even moving on to your next deal, another consideration besides just the timing right now is also your own personal financial foundation. Are you actually ready and prepared financially to invest in real estate? So we did a YouTube video. You can head over to Real Estate Rookie on YouTube, unless you’re already here watching right now. And it was released on March 4th, and it’s a video about how to financially prepare yourself to invest in real estate. So go ahead and go check out that video. Let’s get into step one. So besides getting your personal finances in order, there’s some other things you need to do to kind of lay the foundation for your first investment. One of those things is figuring out what your goal is and what your priority is. So why do you even want to invest?
What do you want to get out of it?

Tony:
Yeahs, I think a lot of people get into … They get so excited about investing in real estate that they don’t really take a moment to pause and understand why they’re doing this and what their actual priorities are. There’s different reasons people invest. You have cash flow, you have the appreciation, you have tax benefits. If you’re doing something like short-term rental, you have maybe owning cool vacation properties in places you like to go. But with those motivations, oftentimes you won’t be able to equally satisfy all of them with one property. You probably won’t get a property that’s going to give you amazing cashflow, amazing appreciation, and amazing tax benefits, and oh, it’s a place that I love to go vacation. So more often than not, you’ll have to choose which one is most important. And I think that’s where most rookies kind of make a mistake is that they don’t make that decision, and then they’ve just got this kind of shotgun approach on strategy and market.

Ashley:
So the next thing you should be figuring out when you’ve set your financials is going to get pre-approved or figure out how you’re going to fund this deal. How are you going to pay for it? Is it going to be cash that you have? Is it going to be a mix of cash and bank financing? Will it be a line of credit on your primary residence? But you need to figure out what your purchasing power is. If you don’t know how much you are able to spend, you are going to be wasting so much time analyzing all these deals, looking in all these markets, looking at all these properties without even knowing what you can actually buy. How annoying is it? Have you guys ever gone to one of those wholesale stores where they dump everything off the truck that was overstocked from Target and all these different places and you go and there’s just stuff piled everywhere and you walk through and there’s no prices on anything.
You have to find someone, you have to barter with them. How do you walk through there and know what you can actually buy without knowing the prices? It’s so frustrating. So same with knowing your purchasing power for your property as to what can you afford? What can you be looking for?

Tony:
I think the last thing that Ricky’s want to do is start investing a ton of energy and time into a city, into a market or into a property, only to realize that it’s not even within their budget. Because who cares if you found the perfect city that checks all the boxes, if you can’t actually afford to buy there because you either don’t have A, the cash for down payment and closing costs, or B, the ability to get approved for the debt to buy in that market, then you just wasted a bunch of time. So that’s why Ash and I are saying, starting with understanding your purchasing power, your cash on hand and your loan approval amount is one of those most important first steps.

Ashley:
And then you’ll also need to know what exact strategy you’re going after because your buy box is going to be tailored based upon what strategy you’re going after. So say Tony and I are both looking to invest in the same market, but he’s going for a short-term rental and I’m going for a long-term rental. He may be looking for a property with a pool because it will increase his daily rate where myself, I don’t want a pool because it’s going to drive up my costs of insurance having long-term rentals in there and a pool. So making sure you know your strategy, you’ve defined your buy box and what you’re actually going to be looking to buy.

Tony:
And just one additional point on top of that is, I guess there is a bit of a distinction between strategy and asset class and having some understanding about those things I think is important as well. For example, with quote unquote short-term rentals, you can have a single family short-term rental, which is the asset class. Short-term rentals are the strategy, single family is the asset class. You could have a “short-term rental with a small motel.” You could have short-term rentals with a large hotel. Same thing for long-term. I can buy a single family property, so long-term is a strategy, single family is the asset class, or I could do long-term as a strategy and focus on small multifamily. Four to 10 units, 20 units. I could do large multifamily, 100 units and up, still long-term rentals, but it’s different assets. So understanding not only the strategy that you want to go after, but also the asset class is important to make sure that you’re putting all of the other pieces in place correctly.

Ashley:
We are going to take a quick break, but we’ll be right back after this with more on how to get your first property.

Tony:
All right guys, we’re back. So we talked about the foundational stuff. Now let’s get into the good stuff here.What’s the actual roadmap? So one of the most important questions you’re going to have to ask yourself is, how am I actually going to fund this purchase? So our second step is to get you to talk to a lender. Your lender’s going to be one of your best friends as you look to scale up your real estate portfolio. And I think Ashley and I both would encourage you to do a couple of things when it comes to lending. Number one is talking to multiple people. I think we’ve seen enough folks who come on and they only go to one lender. That lender gives them an answer and they take that as the gospel. But I think there’s challenges in doing that or you kind of make it more difficult for yourself because every lender has something that’s slightly different that they can offer to

Ashley:
You. Yeah. And I think too, we’re going to get into market selection, but even if you don’t have your market selected, there are nationwide lenders where you could at least get an idea of what you would be approved for. So if you need help finding a lender to get your preapproval, you can head over to biggerpockets.com/lenderfinder. And this is where you can find a lender that works with investors and can help you get that first investment.

Tony:
One other thing too that I just want to call it on the lending side, and we’ve talked about this a lot on the Rookie Podcast also is that there is a tremendous amount of value in going and working with small, local, regional banks. If you’ve got a good relationship with your local Chase, your local B of A, sure, go talk to them as well. But as you start to build your real estate portfolio, the small local banks are the ones that are going to have the most flexibility. And Ashley and I both, as we built our portfolio, have built relationships with these small local banks that have given us loan products that we no way, in no way, shape, or form would’ve gotten if we would’ve walked into Bank of America. My very first deal, my bank funded 100% of my purchase and my rehab.
I could not walk into Bank of America and say, “Hey guys, I got a killer deal for you. Check this out. ” There’s no way they would’ve said yes to that, but small local banks have the flexibility to do so. So whatever market you’re in, look up credit unions, look up regional banks and just go start talking to folks, see what they can offer you.

Ashley:
The next question kind of ties into this. You need to know what market you’re going to invest in, because if you are going to use a small local bank, you’re going to want to use the small local bank that’s in the market that you’re buying the property. So one of the banks that I use now, it is such a small area that they will actually lend in. If I was going to get a property in the city of Buffalo, which is 25 to 30 minutes from where these bank locations are, they would not lend there. They want to stay nice in their little rural surrounding towns and only lend on those properties, but they have great flexibility and they know their market, they know their area and they stick to it because they can tell when they’re looking at a property, what is actually going to be a good investment for the bank to lend onto.
So when you’re looking for your market, the best place to go to actually find it is to go to the BiggerPockets Forums, go to the Real Estate Ricky Facebook group, read, read the forums, read through the post, or ask the question, “Where should I invest? Where are you investing and why are you investing there?” Make a comment or make a post that shows your buy box, what strategy you’re looking for and that you need a market that fits that strategy. This is such an easy lift to do. Even if you get no one that responds, which is very unlikely in these two groups, it took what, five minutes for you to type up that post and to post it. You will get so much information. Then go to the BiggerPockets forums and create a keyword. So you can create keywords. So I have it set.
If anyone mentions Buffalo, even if they’re talking about the Animal Buffalo instead of Buffalo, New York, I will get, and I have gotten, there was a post about that where I got an alert and you have the alert set up right to your email and it says, “This person’s talking about Buffalo.” So if there is markets you’re interested in, start making keyword tags for them so that you’re getting updated information about them. Then you can go to the biggerpockets.com/resources and there’s a whole bunch of market analysis tools there. So the first things you need to know is your budget. So what markets can you actually afford to invest in? If you know you can only buy your purchasing powers only 200,000, you’re not going to waste your time looking in San Francisco for a property. Your strategy. If your strategy is long-term buy and hold, you most likely are not going to go and purchase in a destination area like Joshua Tree or maybe even the Smoky Mountains.
Sure, there probably are deals out there, but those aren’t probably going to be your highest cash flow. You would make more money turning those into short-term rentals probably. So knowing your strategy and your purchasing power can help you narrow down what market you actually want to invest in.

Tony:
Yeah. We actually did an episode recently, Ashley and I, and Dave Meyer from the real estate podcast on the market. It was episode 452 where we broke down market research for Ricky’s and each one of us picked a different market. We explained why. So if you want some more support on choosing your market as a Ricky investor, episode 452 is a great place to go. Once you’ve chosen your market, our next step is in building out your investment team. And David Green, who wrote several books of BiggerPockets, he’s oftentimes referenced this as your core four, but it’s the people that you’ll need around you as you look to build out your real estate investing empire. And I think for most rookies, the kind of core folks that you’ll need, your lender, which we already talked about, you’ll need a real estate agent, you’ll need an insurance broker, you’ll need potentially a property manager if you choose to self-manage or not, and usually you’ll need some sort of handyman contractor, someone that’s going to do that kind of work for you.
And as you put those pieces together, that’s how you start building the confidence that you can actually do this thing, whether it is in your backyard or whether it’s long distance.

Ashley:
Yeah. And I think it starts with finding one of those people and then using referrals, word of mouth, recommendations to actually build the rest of the team. So if you’re looking for deals, I would say an agent is a great place to start. Or if you know somebody that lives in the area that can be your boots on the ground, that can tell you like, no, I would not invest on that street. Turn the corner, then I would buy a property there that’s a way better area. So having somebody who has knowledge of the property, I think is super valuable too. Even if they’re not an agent, they’re not a lender, anything like that, but they can be your eyes and your ears for the property, I think is very valuable too.

Tony:
My very first deal, it was my agent that was kind of like, actually it was my lender. My lender and my agent kind of concurrently, they were like the lunch pin for me, but my lender introduced me to my agent, and then they both introduced me to my contractor, to my property manager, and a good agent who’s well connected and who does a lot of volume in a certain city typically has a lot of people in their Rolodex. So for all of our Ricky’s that are listening, if you want to find some of the best investor-friendly agents on the planet, head over to biggerpoxes.com/agentfinder, biggerpockets.com/agentfinder, super quick, super easy, fill out a quick form and you’ll get all the top rated agents in whatever market it is that you’re searching in.

Ashley:
Yeah. To give it a real life example of this, I’ve used the same real estate agent. I’ve used a couple others, but she’s been the consistent one for a while now. And I bought a pocket listing from her last year and I was flipping the property and an issue came up with the sump pump and it was delaying our closing. So she knew somebody that knew the building inspector, that knew who did the plumbing inspections and just because of how well connected she was just from doing deals in this area, this property was the farthest away from my house that I’ve ever done. I didn’t know anybody in the area. I have a great contractor who worked out there and hired his subs and took care of everything. I barely ever had to go there, but during this issue, it wasn’t a contractor connection. It was like working with the town and she was so well connected because she had done so many deals in that area that it wasn’t … It was one of her clients that used to work with somebody in there, but just having those connections can be so valuable to make your deal go through.
And I think that is a huge benefit to working with an agent who is investor friendly and has experienced doing a lot of deals because of those connections they have.

Tony:
Yeah. Ash, great example of the power of avenue good agent. So again, if you guys, Ricky’s biggerpockets.com/agentfinder best place to go. Once you’ve got your team built out, the next step, I think we’re on step number five now, so set number five is building out your buy box and then actually analyzing your numbers. So I guess before we even get into the nitty gritty here, just to quickly define what your buy box is, your buy box is the specific type of property and location of property that you’re searching for to help you achieve the goals that you’ve set out to become a real estate investor. So I’ll give you guys a quick example. When we made the decision to buy our first hotel, we made the buy box of we want a property that’s between the purchase price of one million to $3 million, value add opportunity, meaning we needed an opportunity to go in there, rehab and increase the value.
We only wanted to focus on either vacation markets or urban markets. We didn’t want suburban or rule, and we wanted something that offered seller financing. That was our tight buy box. And then it became so much easier to filter through all the different opportunities we were seeing to say, does it match or does it not match? Because then we didn’t waste our time with the stuff that wasn’t within our buybox. And we got really, really good at underwriting things that were within our buybox. And then taking it even back to the beginning of my journey, my buy box, when I very, very first started, I wanted a single family home and the 71105 or 71104 zip codes in Shreveport, Louisiana, single story. And I think I wanted it built like 1950s or later, nothing before 1950s with a value add opportunity. And my very first deal was at the three bedroom, single story home, value add 1954 build and the 71105 zip code.
So the better you get it defined on your buybox, the easier it becomes to really scale up the property identification and the property analysis. So I don’t know, what are your buy boxes looking like or how have they maybe evolved? What would it look like for you?

Ashley:
Well, actually I created a buy box worksheet. You can go to biggerpockets.com/Rickyresource and it’s a template and it basically asks you questions as to everything you should be looking at when building out your buybox. Do you want a pool? Do you want a garage? Do you want an HOA? Do you want how many bedrooms? How many bath? What type of building material do you want the property to be constructed of? Things like that. And I know you guys are probably so sick of us mentioning different links you can go to on BiggerPockets, but all of this stuff is free. All of this is free that you’re mentioning. We’re not trying to sell anything, but that’s another link is biggerpockets.com/rookieresource. And it’s a buy box template and you can go ahead and just click on it, download it, and then fill out that information to help guide you.
So for me, my BobBox right now is the next property I’m going to do is I’m going to do another flip and it’s going to be a starter home is basically my buy box. So I have three little towns that I’m searching in and it has to have a minimum of three bedrooms and a max of five bedrooms. So not super big wiggle room there, at least two bathrooms, two full bathrooms. And it has to be on an acre, at least an acre for these towns that I’m investing in, that’s where true value add is having that little bit of acreage. So those are a couple different things that you should be looking at. I don’t want anything with a pool. I don’t want to have to make sure the pool’s working. I don’t want to have to do updates and repairs to a pool.
So different things like that. The more detailed you get, the slimmer your funnel will get to be. And yes, you’ll have less deals to analyze, but at least you’ll only be analyzing the deals that you really, really want.

Tony:
And for all the Rickies that are listening, you might be asking, “Well, how do I know what my buy box should be? ” And a lot of it is you asking the questions or maybe answering the questions that we’ve kind of been talking about. Like as you said, what scope of project are you willing to take on? How comfortable are you going out of your own backyard? How much capital do you have to actually buy something? And as you start to answer these questions, your BuyPod kind of naturally starts to fill itself in. But that’s like the first piece of this equation or at least the first piece of this fifth step. But once you have your buy box, the second piece is to then start finding properties that fit within your buy box and running the numbers on those deals. I think the analysis piece is one step where a lot of rookies make mistakes, both on they don’t analyze enough and they just see a property that looks nice and a nice area and they assume, “Okay, well, if it looks nice and it’s a great area, it must be a great deal.” That is not how you analyze a property.
You want to make sure that you have as much cold, hard facts about the potential revenue on that property, the potential expenses on that property, and the potential profits on that property to see, does this actually align with whatever return expectations I have for my real estate business? So making sure that you’re going through the process of correctly analyzing the deal. Now, the flip side of that is true as well, where we’ve seen some rookies who maybe go too far to the extreme and they overanalyze and they get suck in analysis paralysis and they never buy anything because they feel like they don’t have enough data. So you got to find your sweet spot on that spectrum of not analyzing at all and being frozen in analysis paralysis to be able to find the deals that you’re confident enough in to actually move forward. And I just think the last thing I’ll add on the analysis part is that, because there’s always risk in real estate investing.
There is no real estate deal that it’s going to give you a guaranteed return. If you want a guaranteed return, you have to go buy a government bond, which I don’t know what bonds you’re paying these days, but a couple of percentages, percentage points. So just know there’s always risk. The goal isn’t to eliminate the risk in real estate investing. The goal is to build your confidence as high as you can. And once you feel confident in the deal, that’s when you know it’s time to pull the trigger.

Ashley:
Okay, you guys, welcome back. If you haven’t already, make sure you are subscribed to the Real Estate Rookie YouTube channel. Okay. So next we’re going to be going over making an offer and what to do once you’re under contract. So there’s so many different ways to make an offer. If you’re using a real estate agent, they will definitely help you guide you through this process. But once you get under contract, there’s different things that you need to do as soon as they’re under contract. But Tony, let’s go over making an offer. What are some of the things as an investor that we need to consider when making an offer? We’ve done our deal analysis, we know what we can make the deal work for at what purchase price. What are the next steps from there to actually submit your offer?

Tony:
Yeah, I think first, and this is just mindset, is that the asking price, the listed price of a property is simply a suggestion. And we have no idea what is going on in the mind of the seller, and maybe they’re much more willing to accept a number that’s lower than what they’ve initially listed for. I feel like most people, when they go to sell a property, understand there’s some form of negotiation in that. So typically they’re not just going to list it at their rock bottom price, right? They usually have a little bit of wiggle room there. So I see a lot of rookies who kind of get caught up because they’re like, “Oh, well, they’re asking this and the deal just kind of doesn’t make sense there.” But the question isn’t what did they list it at? It’s like, “Hey, what number makes the most sense for you?
”

Ashley:
Yeah, I’m honestly one of those people right now. I’m trying to sell this property that I had bought, kind of held onto it and now just want to unload it, not doing anything with it anymore. And I would take a lower offer than what it’s sitting at right now too. So you never know.

Tony:
You find the right seller at the right time. When we bought our hotel in Utah, I don’t recall how long the property had been listed, but enlisted for a while well over, I think they had an initial list for like close to two million and we bought it for just under a million bucks. Same property, but it just sat long enough. The pain was strong enough for the sellers. They said, “Okay, cool. Hey, we just want to get this off our hands.” So just from a mindset perspective, actually, I think there’s a lot of value in treating the listing price as a suggestion and always basing your numbers off of, how does this deal make sense for me?

Ashley:
And then too, when you’re making your offer, you don’t have to make just one offer. I like to submit multiple offers so the seller is getting the decision, which when people get to make a decision, they feel happy. That makes them, instead of getting something and like, “Oh, well, you’re offering this, I’m going to counter this so that I’m getting what I want. ” That weird mindset thing of somebody wanting to have control of the situation, you give them two, you give them three offers, let them select it in their hands. They’re getting to choose. So one could be conventional financing, one could be seller financing, and one could be an all cash offer. So my all cash is going to be the lowest offer. I’m going to give you $80,000. Do loan financing, I’m going to give you $100,000. You do seller financing, I’ll give you $115,000 as the purchase price, okay?
And you can tailor up these different contracts, these different offers as to what your terms are going to be for each, but you could still have the same purchase price, but maybe change the contingency. I’m willing to pay this amount and on this one, I’m willing to close on the property in this state, but I want seller credits. So I’ll close sooner, but I want $10,000 in seller credits. Then your other one could just be, well, close whenever or whatever it may be and you don’t have to pay me any seller credits. So there’s different things that you can negotiate rather than just the purchase price of the property too, to make it more appealing.

Tony:
We did an episode recently with J. Scott, episode 525, where we talked about negotiating tips and tactics for real estate. So again, if you guys want a full deep dive on real estate negotiating, episode 525 with Jay Scott, but I guess just one more thing to add to what you said, Ashley. I think when we think about negotiating real estate, there’s a few things and you touched on a few of them, but just to kind of clearly articulate it for the listeners, you have the purchase price, which is what I think most people think about when it comes to negotiating real estate, but that’s just one lever you can pull. In addition to your listing price, there are things like if you’re doing a traditional real estate transaction, it’s like, “Hey, what contingencies am I going to add?” And maybe you can make your offer more competitive by reducing the number of contingencies.
Some of the common ones are you have a due diligence period, like an inspection contingency, you have a financing can Contingency, those are true of the most common ones. Sometimes if you’re in certain markets, you might have a sword type plumbing type thing, whatever it may be. But what contingencies are you including and which ones can you maybe not include to make your offer more competitive? We’ve heard some interesting stories from folks in the Rookie Podcast as well, like people who are like, “Hey, all I need is help moving. If you can help me move, I’ll give you a really good deal.” And that’s something that’s so out of the box that you would never think would impact the ability to get the deal done, but the more you know about the seller’s motivations, the easier it becomes for you to solve that problem. So just the point here is that there are more things to negotiate than just a listing price.
And the more questions you ask, the better job you can do at providing the best offer to the seller.

Ashley:
So now that you’re under contract of the property, say you did your inspection, you went past through all the contingencies. And just a little side note is that I highly recommend if you don’t know anything about construction or rehabbing a property and this is a property that needs work, or maybe it doesn’t, maybe it is being sold as turnkey and in perfect condition, but you don’t know things to look for, I would highly, highly suggest getting the inspection done. Don’t skip that because there could be issues that you don’t even know. And when you’re vetting an inspector, make sure there’s certain things that they are going to do for you. I used an inspector for a long time and I didn’t even realize that there was way more capabilities until I went to a different market and used a different inspector. And I was like, oh my gosh, taking a tool to the wall to make sure every wall was insulated.
My other inspector had never done that before. So little different things like that is to make sure when you’re interviewing inspectors, what is their full scope? What are they actually going to give you? So once you’re under contract on the property, there’s other things that you need to do. You need to get your insurance in place. You need to switch the utilities into your name for your closing date. If this is a rental property for especially short-term rental or long-term rental, and I guess even midterm rental is setting up your systems of processes for the day that you close. So are there already tenants in place? If it’s a short-term rental, are there already bookings in place? Do you need to set up your bookings? Do you need to order furnishings? Do you need to hire a property manager? So start thinking about, it gets so exciting when your offer is accepted and you’re under contract, but the work doesn’t stop there.
That’s where the real work begins. And then you close on the property and it’s like, yay, I closed. But now you have to put all those processes in place that you worked on while you were under contract. And that’s when starts to take off for you and is exciting when you have that first deal in place. But you need to really focus on building out what is your business for this property and how are you going to asset manage it? How are you going to operate this property?

Tony:
You hit on so many good things, Ashley, that I think a lot of rookies don’t realize go into being a successful real estate investor. But I think that the main takeaway from what you said is that we have to approach even our first real estate investment as a business. And I think if we can kind of just take off the hat of over just real estate investors to putting on the hat of we are entrepreneurs and business owners who just happen to be in the business of real estate, it gives you a slightly different perspective on how to approach even that very first deal because Ash and I have both gone through the growing pains of scaling a portfolio ineffectively to then having to go back and kind of rebuild it from the ground up. And it’s so much easier if you just take the time to do it the right way.
So everything you actually said about having the systems, the processes, everything from making sure you turn on the utilities and turning them off, those are the things that’ll save your headache as your portfolio continues to scale. I think the only other thing that I’d add to this is the goal is to get the first deal done, and hopefully you’ve done that, but also think about how you can leverage that first deal to get to your next deal. And I’ll give a really quick example, but let’s say that you’re able to save 500 bucks a month from your day job. That’s 6,000 bucks a year. And so you’ve got a starting pile of cash of about 50,000 bucks. So you’ve got 50,000 to start with, $6,000 per year that you’re able to save. You take that 50,000, go out and buy a property and say you’re able to get, you’re doing rent by the room and you get a 30% return.
What is that? 15,000 bucks a year that you’ll get back on top of the $6,000 per month or $6,000 per year that you’re saving, like two and a half years, you got another 50 grand. Now you’ve got two properties kicking off 15,000 bucks per month. So you can see how it starts to snowball. So one property gets you a lot further when you recycle those profits back into the business, you can go from one property to two properties to five in a relatively short period of time.

Ashley:
Well, thank you guys so much for joining us for this episode of The Ultimate Guide to Investing in 2025. I’m Ashley and he’s Tony. And if you guys aren’t already following our new Instagram account, make sure to go check it out at BiggerPocketsRookie. You’re watching on YouTube, make sure you let us know in the comments what you want to learn for investing in 2025. Thanks so much for joining us. We’ll see you guys next time.

Dave:
How will AI impact the economy? And what does it mean for investors in 2026? It’s a massive question that may define the next few years and beyond, and today we’re diving deep. Hey everyone. I’m Dave Meyer, housing market analyst and head of real estate investing at BiggerPockets. My guest today is Ben Miller, the CEO of Fundrise. Ben is a thought leader in the real estate and finance space, and he has a long track record of finding value and making deals work in many different investing markets. We had him on last December when he came onto the show and presented a case for real estate investing in 2025 that mostly proved correct. But since the market is always changing and we face a lot of uncertainty heading into next year, I had to bring Ben back on to share his expectations for the economy next year and how he recommends real estate investors take advantage.
We talk a lot about AI and its potential impact on different parts of the economy and the housing market, including how you can leverage new tools in your own analysis and investing. Ben, welcome back to the show.

Ben:
Yeah, thanks for having me.

Dave:
I am always looking forward to these conversations. You are exposed to a lot. You see a lot of different stuff in real estate and in the economy, and you always have a very unique perspective on where things are going. So maybe we can start there and have you tell us just what’s your read on real estate and the housing market right now?

Ben:
Yeah. I mean, I think real estate’s bottomed, but I’ve been humbled by the last half decade. We had COVID, we had interest rates, so I’m much more humbled than I was before. There are three or four really big things happening in the world today. Obviously AI, interest rates. The political environment affects the business environment a lot these days. And then, I mean, the good news is that supply is going away. New supply of construction has really fallen off a cliff. So those are part of the big four things driving real estate these days.

Dave:
All right, great. Well, let’s dig into each one of them one at a time. But before we do, when you say real estate has bottom, do you mean that for multifamily specifically?

Ben:
Well, I guess all real estate is interest rate sensitive. And I think interest rates are approximately, this is my point of view, obviously it’s impossible to know. But yeah, I think interest rates are going to keep falling. The market doesn’t believe that. The market doesn’t know. There’s a lot of debate about that. And I think so that would affect all real estate, including single family housing.

Dave:
So you think the federal funds rate will keep falling, is that right? But you also think mortgage rates will fall as well?

Ben:
Yeah, I think everything will fall. I could walk you through my argument. So let’s just set the stage. So the stage is they cut rates 375 to four. The Federal Reserve doesn’t want to cut anymore because they really don’t know. Inflation has been stuck at about 3% for the last 18 to 24 months. And the long end of the curve, the 10 year treasury has also pretty much been stuck at the low force. And so what you’re seeing is essentially a lot of uncertainty about the future interest rates. Some people arguing that we’re going to see a reacceleration in the economy, and then some people are arguing it’s going to soften. And so the reacceleration in the economy would happen for two main reasons. One is that the great beautiful bill, that big bill is going to start hitting the economy around April. And so a lot of those tax incentives will hit in 26.
And there’s an argument that companies will start spending and hiring as they get all these tax incentives from the bill. That’s one acceleration argument. The other one is obviously AI and data center build. Those are the two main arguments for why the economy reaccelerate. I’m skeptical on both. I think that the economy is not doing great outside of AI, outside data centers,
And that most companies, most people, if you get a big windfall from your taxes, are you going to spend it on hiring people or are you going to basically sock it away a little worried about the state of the economy?

Speaker 3:
Yeah.

Ben:
I personally think most people aren’t in a risk appetite mood.

Dave:
It’s risk off. Most people are risk off right now and wait and see. And although a tax boon might help some people start hiring, I don’t think it fundamentally changes the outlook in a way where people are going to feel confident about making large investments. I think that on a business level and actually on an individual level as well, just like average consumers.

Ben:
Totally. So that’s my view as well. And I say a year ago when I passed that bill, they didn’t realize that sentiment would be so much more negative. And so maybe it would’ve worked a year ago, but I think it’s not going to reaccelerate the economy in any material sense. April’s a while away, things could change. So it’s possible, but that’s not my expectation. It doesn’t seem to be yours either. The other one is AI. AI data center, really AI data center spend is the biggest CapEx or biggest dollars moving the economy. It’s absolutely insane.

Dave:
It’s wild.

Ben:
I think it’s real. I think that it’s not a bubble

Dave:
Right now

Ben:
And that the amount of money, I mean, it’s definitely going to keep the economy propped up, but it’s such a narrow part of the economy that I don’t think it’s enough to reaccelerate inflation outside of transformers, electrical equipment. Things that you need for data centers are going to be really inflated. But there’s like limited spillover effects the way that you have spillover effects on housing, huge spillover effects in housing construction.
If we were spending a trillion dollars more on housing construction, we’d see massive spillover effects, but I just don’t think that’s true for AI. So what would cause things to get slower? I think that you have sort of two main things. One is that generally things outside of AI are not that strong, not that hot. I mean, it’s like high interest rates really did slow down the economy. Home builders are as strained as they’ve been in more than a decade. Inventories are high. Multifamily construction’s off a cliff. All real estate’s pretty depressed outside of AI. Wage growth is not really strong. Hiring is not very strong. So generally the economy is pretty soft. And then on top of that, I mean, everybody knows this, but it’s one of those things that people forget. So the tariffs were put in place in April. Companies did raise prices.
They raised prices April, May, June, July, August. And so we saw inflation stay high for longer because of tariffs. But I think we’ll start to see, hey, actually, there really isn’t any more inflation in the economy. I think the inflation is gone. I think it’s just not a driver of the economy anymore. And then people will realize, oh my God, interest rates are too high.
Inflation is not 3%. It’s actually 2% or low twos. And then I think everybody’s going to wake up to that and that’s just going to cause interest rate sensitive things to get really, really, really valuable.

Dave:
I see. So my opinion is that mortgage rates wouldn’t change very much in 2026 because I think until we get a line of sight of what’s the bigger risk inflation or recession, bond yields are kind of locked up and people are kind of locked up. And so it sounds like you think we’ll get that line of sight sometime in 2026 and your feeling is that inflation will be, maybe we don’t get back down to 2%, but people will see the path down to 2% and that we’ll feel more confident that the risks, whether it’s tariffs or some other risk that could create inflation, will be mitigated. And then for reasons, bond yields start to come down, spreads start to come down, we start to see better buying conditions and a lot more activity in real estate.

Ben:
Yes, completely. That’s exactly what I think. And then I think if you were to play that out, I think there’s like two main questions. One, the market’s forward-looking. So it’s possible we start seeing that sooner than October or November or something. It’s probably really, really like 100% by November or December, but the market probably starts to get anticipatory signals earlier than that. And then everybody, at this point, you always end up conditioned by recent events. So everybody got conditioned by inflation, high inflation. And it’s like usually what happens is because everybody’s conditioned for it, it’s the least likely thing to happen.

Dave:
That’s interesting.

Ben:
The thing we’re defending against, that’s my view. And then I think the question’s going to be, what happens after that?

Speaker 3:
Well,

Ben:
What then? Now I’m going to take a really big leap. I think it goes through 2%. Really? Why? I’m curious. Because AI is deflationary.

Dave:
Yeah. Yeah. So please expand.

Ben:
Yeah. Okay. So let me do Fundrise. So Fundrise, we’re 200 people. We have a lot of different departments. Customer service, we get 6,000 tickets a month, half of them are handled by AI.

Dave:
Wow.

Ben:
Maybe more. We used to have twice as many investor relations people handling tickets as we do now. We have cybersecurity, IT, we used to have eight people, now we have five. We used to have three people doing copywriting. Now we have none. I mean, just go down the list. Everywhere that AI touches, it either suppresses the number of jobs hiring or it gets rid of jobs, and then that will suppress wage growth.

Dave:
Yes, I agree with that. I was actually just debating this with someone on the market, our other podcast earlier that I thought real wage growth was going to go negative next year. I just think that trend is going to continue. So basically people are going to lose their negotiating leverage in labor negotiations, and so wages are going to go down.

Ben:
Yeah. We can debate, and I think it’s really hard to know exactly if it goes negative or exactly what happens, because certain people benefit and certain people will get punished. But overall, you’re replacing people with software and that’s deflationary on wages. So you have this thing where people became more expensive and goods became cheaper.

Dave:
Yeah. Or services basically. If you think about it. Service. Yeah. So services are more expensive.

Ben:
Exactly. And so AI is the first technology that really makes services cheaper. Interesting. It’s going to make people cheaper.

Dave:
So that’s the argument for lower wage growth in general.

Ben:
You basically have majority of people with lower wages and then a minority of people with higher wages. Because if Dave had 10 employees in LES five, is Dave making more money? Maybe because he has a lot more profit. So the average may not be lower, but the median will be lower.

Dave:
Okay. All right, everyone, we got to take a quick break, but we’ll be back with Ben Miller right after this. That’s a scary proposition, to be honest. When I think about it, just like society-wise. To me, the idea that we’ll have fewer people employed and at lower wages is a big break in the economic system, is it not?

Ben:
I think that there’s a transitionary period that could be quite ugly. And I’ve actually sat down and done a lot of work on this. You can go on ChatGPT, go on Claude and ask these questions of like, okay, what percentage of their work can be replaced by GPT-5, GPT-6, go through the tasks they do. And you can really quickly get to a pretty confident conclusion that it’s not less than 10% of most people’s work. And in some places where you’ve built a customized application like for customer service or customized accounting software for AI, it can do more than 50%, I think. Let’s say 50%, maybe 90% in scheme cases. And so you say, okay, let’s just say it’s 20%. Well, 20%, 100 million is 20 million people. It’s a lot. It’s a lot. It’s huge. It’s

Dave:
Too many. Yeah.

Ben:
And it doesn’t actually cause unemployment to go through the roof. Maybe unemployment goes to 5.5% or 6%. Is it mostly it suppresses hiring? Well,

Dave:
That’s kind of what’s going on right now, right? Yes. We’re not seeing layoffs. We’re just seeing no one hiring.

Ben:
Yeah. I think that a generation of people who are in their early 20s are going to really get impacted.

Dave:
Yeah. I mean, you look at unemployment for 16 to 24 year olds right now, it’s already 10%. That’s really high. And it’s hard to imagine that picking up anytime soon. That’s what I mean about the societal challenges here. There’s obviously benefits to it, but there’s a lot of stuff that just feels uncertain. Another reason why, going back to your previous point about people not wanting to make a lot of investments, it just feels like so uncertain about these things, how these things are going to play out. We’ve had ChatGPT for what, two or three years now, but it’s still so brand new. There’s going to be so many different forms of AI that start to come in, not just in large language models that could do totally different things. So I buy the idea that this could be deflationary, at least in the short to medium term.
And I can’t really think in my head of precedent for that in the economy where it’s been a sustained deflationary period. We’ve had lagging wage growth for 40 years in this country, but this seems more serious than that.

Ben:
Yeah. I guess I’d argue the opposite of that. You’ve probably seen this graph, but corporate profits have been going up for 25 years. And if you look at the number of people it takes to produce something, it’s been falling. It used to take eight people per corporate dollar and now it takes two and it’s falling to one. So technology has been making the economy more productive, need less workers, and it’s been mostly gains to capital,

Dave:
Not

Ben:
Gains to labor. That’s

Dave:
Right.

Ben:
So I think this is very consistent with that. That’s

Dave:
A good point. So there is precedent. Yeah. Yeah.

Ben:
I think it’s more similar, but more extreme.

Dave:
It’s just more dramatic. Yeah. It’s just basically the acceleration of a pattern we’ve seen.

Ben:
Right. And it’s a pattern that is both very productive and very counterproductive, counterproductive politically, productively from a capital point of view. I’m not as bearish. I think that an optimistic view would be that AI is really designed for the young people. They’re much more adaptive. So it could be that at some point, all these young peoples are getting hired to really be the person in the office who understands how to use AI.

Dave:
I’m following you. I mean, obviously no one really knows, but I think this is very plausible. This is a very plausible line of thinking here. To continue your thesis here about real estate in general, how do you think this impacts, like you’re saying deflationary that could lead to lower mortgage rates. I totally buy that if it is deflationary. So then is this kind of where the thesis about real estate bottoming comes from is like, we’re going to get cheaper cost of borrowing and asset prices are going to go back up?

Ben:
That’s my expectation, my belief that basically we end up in a new era. And this era is different. We go through these paradigms. You and I have been through, I don’t know how many now, three or four. So we’re going into a new one and that new one is not like the old one. COVID almost accelerated it or something. We went through usually about a decade and this one ended up being five years or something instead of being 10. And so the old one was money printing, inflation, high rates, and now we’re going to go into something that’s like high productivity growth, high returns to capital, lower inflation, but higher real interest rates because what happens is we have really high GDP growth and high growth that drives the real interest rate up, but it drives the inflation rate down. So it’s a little bit of a, you get some and you lose some, but generally that’s good for growth in which real estate is a levered investment in growth.
And so the leverage part gets cheaper and you get more growth. And so I think you’re just going to see a lot of benefits and then it’s going to be more asymmetric. I think that high end does better than low end real estate. So San Francisco, New York, places that selling to a multimillionaire, the high end is absolutely crazy how much money is going to be created for top 0.1% of the country.
So high end real estate, I think is where you want to be. Interesting. I’ve spent 20 years focusing on workforce real estate, real estate for middle class because usually middle class real estate is more resilient. This is where I don’t have my thinking as refined, but I think that could be impacted by this hollowing out dynamic.

Dave:
I haven’t thought about it that way. I buy the idea, if you’re right, that we’ll have a lot of wealth creation at the top. That’s certainly a continuation of a trend that’s existed in the US for a while now. I guess I’ve made my own investing thesis more about affordability and trying to find places similar to what you’re saying about workforce housing. Trying to find places where the average person can afford the average price home is your move away from that thinking that affordability for the average American could get even worse than it is right now?

Ben:
That’s the political dynamic that’s really quite ugly. There’s affordability in terms of goods and services and there’s affordability in terms of assets.

Dave:
Sure. Yes.

Ben:
I think assets get more expensive, but goods and services get cheaper. So it’s harder to buy a house, but you can afford the healthcare, maybe it gets cheaper for the first time, not in the short term, but really like healthcare is, I think, very impacted by AI. And so that’s why I was saying if you’re going to buy assets, which is real estate, you want to be in assets that benefit from the wealth effect. And we haven’t shifted our real estate strategy yet around this. It’s still early, early days on this, but high end San Francisco for sure, no question. High end New York, you probably want to be in the suburbs. I think it’s like a challenge for where you want to invest. You really have to think about that. So you’d want to be near these big economic centers, but not actually probably in them.

Dave:
I’m curious, this is kind of another tangent, but how does the average person afford rent in this scenario? Asset prices are going up. People are making less and less money. I see a lot of people talking about universal basic income. Is that kind of the avenue you go down?

Ben:
I don’t think so. Have you heard this thing? It’s a new concept to me. I heard it recently. It’s as opposed to redistribution, you have pre-distribution.

Dave:
No, I have not heard of that.

Ben:
It’s actually comes from the right, but it’s an argument from, we’re in cash from New Compass. The argument is people don’t want handouts. They want a job and they want a purpose. And so we’d rather do it as effect. So like unions are pre-distribution, minimum wage pre-distribution, things that are before you get to the government. So you’ve affect the workplace. So rent control is kind of a pre-distribution thing.
Anyways, I think it’s going to be really popular. And so I think that there’ll be this new movement around how you address this inequality. Rent control is obviously an example of that. And I mean, it’s pretty crazy in some places where you can’t evict people and you can’t raise rents. And probably a million units in New York will go bankrupt because essentially their costs went up, their mortgage went up, their insurance went up, everything went up, but their rents didn’t go up. So all these affordable housing projects in San Francisco and DC and New York are going bankrupt. So it’s like that’s a taking, right? That’s a way of kind of redistributing wealth from the owner to the renter. So that’s a version that’s already happening. So what’s the next version of that? I think it’s hard. I think maybe Europe, you can’t fire people.
Maybe they start making it so you can’t fire. Maybe unemployment insurance becomes 10 times more expensive, so you have to support people. So there’s all sorts of possibilities, but I think it’s like in a world where you have an extreme effect on AI, I think you see extreme government intervention into the private economy.

Dave:
Yeah. I mean, something would have to happen if this scenario … I just don’t think you can have a functioning society where people continue to make less and less and unemployment goes up and up and all the money’s going to a very small percentage of people. That’s just the recipe for civil unrest if you look at history. So something would have to happen. Yeah.

Ben:
And what you’d hope is that somebody has a good idea.

Dave:
Yes, I would definitely hope that.

Ben:
Well, mostly I’m giving you bad ideas.

Dave:
But this is not your job. You’re not a policymaker. So I understand. I’m just curious if you had any, if you had seen any good ideas.

Ben:
No, have I seen any good ideas? I have to think about that. But anyways, but you understand where I’m coming from. I

Dave:
Do understand what you mean, yes.

Ben:
But I mean, the point is when people say AI is a bubble, what I hear is deflation

Dave:
Because

Ben:
I say, “Oh, so you’re going to put two, three, four trillion dollars into AI.” It’s either deflationary or very deflationary. So the two versions of it is they put trillions dollars into building artificial people. It’s software that can do the work of 20 to 50% of people’s work. That’s like my base case or worse, it is a bubble, it blows up and then we have super deflation because you have built trillions of dollars of AI data centers that are pumping out all these tokens that are replacing people’s tasks and the AI economy blew up and deflated. So I’m like, oh, it’s just a question of how deflationary it is.

Dave:
Stay with us everyone. We got to take a quick break, but we’ll be right back. Welcome back to the show. Let’s jump back in with Fundrise CEO, Ben Miller. All right. Well, you’ve given me a lot to think about a lot. Before we get out of here though, just curious, you’ve given us a couple of hints that you think about investing near these big economic hubs, being careful about where around those hubs you choose to invest. What about different asset classes? Do you think residential versus multifamily or commercial will perform differently in the coming years?

Ben:
Well, I definitely don’t touch office.

Dave:
Yes. Me neither, thankfully.

Ben:
Yeah. I mean, it’s obvious because I’m talking about eliminating jobs, which eliminates office and office was already bad. No, I mean, I’m a big believer in industrial and in multifamily. I think you’re high-end for sale housing and then also rental housing in places that are not going to be overregulated. And then we don’t do high-end, super high-end residential, maybe super even high-end retail where it sort of caters to that upper class. It’s not something I think I want to do, but I think that the asset classes around Greenwich and Susalito and places that are extreme wealth would just get even crazier. And then I mean, I’d be remiss not to talk about our AI product that we’ve been building.

Dave:
Yeah, let’s do it because I mean, we talked a lot about AI. So tell me how you and Fundrise are using AI in your own investing.

Ben:
Yeah. So we, for the last couple years, been building a real estate AI product called RealAI. It’s not realai.com. It’s still kind of in beta, but you can go in there and it’s pretty amazing.

Dave:
I’ve got to use it. It’s really cool.

Ben:
It’s amazing to me because it makes me understand the potential of AI in a different way.

Dave:
Yeah. It makes me glad that I’m a podcaster now and no longer a data analyst. Yeah. I

Ben:
Mean, it turns ordinary people into advanced data scientists.

Dave:
Yeah, it does. It’s crazy.

Ben:
We built real estate, one called real estate AI, and that’s basically to help you do analysis. We’re building more things so you can … If you take like a, “Oh, I have an OM from a broker, maybe I have a T12, I have some information, I upload the deal and I start using it to interrogate the deal. Do you think these rents are realistic? What if tariffs get removed? Or what if you can do all this thinking, all this analysis with this tools and then have it produce draft for you that you can then edit?” It both saves you a lot of time, but it makes you so much smarter. I mean, so smarter. It really

Dave:
Does. Yeah. I find myself doing the same amount of thinking that I used to. I don’t feel like I’m necessarily spending less time working, but it’s like I just get better information to consider so much faster and ideas are introduced that I would’ve taken me a longer time to come to. Or just like I’m an analyst. So sometimes AI will suggest a data set I didn’t even know existed and that means that I can now start thinking about something else or there’s just framing it somewhere away. I wouldn’t think of it. I still find myself working, of course, but it’s just a much more robust and rich set of information that I can work with. At least that’s how I’m using it right now.

Ben:
That’s a funny way to think about it because I was on a podcast three years ago and I was on again this week and they said, “Three years ago you recommended a bunch of podcasts. What do you recommend now?” And I was like, “I think I spent all my time now in AI where I used to spend it on listening to podcasts.”

Dave:
Yeah, listen to podcasts, right? Yeah.

Ben:
Because I just spend so much time essentially, it’s a form of content where I’m like, “What about this? What about that? ” And I’m thinking about things and it’s producing things for me. And so I want to ask you, because you’ve played around with real

Dave:
AI,

Ben:
What do you have to say about it?

Dave:
I love it. I’m being sincere that someone like me who analyzed housing markets, don’t go into that career right now. Aggregating real estate data is a huge pain in the butt. We don’t need to get into why, but it’s really disparate. There’s MLSs, there’s data source, there’s private sources, there’s public sources, there are county and national. It’s a lot of stuff. And what Ben and his team has done and allowed us to access all this information about a city, dig into comps, dig into migration patterns, dig into ARVs, all of it in one place, it’s incredible. This is a true time saver. I felt like I could do this analysis before, but I was probably one of few people who could do it confidently. But now not only can anyone do it, but you could do it in a fraction of the time. It even took me to do it.
And so I think it’s going to be an interesting thing, but I can even feel myself feeling a little overwhelmed by it almost, where if you’re not an analyst digesting just tons of data might be a little bit intimidating. But for people like me who are analytical, it’s a playground. It’s super, super fun. And I’m sure what you and everyone else is working on is just like, how do you make this different levels? How do you create a level for a beginner investor to understand things and then a little bit more sophisticated, more sophisticated and have different levels of communication. But the fact that it’s all there is just fascinating. I am guessing, because I get messages from our audience all the time, people saying, “Where do I get data about the housing market?” And they’re not even talking about anything like what you’re doing, but it’s frustrating for regular investors even to go to Redfin, then to go to the BLS, then to go to the Fred website and just even get four or five data points, even if you’re not trying to aggregate them, it’s frustrating to do just that.
And so I think the merging of all this information into one digestible place is going to make the job of an investor, I think just more fun. You get to do more of the enjoyable part
And less of the admin kind of backend stuff that someone like me does at least. I think it’s going to become more fun.

Ben:
My friend, I have a friend who’s a very inappropriate person, but he says, “Wake up in the morning, I should have an omelet. There’s the insight. He go to the store, he’s got to get these eggs, he’s got to get the butter, you got to cook it. ” And finally at the end, you get to eat it. But how much of the time was not the insight, not the eating?

Dave:
Oh my God. I’ll spend an hour cooking in four minutes eating. I just inhale food. It’s embarrassing.

Ben:
That’s how I think a lot of work is a lot. I don’t think AI is going to get rid of the four minutes. I think that we’re nowhere close to AI replacing people. There’s so much of your work is just not valuable. It’s just grindy, administrative, sucky work. That’s the stuff AI is so good at.

Dave:
All right. Let’s end there because to me that is an optimistic out. I love that idea. That’s a great positive view of how AI might impact all of us on our work. Well, Ben, thank you so much for joining us. It’s always a pleasure.

Ben:
Yeah, thanks for having me.

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

Dave:
Hey everyone, Dave here. Happy holidays from all of us here at BiggerPockets. To wrap up 2025, we’re sharing a few of our favorite episodes from across the BiggerPockets Network this year. Today, it’s an investor story from Real Estate Rookie that was originally published back in April. So you can enjoy this episode. It’s Ashley Kare and Tony Robinson speaking with investor Luke Tetro, and I’ll be back with new episodes of the BiggerPockets Podcast starting January 2nd.

Ashley:
This is the Real Estate Rookie Podcast, and I’m Ashley Kehr.

Tony:
And I’m Tony J. Robinson, and let’s give a big, warm welcome to Luke. Luke, thank you for joining us today, brother. Thank you guys. I appreciate it.

Ashley:
So Luke, you work as a welder for your full-time job, but you’ve told us you don’t love your job per se. So how did you land on real estate for your next steps for financial freedom?

Luke:
Well, I think it kind of started with it was a little bit more than a dislike of my job. I found myself pretty miserable, just kind of disappointed in myself how I ended up where I was at in life. I always felt like I should be doing something a lot bigger, a lot more, and I just never felt like I quite fit in with the guys I was working with, the long 60, 80 hours a week we were working. And before I knew it, I was 25 years old and I started welding straight out of high school. I didn’t go to college, just went kind of straight to work. And I just felt like my life just kind of … I snapped and all of a sudden all of my younger years are over and I’m just not really getting anywhere.
So that’s kind of how I started thinking outside of the box, getting out, what am I going to do? And real estate kind of fell into my lap because I had one mentor in my life and it was my best friend growing up’s father. He was a custom home builder. He had a few single family rentals and it was just kind of always topic of conversation. I can remember when we were younger, just he was going to pick up rent or he was going to fix a house. I don’t think I really took much to it. When we were in high school, I was 18, our mind was on some other things, but I think that kind of ingrained somewhere in my mind. I always kind of knew I could fall back on that. So I think once I got to almost a breaking point of where I needed to make a change, I called him up.
We had a quick phone call and I was like, “Yeah, now or never, let’s just try it. I’ll find a deal.” And I kind of made an agreement with him where he’d essentially be my first private money guy. And I ended up finding the first deal and it kind of all just snowballed from there.

Tony:
I want you to take us through your first deal, Luke, because I’m told that you found your first real estate deal on Facebook Marketplace, which is almost the quote of finding a good deal on Craigslist. So walk us through how you found this deal.

Luke:
It gets even better than that because the top off, the fact that it was off Facebook Marketplace, I sent my now fiance to go walk it because I work a lot, so it’s hard for me to be free during the day. And she’s never done one construction job. She’s never bought a house before. She has zero real estate experience. So she walked it. She’s like, “Oh, I guess it looks all right.” And I negotiated with them over Facebook Messenger because they didn’t want to take a phone call. And I bought it sight unseen to kind of make things a little more interesting.

Ashley:
And did not even talk to the person either that they won’t take a phone

Tony:
Call. My God. So I guess let me just ask, Luke, did you not at any point feel that this might’ve been a scam given that Facebook Marketplace didn’t want to talk on the phone? Were you worried at all about that?

Luke:
Honestly, I had 20 mutual friends with them. So to me, that was a real person. So I didn’t know them personally, but I was like, “It’s got to be legit.” And she showed up. They were there when she was there and they walked through it. There was a tenant in there. So she was like, her first experience of tenant, she’s walking over all their stuff. They’re kind of walking them through with the homeowner. She said it was just wild. And yeah, we decided to go through with it.

Ashley:
So let me ask you this for your first steps as, okay, you guys negotiate through Messenger, you have a deal, what’s the next thing that happened? Did you hire an attorney? What are those next crucial steps to actually close on the property?

Luke:
Luckily, I kind of really leaned on my mentor there because he’s been in real estate for 30 years. And so as soon as we agreed on a price, I just kind of went to him and he sent me to his attorney. They drew up all the paperwork. I didn’t know what I was looking at. I barely even read the contract if I’m being totally honest. And we just bought it. That was kind of how … I don’t know if it was ignorant, me being naive or just ready to go. I don’t know, but luckily it worked out.

Tony:
And Luke, obviously you’re in a unique position because you had this mentor, someone who had a lot of experience in real estate. And for a lot of the Rickis that are listening, you may not have someone like Luca that can hold your hand and guide you this process in real life right next to you, but there is a way to create your own board of mentors. And I think a lot of it starts with building the right team to support you. So for me, the folks that really helped me early on were my agents and my lender, and they were kind of my conduit to introduce me to the other people that I needed to meet. So for the Rickies that are listening, use the BiggerPockets Agent Finder, use the BiggerPockets Lender Finder to get connected with folks in your specific markets that are already working with real estate investors and can hold your hand to say, “Hey, you found this amazing deal, Luke.
Here’s who you need to go talk to you next.” So just trying to make sure that for the Rickies that are listening, you understand what those options are for you as well. So Luke, you find this deal. I guess give us the numbers on it. What did you end up buying it for and how did you know that it was actually a good deal?

Luke:
So they had it listed for 85 grand, I think. And after, I mean, I really just kind of took it upon myself to comp a property. So I went on Redfin and all the solds and I was kind of doing the whole shebang and I figured it’d probably be worth right around 120, 130, and it didn’t need much work for what it was, I mean, from the pictures I saw. So I figured my original plan was I was going to be the one to fix it up along with my mom, she helps us do stuff and my fiance. So I figured we could fix it up pretty cheap. I budgeted for 20 grand. And I was like, after listening to your guys’ podcast and to some other people, I was like, we could refi out and then move on to the next one. And that’s kind of how it went.
We ended up putting a little over 20 grand into it and we got it rented. I took it to the bank and they appraised it at like 135, 133, somewhere in there. And I pulled out as much as I could. I paid him off. We profited a little, took home a little less than 20 grand and we were off to the races, I guess you’d say.

Ashley:
That’s awesome.

Luke:
What a

Tony:
Killer first deal.

Luke:
Yeah. At the time, I didn’t know that because I had done so little research and stuff, but now kind of where I’m at now, it was a pretty good one.

Ashley:
So with that property, you ended up renting it out. What were the rents? What was the cash flow?

Luke:
Yeah, so we ended up … Now it’s rented for like 1,350 and it cash flows about 400 bucks a month.

Ashley:
That’s awesome.

Luke:
Yeah. Yep.

Ashley:
With no money into the deal. You pulled all your money back out.

Tony:
Yeah. Yep. It worked out great. This might be one of the best first deals, Luke, that we’ve heard on the podcast. You found it in a very unconventional way, messaging someone on Facebook. You had a private money lender line up the whole thing. You estimated 20K in rehab. You actually spent 20K in rehab, which isn’t normal. You refinance, pull cash out, and you’re still cash flowing several hundred dollars per month. That is amazing.

Luke:
Looking back now, it is pretty funny that it all worked out that way.

Ashley:
Luke, I have a question about your friend’s dad being the private money lender. Does your friend invest at all too, or is this just something that you’ve done? And I guess if your friend hasn’t, why hasn’t he with his dad’s help?

Luke:
No, he does not actually. And I don’t know why. Me and him kind of, once high school hit, me and him kind of went two different ways. He was a great lacrosse player. He went out. He actually won a couple national championships. Unfortunately, came from a little different family and I went right to work after high school. So I think we just kind of had different mindsets. I think he’s kind of back in town now and I’m sure he’ll eventually get into it. But I also kind of … His dad helped me. I mean, to this day, I love him and I call him my dad, but he built his portfolio brick by brick, cash, save up cash for the next house, no banks involved, no nothing. So when I started kind of going this route, it quickly turned into him calling me crazy. So that was the one and only deal we’ve ever done together.

Ashley:
I just find it interesting because my story started out very similar where I started working for my childhood friend’s father helping him with his real estate as a property manager. And he was my first mentor, but my first deal I actually partnered with his son, so my friend growing up and we did our first deal together. And my pitch was like, look what your dad is doing. We should do that. We’re going to take a real quick break, but when we come back, Luke, I want to hear more about your journey and how you were able to scale so quickly to 35 units in two years. We’ll be right back.

Dave:
As a real estate investor, the last thing I want to do or have time for is play accountant, banker, and debt collector. But that’s what I was doing every weekend, flipping between a bunch of apps, bank statements, and receipts, trying to sort it all out by property and figure out who’s late on rent. Then I found Baselane and it takes all of that off my plate. It’s BiggerPockets official banking platform that automatically sorts my transactions, matches receipts, and collects rent for every property. My tax prep is done and my weekends are mine again. Plus, I’m saving a ton of money on banking fees and apps that I don’t need anymore. Get a $100 bonus when you sign up today at baselane.com/bp. The Cashflow Roadshow is back. Me, Henry, and other BiggerPockets personalities are coming to the Texas area from January 13th to 16th. We’re going to be in Dallas, we’re going to be in Austin, we’re going to Houston, and we have a whole slate of events.
We’re definitely going to have meetups. We’re doing our first ever live podcast recording of the BiggerPockets Podcast, and we’re also doing our first ever one-day workshop where Henry and I and other experts are going to be giving you hands-on advice on your personalized strategy. So if you want to join us, which I hope you will, go to biggerpockets.com/texas. You can get all the information and tickets there.

Ashley:
Okay. Let’s get back into the show with Luke. So Luke, you’ve had your first successful Burr that you completed. What is the next move for you? What did the next couple deals look like?

Luke:
We kind of just kept the ball rolling with the next one. I found, honest to God, another house off Facebook Marketplace.

Tony:
What market are you in, Luke? We didn’t mention that. What market are you in?

Luke:
I’m in a small market outside Rochester, Syracuse area of New York. We’ve kind of stuck to smaller towns, and I don’t know if that plays a difference, but I’ve bought quite a few deals off Facebook Marketplace. We kind of went, walked it, same deal. It was disgusting. So this was a lot different where we were going to be getting into some real rehab on this one. And I bought it for 40 grand. We put another 40 into it and at the end of it, it ended up appraising for 145. So that was another great one. But it was a lot of learning lessons along starting to work with contractors because after that first deal, I didn’t really mention, but halfway through it is when I started building some relationships with contractors, with guys that do stuff because I got about a month in to me doing the work after I work.
And usually I don’t get out. We usually start working around 5:00 AM. I work till five, six o’clock at night. So by the time I get over there, it’s seven and actually productivity-wise, you’re probably only getting an hour and a half of work done at night. And after about a month of that, I sat down with my fiance and I’m like, “This isn’t going to work. This isn’t scalable. This isn’t repeatable.” And I’m miserable. This sucks. And so we started finding people. So then they kind of finished up that first one for us and then we kind of rolled them into this next one and immediately that didn’t work out. So I was on the hunt for contractors. I found some more. They came in and we ended up doing the property pretty decent. They weren’t the best to work with, but it was kind of one of those things where I couldn’t be too picky because we had the house and we had to get it done.
But yeah, we ended up getting it done. We rented it out to an attorney and that come to find out cashflow a good $40 a month. When I ran my numbers, those were not the numbers I budgeted for. I thought I was going to be like the other one around three, 400 bucks a month. And I had made some mistakes. I missed a couple. This was a different town and taxes were way higher for whatever reason. And I skipped it, honestly. It was just me not kind of doing my due diligence. So that was kind of an eye opener to where we got it rented, I was pumped, it was an attorney, she was great. And then we started kind of paying everything. And after a few months, I’m like, this thing is … We ended up turning that one into an Airbnb now, actually.

Tony:
Interesting. So you guys pivoted the strategy a little bit. And since you made that transition, what has the cashflow looked like on that one?

Luke:
That one on average does like a thousand bucks a month.

Tony:
Yeah, that’s amazing. All right. So to take it from 40 to 1,000.

Ashley:
What a drastic change in cashflow by transitioning that strategy. How much more did you have to put into the property to furnish it and things like that?

Luke:
Not much. I mean, we only spent like five grand on getting … It’s a small little two bedroom, so we definitely went the cheap route, but I mean, it looks great and it does really well in the area. It’s the number one Airbnb.

Tony:
You said something that was pretty amazing. So we got to pause in this, Luke, because you said that you were netting 40 bucks per month as a long term. You transitioned to short term and it went from 40 to 1,000. So that’s an additional $960. And I’m breaking down my calculator here. That’s an extra $960 per month in profits, right? So 960 over 12 months is $11,520. You said the investment to get that additional revenue is only 5,000. So if we take our profit of 11,520, divide that by our investment of 5,000, we get a cash on cash return of 230%. The reason why I point that out is because there are a lot of people who are listening that already have properties that much like yours aren’t meeting their initial projections, but instead of focusing on buying the next deal, sometimes you can get a much better return by reinvesting into the properties that you already own.
And that is an amazing proof of concept because you invested 5,000 bucks and got a 230% return. Could you have put that money into a different deal and gotten a 230% return? Probably not. But going back to your story, Lupe, because I think it’s amazing, I just want to make sure I have your stats right. 35 rentals, 13 flips, AKA monthly cashflow in two years.

Luke:
It’s not entirely correct because we have a few things that are under contract to sell and buying, but it’s right in there. Yeah.

Tony:
Generally speaking, right?

Luke:
Yeah. Yep.

Tony:
So I think the biggest thing is, I can’t even wrap my head around that level of activity in such a short timeframe. So how were you able to scale so quickly? What was the secret sauce that allowed you to move at such a rapid pace?

Luke:
I think it was a mixture of just my mindset mentality and kind of really reflecting on the deals we’ve done and kind of looking at those, how we did them and how can we do them again. So I was just kind of going back to where we’ve originally talked and where I was in life, I was ready to get out of it. And I’m the type of person that once I kind of reached that point, I don’t care. I will go and I’ll make it work. And so I kind of had that mentality. And then once I did the first deal with my buddy’s dad there, I learned that that was an option. And then obviously exploring all the forums and YouTube and podcasts and stuff, learning about private money, different ways to get money. I actually went out and joined our local country club to try and network, and that’s where I found a couple of the guys that I do all my deals with now.

Ashley:
What a great idea. I know our local country club, I mean, it’s out on the sticks, but it’s like a hundred dollars a year for a social membership. If you don’t play golf and you just want to go and be a social member, what a great investment.

Luke:
That was kind of where our head was and that was why we joined. I like to golf, but I didn’t need to necessarily join the nicest place in town, but me and my fiance kind of talked about it and we figured it would probably be good for business and it definitely has been.

Tony:
Luke, let me ask. So you joined the country club. First, what was the cost?

Luke:
It’s like 3,500 bucks a year.

Tony:
Okay. So not a small expense, but definitely not a major expense either.

Ashley:
But that’s what somebody would pay on a mastermind.

Tony:
Yeah, exactly. Or even more than that in a lot of situations, right? So 3,500 bucks for the year, you join, you’re a member now. How do you go from, I signed up to getting to the point where the folks who are in this country club are actually lending you money because are you just going in there handing out your business cards saying, I’m Luke, give me your money, I’m Luke, give me your money. What do the actual conversations look like?

Luke:
Well, so luckily for me, I kind of have a foot in the door because I’m very good at golf. So when I go and sign up for leagues or tournaments, everybody wants to be on my team and that’s not cocky at all. It’s just-

Ashley:
No, no, no, no. I love the honesty of it.

Luke:
Just the reality of it.

Tony:
Yeah. It would be the literal opposite for me. No one would want me on their team if we were golfing because I am terrible. So I’m glad you had that working for you.

Luke:
Yeah. And that’s kind of how I’ve met so many people because I started to get random text messages like, “Hey, there’s a tournament going on next Friday. Would you want to go? ” So because of that, I’ve just met the biggest roofer in our town. I know him. I have a cell phone number now, so he does all of our roofs. I met a guy who owns a couple big fence companies, so they do our fence. I mean, just all these relationships that have come of it, it’s worked out great.

Ashley:
Tony’s literally looking up golf lessons right now.

Tony:
Not golf lessons, but I am looking up our local country club right now to see. I’ve never even looked into it before.

Ashley:
But how cool to take something that you enjoy doing, that you love doing and turning it in a way to network and to make those connections.

Luke:
And that’s just kind of what I did. Whenever we play, I just would make a point of talking about what I had going on. And I’ve learned that guys with money, everyone kind of thinks the same. Everyone’s trying to make money with money. So they hear of a young kid who’s hungry, who’s doing deals. They’re not afraid to throw them a hundred grand.

Ashley:
And you’re good at golf, so you must be trustworthy.

Luke:
Yeah, of

Tony:
Course. I guess Luke, one final question on that piece, was it a very direct ask on your part after you had built these relationships to go to some of these folks and say, “Hey, you know I’m in real estate. I’ve got this deal. Let me know if you’re interested.” Or was it more, I guess, kind of the inverse where they were like, “Hey, Luke, if you ever have anything, let us know. ”

Luke:
I work with three main guys now and two of them came to me. And then the first guy, I actually printed out the entire deal, I brought it to his office where he works and we kind of sat down and went over all the numbers and I kind of sold them on the deal. And since then, now that it’s been a lot easier now that I have stuff going on and people know what I’m doing. And that was the biggest thing I preached to anybody I talked to was I wouldn’t ask for any money that I couldn’t pay you back, whether this house burned up in flames. And I truly meant that and I truly would never borrow money unless I had a way of getting them paid off in other deals or in other equity lines I have. So being very open and honest about the numbers and kind of where I’m at.

Tony:
And then in terms of structuring these deals with the various partners, was it all private money? Were there equity partnerships and how were you actually structuring the relationships on these different deals?

Luke:
So we do a very basic, depending on who I work with, it’s either 10 to 12%, and it’s just a flat 10 to 12% interest, whether I have the money out for a month or a year. And I always cap it at a year. So that’s how I’ve done every deal. I haven’t done any equity positions yet. I’m looking at some bigger deals that we’re trying to possibly talk about that. But as far as everything I’ve done with them, it’s kind of been smaller stuff where we buy it, we go in, we fix it up, either sell it or refi them out and get them out of it pretty quick.

Ashley:
Now you mentioned some bigger deals and you’ve got your rentals, you’ve got the flips that you’ve done. So what are these bigger deals that you’re looking at?

Luke:
Obviously, I just closed on a 18-unit mobile home park.

Ashley:
Congratulations.

Luke:
Thank you. Thank you. That’s been a pretty big learning curve.

Ashley:
Is that in New York? You did close on it in New York?

Luke:
Yeah. Yeah. It’s like 45 minutes away, so pretty local. And we have a couple larger apartment complexes that we’re looking at as well, but nothing official on those.

Ashley:
So let me ask, when you’re looking at these bigger deals, what has been the difference between looking at the single family properties you’re buying to rent or flip compared to the due diligence per se on a larger multifamily property?

Luke:
Oh, it’s leaps and bounds different. I’m learning now that, so I don’t want to sit here and act like I know what I’m talking about because I don’t feel like I do. Well, yeah, there’s just so much that goes into them. So many more tenants and I’m in New York, so there’s so many tenant laws and I’m learning for this mobile home park. There’s also a seven unit apartment building on the mobile home park that’s condemned that we’re starting with. And one of the apartments, we’re kind of doing our walkthrough and all of their stuff was still in there, but they were gone and supposedly moved out. Well, come to find out they did move out, but all their stuff’s there, but in New York, technically I still have to go through an eviction process. If I don’t, they can sue me for getting rid of their stuff.
So it’s kind of like one of those things where I wouldn’t have thought that’d be a big deal. I wasn’t told about the tenant. I was told it was a condemned building by everyone I talked to, Co, the previous owner, and now come to find out we might have to go through this process.

Ashley:
Which do you even know where to find the tenant to serve them or anything?

Luke:
I got a number, so I got to make a few phone calls and hopefully I can offer them a little money and get out of there.

Tony:
So look, super excited to hear about this 18 mobile home park property that you just purchased. I think the biggest thing for Ricky’s that are listening is probably the thought of how do you actually put the funds together to buy something this big? So what approach did you take to buy this mobile home park? Was it creative financing, seller financing, private money? What did you do to take this deal, deal?

Luke:
Yeah, so this deal was very odd situation how the whole thing happened. It was actually, I saw it for sale on Craigslist about a year ago, actually.

Ashley:
And we go from Facebook Marketplace to Craigslist.

Luke:
Even worse. So I talked to the guy, I talked to him for a few months and it was always odd conversations with him. It was just, he was super squirrely. There’d be one week where he’s like, “I need the money. I need the money. Let’s sell it. ” And then I wouldn’t hear from him again for a couple weeks and same kind of cycle. And eventually I just kind of gave up on it, moved on. And then a couple months ago, I saw it listed on the MLS and I’m like, and they wanted a ton for it, so I didn’t even bother. Kind of moved on again. And then I was talking to one of the guys I do deals with and he was kind of talking about how he’s foreclosing on a property up in Addison. I’m like, “Is that? ” And I asked, and sure enough, it was the same deal.
He was actually holding the note for this mobile home park. So I started kind of talking to him. He gave me the whole rundown. It was not the best situation, a bunch of back taxes, a bunch of back utilities. Nobody’s gotten paid in years and the whole town wanted him out. So I kind of talked with the seller, I kind of talked with the lender and I kind of was the middleman trying to wheel and deal and kind of wisdom my way in there. And so the agreement I came up with, the lender was if I could get him to just sign the property over me, can I just assume the debt and you’ll start getting paid and we can all move on. You don’t have to worry about going through a foreclosure process and he already knows I’m good for it. So he’s like, “If you could talk him into it, that’s fine by me.
” So then the next couple months were just me and the seller kind of going back and forth for basically what extra he was going to pocket on top of a sub of the debt. We ended up agreeing on him not getting a dollar. So at closing, I came out of pocket, no money, and I completely assumed the debt. We’re going to defer payments for a year while I fix the whole property up so I don’t have to worry about mortgage payments. The trailer park cash flows quite a bit of money on its own without the seven unit building in the front. So by the time I’m actually going to have to start making mortgage payments, everything should be up and running and it should be a really, really good deal.

Tony:
So Luke, you don’t have any partners on this deal. You didn’t even necessarily raise any private money for this deal. You just assumed the note and came with $0 out of pocket?

Luke:
Yeah, exactly. I actually got paid 50 grand at closing because I had him bump the note up an extra 50 grand so I could start rolling some of that into renovations.

Tony:
Luke, you might be the best real estate investor we’ve ever interviewed, finding deals off of Craigslist and Facebook Marketplace. And I love the story, man.

Ashley:
This guy just got burned for years from this other person and he’s willing to give you an extra $50,000 to take this property.

Tony:
Imagine going to a bank and saying, “Hey, bank, give me $50,000 to take over this note.” Oh

Luke:
Yeah. And if they saw a picture of the property, they would’ve laughed at my face too.

Tony:
Luke, I got to take you with me in my negotiations moving forward, man, because you got the gift of gab or something going on there, man. Oh,

Luke:
No. No, I think I’m just lucky.

Tony:
Well, we’ve got to take our final ad break, but we’ve got a little bit more to get into here with Luke. But while we’re gone, make sure you guys are subscribed to the Real Estate Rickey YouTube channel guests and find us @realestatericky, and we’ll be right back after the short break.

Ashley:
Okay. Welcome back from our break. We are here with Luke. So Luke, before we wrap things up, I want to touch on your W2 job. So you were able to actually move your fiance out of her normal W2 to run the business with you. So maybe touch on what she’s helping you do in the business and then also what your plan is to be able to quit your W2 job.

Luke:
I want to preface that. None of this would have been possible without her. And I also, my mom used to work for UPS. She would load boxes on the trucks and she quit and she now works as well. So those two are kind of full-time during the day, which allows me to still work and pay the bills. And I’ve yet to take $1 from anything we’ve made. It just all goes right back in. And the only thing we’ve paid is just my mom and her and the Airbnb has covered that. So it kind of works out great and so we kind of split the roles where my mom kind of handles project management, I guess you’d say. And then Mal takes care of all the tenant issues, all the legal document Payments, she’s extremely, extremely type A. So it works out amazing for emails, calls.
I don’t have to worry about a thing. If I need something, there’s an Excel spreadsheet that is updated by the hour and I’m not like that at all. And I think without her, we really would be in a mess because our numbers would be kind of … I like to be in the front, kind of pushing forward, finding deals. And then luckily she’s able to keep everyone organized. And my mom’s really got good at talking the contractor jargon, so it’s kind of worked out well.

Ashley:
And then what about yourself? What’s the plan for you to eventually move out of your W-2

Luke:
Job? That’s kind of where my biggest, I guess, hurdle would be right now. It’s just, it’s obviously a scary thought leaving a good job that pays all the bills and allows us to do this. I have worries if I do it too soon, it might really hinder us being able to continue to grow. But also I know how productive I can be. So I could only imagine if my two, three hours a day working was 15. So it’s kind of one of those things where I’m nervous on it. I don’t really know how I should pay myself. I’m afraid to take money from the business. I don’t like the thought of it. And so I guess that’s just kind of where I’m at currently, is trying to figure out exactly all the logistics. Do I want to up my flipping? Do I want to just pay myself off of flipping?
Should I worry about growing cashflow to get to the point where all my bills are covered and then I can just not worry from that? And so it’s kind of currently where I’m at with everything.

Tony:
Yeah. If I can give you my recommendation, Luke, I think there’s a couple of things. You’ve built an expertise in a few areas already. The flipping to generate large chunks of cash, which is great. Obviously, you’re really good at finding deals in your market that are undervalued and then stabilizing those properties to generate cash flow. And your ability to raise money to fund these deals. So you’ve got three massive skillsets, flipping for big chunks of cash, buying, renovating for the cash flow, raising money to fund all of your deals. So you’ve got all of the pieces in place, I think, to lay that foundation to get you to step away. I think if I were you, the two things I would focus on are one, getting your personal reserves to a point where you’re comfortable. And what that comfortable is, what that number is going to vary from person to person.
Maybe for you, it’s six months of your living expenses. Maybe it’s two years of your living expenses. Whatever the number is, just decide for yourself. What number do I want to have in the bank? Not business reserves, but for Luke personally, to cover my mortgage, my groceries, my bills, my fund, just my life. How much do I want to have set aside? Then get your cashflow to a number to say, okay, well, if I know my living expenses are X, maybe you want 2X in cashflow because there’s going to be ups and downs. You’re going to want to make sure you have money set aside. So I think if you can tackle those two things, getting your personal reserves in place and then getting your cashflow to a point, again, whatever threshold you feel makes the most sense. But if you can check both of those boxes, then it’s like, okay, well, I’m almost losing money at this point by not going into the business full-time.

Luke:
I guess when you put it that way, I should probably quit tomorrow. Well, there you go, man.

Ashley:
Well, Luke, thank you so much for joining us on this episode of Real Estate Rookie. Where can people reach out to you?

Luke:
I’m not huge on social medias, but you can look me up on, I mean, Instagram is luke_tetro, Facebook. It’s Luke Tetreau and- And Luke,

Tony:
How do you spell your last name for folks?

Luke:
It’s T-E-T-R-E-A-U-L-T.

Ashley:
I’m Ashley and he’s Tony. Thank you so much for joining us on this episode, Real Estate Rookie, and we’ll see you guys soon for another episode.

Ashley:
We’re closing out the year with one of our most popular episodes because what better time to plan your financial freedom than right after the holidays? This is the Real Estate Rookie Podcast, and I’m Ashley Kehr. As you unwind from Christmas and start thinking about what you want 2026 to look like, this rerun with Dave Meyer is exactly what you need. Most investors go into the new year saying they want to build wealth, but they don’t have a clear plan, timeline, or number. They just stay stuck. In this episode, Dave walks you through how to define your financial goals, calculate your freedom number, choose the right strategy, and reverse engineer your real estate game plan. Before January hits, take an hour to map out what your future could look like. Financial independence isn’t a dream, it’s a math equation. Let’s get into the episode.

Dave:
Hey everyone. Welcome to the BiggerPockets podcast. I’m Dave Meyer. Thank you all so much for being here. I want to ask you all a question to start this episode, and I want you to be honest. How many of you actually have a specific financial goal? I’m not just talking about, oh, I want to be financial free. I’m talking specifically like I want $10,000 a month in cashflow by 2035. How many of you have that level of goal? I think if we’re all being honest with each other, it’s like basically none of us, maybe 2% of you have actually gone out and done this. And that’s okay. It took me probably eight years of investing in real estate and being really into personal finance before I figured out that I really mattered whether or not I had a financial goal thickly. And that might be okay at the beginning of your investing career to be perfectly honest.
But if you want to build a portfolio of low risk, high upside investments over a sustained period of time, you need to have a plan, you need to have a strategy, and in order to have that, you need to have good goals. And so today, what we’re going to do is talk about goal setting and how to do it the right way. I’m going to break this down into three really actionable parts and you all should just follow along. I’m actually going to break out the whiteboard and show you some really simple tools like actual things that you could do either as you’re listening or later today when you go home. Go and actually do this so that you have these financial goals, especially as we head into a new year, you can have these specific goals and build a plan backwards from those goals.
The three parts we’re going to go over are first, the long-term goal. And this is the most important. We’re going to spend most of our time here figuring out why you’re doing this in the first place. Where do you want to be 10 years from now, 15 years, 20 years? I know everyone has this vague notion of being wealthier or having more time. That’s not good enough. What you need is a specific goal, and I’m going to help you get that today. The second part is defining a one-year goal because once you’ve figured out the long-term vision, then you need to sort of back into more achievable, more actionable things that you could do in the next year. And then part three is a three-year vision. So we’re going to do long-term big picture, then one year, then three years. And as you’ll see, even though very few people have actually done this, it’s really not hard.
By the end of this podcast episode, you’re going to have these three numbers. And I promise you, it will help you a ton as you formulate your strategy as an investor. So let’s get into it. First up, we’re going to be talking about our long-term financial goals. And there’s basically two different questions that I want you all to answer by the end of this section here. Number one, how much money do you want? And number two, this is the one that people miss is when do you want it by? The key to doing this the right way is finding something that is tough. You want to be a little bit uncomfortable. You don’t want to be, “Oh, for sure I’m going to be able to hit that number.” But you want to feel like if I execute my plan well, if I am diligent, if I work hard, I’m going to be able to hit that number.
That’s sort of the magic balance that you’re looking for here section. So these are the first concepts. The first question is, how much do you want to have? And the second question that we want to answer here is how long? Those were the two things I said. So let’s start with how much. There’s different ways that people can answer this. You could answer this through net worth. You can answer it through cashflow, through your portfolio. For me, the way that I think about it is the after tax money that I need to support my lifestyle. So I recommend that people think about it this way, after tax income, because all of us are going to be taxed differently. Real estate has a lot of tax advantages. So if you’re using real estate for your lot of your income, you might not need to earn as much as you would in a normal job because you’re going to have those tax advantages, which is why I prefer this after tax income thought.
Now, for those of you who don’t have a budget or don’t really understand what your spending is right now, that’s probably a good place to start. I would recommend you have a budget or go onto your banking app. It doesn’t need to be super complicated. Most people, if you have online banking, go and look at your online banking and figure out what your average spend is per month. And this is a great place to start when you’re figuring out what you want your income to be. And I want to be clear that you can’t just make this number up. You could, but I don’t recommend it. It would be easy to just say, again, I want $30,000 a month in after tax income. That’s a ton of money. And maybe you do aspire to that. And if you’ve thought about this hard and come up to that number, that is okay.
But there is risk in overshooting here because if you say 30,000 and all you need is 20,000, that means you might work in a job or build your portfolio longer than you actually need to. We want to find the balance of getting what we want out of our lifestyle and making the most time for ourselves. And so if you’re working unnecessarily to achieve an income that you don’t actually need, that kind of goes against the purpose, right? And so I really recommend just starting rooted in what you’re actually doing today. Now, I expect for some people who are listening and watching the podcast right now, they might be okay with their current income. If you are established, you like your lifestyle, that’s really all you have to do is figure out your budget and average spend if you’re comfortable staying at this level. If you are not and you want to expand your lifestyle in some way, I would just say try and be specific about that.
So if your budget right now is $5,000 a month, I wouldn’t just randomly say $10,000. I would just spend 20 minutes thinking about the things that you would want that you don’t have now and how much more that costs. It’s really not that hard. I actually have, as part of my book, Start with Strategy, there’s a Excel file that goes through this and that actually helps you calculate these numbers so you can do that or you could just do it on a piece of paper, honestly. It’s not that hard. So I’m going to assume that our budget and what we want is $7,500 per month, but there is one more advanced move that we need to do, right? We want $7,500 a month in today’s dollars. And I know this is going to get a little bit nerdy, but this is, I think truly the number one mistake people make in setting their financial goals is not accounting for inflation.
This is a big picture stat, but the value of your dollar on average gets cut in half every 30 years. Just think about that for a second. So if you are near my age, I’m 38 years old, I probably will be retired at 68, hopefully. In 30 years, if I was making $10,000 a month, it would be the equivalent of having $5,000 a month today. Now this is a big problem that a lot of people face in retirement and I don’t want all of you to face that problem. So I want you to adjust upward your goal to account for inflation. For us in our example here that we’re following along with, our goal is going to be $10,000 per month. We’re going to adjust up for inflation from 7,500 because we want to make sure that our spending power stays at that $7,500 level well into the future.
And in the future, you’re likely to need at least $10,000 to be able to do that. I’m not doing this in a very precise way. I’m doing $10,000 because that’s a nice round number, but adjust upward your goal to account for inflation. That’s the main thing here. So that’s step one in figuring out how much you need is what actually you need to fund your lifestyle. Step two is going to come where we figure out what our equity goal is in our real estate. So we need a real estate equity goal because even though the way that you’re going to replace your income long term is through cash flow, I personally believe that it’s easier to think about this by thinking about how much equity you actually need. Now, I’m not one of those people who doesn’t think cashflow’s important. I only buy deals that cashflow, but I am not focused on cashflow early in my career because what I believe and what I know based on all of the analysis I do is that the best way to have cashflow later in your investing career is to have a lot of equity.
Once you have equity, once you have money, cashflow is super easy. So I’m going to extrapolate our goal out from, we had $10,000 a month, but for this calculation we need to do annual. So what I’m going to do is say that we want $120,000 per year in cash flow. And then the next thing I need to look at is what cash on cash return do I realistically believe that I can get 20 years from now? And I know that’s hard to project, but it’s got to be somewhere between five and 8%. I’ll tell you that. That’s the number you should be picking. I like 6%. I think we’ll be able to do better than 5%. 8%’s a little bit higher. This is not deals that you’ve held onto for a long time saying, you can go out and buy off the MLS, you can buy an apartment building and get this number.
This is equivalent to what anyone who’s familiar with commercial real estate would call a cap rate. And so I believe 20 years from now, I’m still going to be able to buy six caps, and that’s a 6% cash on cash return. So all I’m going to do is divide my annual goal of 120,000 by 6% cash on cash return. And what I know from that is that I will need $2 million in equity to be sure, pretty much 100% sure that I could get the cash flow I need at the end of the day. So for me, this becomes my goal as a real estate investor. I’m sitting here in 2025 thinking, how do I get $2 million in equity by the time I want to retire? This is obviously just one example. If you said you wanted, I don’t know, $150,000 a year in income, but you’re a little bit more conservative and you think that you could only get a 5% cash on cash return, then you’re going to need $3 million, for example, in equity.
Or if you only need $100,000 and you’re more confident that you’re going to be able to get an 8% cash on cash return, what does that come out to be? That’s $1.25 million. So whatever these numbers are for you, this is the financial goal I want you all to come up with. How much equity does your portfolio need to be worth? And I’m not saying the value of your properties. That is not what I’m saying. It’s the equity you actually own in those properties. That’s what you need to be calculating. So if it’s $2 million, $3 million, $1 million doesn’t matter, figure this out for yourself. Okay. So now we have answered question number one. Remember we started by saying, how much do you need and how long? We now know how much. We’re going to use $2 million as our example and we’re going to get to how long now, which is what we call your time horizon.
And this is super important thing that not a lot of people think about, but your time horizon is really going to dictate your investing strategy. I’m going to explain that more right after this quick break. Welcome back to the BiggerPockets Podcast. I’m Dave Meyer going through how to set good quality financial goals that will help you formulate a great investing strategy heading into 2026, and honestly, for the rest of your investing career. Before the break, we talked about just needing to know how much you want, and I recommend thinking about that in terms of equity. There’s a couple of steps to that as a reminder. Figure out the after tax income that you want, adjust it for inflation, divide it by the cap rate you think you can get, and that’s going to get you that equity number that you want. We’re going to be using $2 million as an example.
Now the question then becomes how long? And this one is a little bit more of an art than a science because most people will just say ASAP, right? You want to be retired in three years or five years or seven years. And for some people, that might be realistic. If you were just trying to replace your income without any additional lifestyle enhancements, I would say that the average there is eight to 12 years. You could probably replace your income assuming that you have enough capital to buy your first property today. So I think a lot of people are in that situation. So eight to 12 years could be a good timeframe. That’s for doing pretty plain vanilla kinds of deals. If you’re willing to be a little more active, maybe take on a little bit more risk, which we’re going to talk about in a little bit, you can speed up that timeline.
But for most people, I think we’re going to be talking about something around eight, 10, 15 years. And they might feel like a long time, but I have been doing this for 15 years and I promise you it is really not that bad and it is so worth it. Taking 15 years to achieve financial freedom is amazing. I am sorry that people on the internet lie and say that they do this in three to five years. Maybe some of them do, but I promise you, the average person, it takes 10 to 15 years. Unless you want to take on a lot of risk or you’re pouring 60 hours a week into this business, 10 to 15 years, totally doable. You can probably do it in eight to seven if you’re going to be even a little bit active in your portfolio. So just think about that for yourself, where you’re starting out and where you want to get to.
I’m going to just assume for the purposes of our example that we’re going to start with, let’s call it $75,000 in savings that we can invest today, and that we want to retire within 15 years. Now, I understand that some people want to do it faster, and that is definitely possible, and this is the time to dictate that. If you want to go faster, you need one of a few things to happen. One, you need to be starting with a lot of money. I know that sounds really silly, but it’s true. If you have a million dollars, you’re probably going to be able to do it pretty fast, right?That’s a lot of money to start with. The second thing you could do is try and increase your income. I did this by deciding to go to a state school and go back to college for a master’s degree and try and increase my income to accelerate my financial freedom through real estate by making more in my day job.
Some people might want to do that. The third option is to do it through real estate. And I know this is a very common question on here, but it’s not required. But if you think that you could go and flip houses and make a ton of money, that might be something to consider. If you think you can wholesale in addition to your job, or you can wholesale and make more money than you do today, also a decent option. If you think that you would be a great real estate agent and would be able to make more money than your current job, that’s another way that you can do it too, some people. And then the fourth option is to do value add real estate investing. And so that would be, I think for the majority of people listening to this podcast, probably doing something like the BRRR method, because that’s going to allow you to invest in relatively safe rental properties, but also build equity at the same time.
And so just think about which, if any, of those things you want to do. If you don’t want to do renovations, you don’t want to change your job and you’re kind of just want to coast, that’s totally fine, but it’s going to take you probably 10 to 15 years. If you want to shorten that to let’s call it seven to 10 years, think about which of those things you can realistically do. Can you get more income or are you willing to put in the time and effort into doing things like the BRRR method to grow your equity faster? For the purposes of our example, I’m going to say that we have $75,000 to invest today and that we’re going to shoot for, let’s call it a 12-year time horizon. So that’s what we got. That is step one of our long-term goal. That’s all it takes.
I’m blabbing about and explaining this and we did this in like 15 minutes, right? So you can do this in your own time, take 10, 15, 20 minutes and figure this out. We know now that our goal as a real estate investor, the thing we need to be focusing on when we set our tactics, when we pick what deals to do, what markets to invest in, our goal is to have $2 million in equity in 12 years. That’s the goal that you need to set. And if you have this, I promise you, everything is going to get so much easier. It sounds so simple and it is, but everything will get easier if you start to think about your portfolio in this way. Now, before we move on to the one-year goal, which we’re going to do in a minute, just do a gut check and make sure that this sounds reasonable.
If you want to do the math, you could do that because I would recommend that. But if your goal is like, “I need $5 million in five years and I’m starting with 50 grand, I’m sorry, that’s just not going to work.” If you’re a rental property investor, you can expect your money to compound at somewhere between 10 and 25%, depending on how involved you want to be. If you’re just buying regular deals, 10% is probably 12% is probably where you’re going to be. If you’re going to do the Burr, you could probably do 20, 25, maybe 30%. And so think about that and see if you’re within that realm of possibility. If your goal is way bigger and you’re going to need to compound at 50 or 60 or 70%, honestly, you can do that, but you’re going to have to flip houses. It’s the only way you can earn those kinds of returns in real estate, and that comes with risk and a lot of time that doesn’t make it wrong, but that’s how you’re going to have to do that.
So think to yourself, is it worth it to me to do flipping and take on more risk and commit more time? Or should I just back out my goal a couple of years and take on less risky, less time intensive kinds of strategies? That’s totally up to you, but just think about that before we move on to our one-year goal. So that’s step one of your financial goal. And then we’re going to move on to our one-year goal because obviously having that sort of 12-year vision isn’t good enough. You need to start now backing into what you have to achieve this year to make sure that you’re on track for year two, for year three, for year four, and so on. So the place that you need to start for your one year goal is by doing something what I would call a resource audit.
And this sounds fancy and corporate, but it’s not. It’s just a question of how much time do you have to commit to real estate in the coming year and how much money? Everything comes down to these two questions, right? Our first year goal was what amount do you want? In what timeframe? Our one year goal is going to come down to those same sort of variables that we’re dealing with. Now we already answered the question for our example, which is $75,000. But for all of you out there, I really, really encourage you, if you haven’t done this yet, think about what are your investible assets right now, right? Investable assets are not your total net worth. It’s how much money you can responsibly put into real estate today. So let’s just use an example and say, you have $50,000 saved up. Now, you shouldn’t invest all of that.
You can’t invest all of that because budgeting experts say you need three to six months of emergency funds to weather a storm. We’re going into a difficult economic period, I believe, and so you probably want six months of emergency funds. And if you have kids, that might be even longer, that’s up to you, but you need to set aside some money. And so it’s not just the number in your bank account, that’s not your investible assets. What you need to figure out is how much money you can responsibly put into real estate. So figure that out for yourself. But for our example here today, we’re going to use $75,000 as an example. Now, time is another really important variable here because again, if I wanted to grow as quickly as possible, I would flip houses. That is the best way to earn a lot of money quickly in real estate, but I don’t have that time.
And the example that we’re going to use is going to say we don’t have that time. We though are willing to put in, let’s call it 10 hours per week for real estate, thousands. To me, 10 hours a week, you’re going to be able to do a lot in real estate investing. You’re going to be able to find great deals, you’re going to be able to do value add, you’re going to be able to self-manage, you’re going to be able to do a lot of things that you might want to do to maximize the early years of your investing or whatever, the next years of your investing, if you put in 10 hours a week. And so figure that out honestly for yourself though. If you don’t have 10 hours a week, be honest about that because if you buy a deal that requires 10 hours a week of a commitment and you only have five, you’re not going to operate that deal well.
And this is exactly why you have to go through this process because I see so many investors going out there and just buying whatever deal. They buy a short-term rental and they don’t have a lot of time to furnish it. And then it just winds up being kind of a crappy short-term rental and it doesn’t perform. And then what’s the point of doing that in the first place? So be honest with yourself about how much time you’re going to be able to commit, because that’s how we’re going to pick what deals that you should be doing in the next couple of years. So for me, if I’m trying to take a medium aggressive approach, which is what I recommend to most people, it’s like you don’t need to be really passive and really conservative. You don’t need to be super aggressive, but if you want to do things like a BER or cosmetic rehabs on rental properties, those are fantastic ways to pursue financial independence.
And the first, if you have 10 hours a week, you’re going to be able to do that. So think about this for yourself. Once you have an answer to that, I think sort of paths kind of start to diverge here because what your answers are are going to really depend on what you’re going to do in 2026. So I’m going to draw up actually a little quadrant here about the two different variables that we’re talking about. So on one axis, if you’re listening on the podcast, I’m drawing a quadrant. On the horizontal axis, I’m drawing time and on the vertical axis, money. And where you fall, in which quadrant, which box you fall in is going to really dictate what you should be doing in your first year. So if you’re low on time, but you have lots of money, so you’re in this first quadrant here.
What I would invest in here is I would think about rental properties because you don’t have a lot of time, you’re not going to be able to flip. So I would think about rental properties, low leverage because you have money and so you’re not going to need to put five or 10% down. So I’d say put 25% down. And then if you have time, I do cosmetic rehabs because you’re not going to have time to do a big rehab because again, you’re falling into this low time bucket. That’s what I would look for. If you’re just asking me and you fall into this bucket, you have money to invest, not a lot of time, buy rental properties, put 25% down, do a cosmetic rehab, don’t think that hard about it. This is going to work. Next quadrant that you go into is a lot of time and a lot of money.
This is obviously a good place to be in, but what I would do is heavy into Burr’s. If I had both time and money, that makes a lot of sense to me because that’s going to grow my equity as quickly as possible. But if I did a heavy Burr or heavy value add Burr, that is going to take up a lot of time. But if you have time and money, I would go heavy into these BRRS. The next one is high on time and low on money. The things that I would look to do are things like potentially wholesaling. I don’t have a lot of experience in that, but if you wanted to, this is a good way to make money. I would try and partner on flips and see if you can use sweat equity, or I know this is going to be controversial, make more money.
I know that sounds silly, but if you don’t have a lot of money, but you have a lot of time, go make more money, whether that’s doing a side hustle, investing in your education so you can increase your income to becoming an agent on the side. I don’t know, but if you can make more money with that extra time that you have, that’s probably going to be the best way to help your investing career at this point. So think about that. Then we go into the last bucket, which is low money and low time. This is a tough place to be, right? If you don’t have time and you don’t have money, real estate investing is going to be very difficult for you. And I just want to be clear about that. I know there are tons of people on the internet who like to say, you can get into this industry with no time, no money, I’m sorry, but that is not true or it is very, very rare.
And I don’t want to discourage you if you fall into this bucket because you can get from where you are today to becoming a real estate investor, but making a real estate investment is probably not the next step in your journey. What you need to focus on is one, either freeing up time so that you can do those other things I just talked about, or earning more money, spending time saving money. You can still educate yourself as an investor. You can save money and then invest maybe in a year or two because your goal is to get your foot in the door. And so if you’re in that fourth quadrant, figure out a way. Your year one goal is find a way to get your foot in the door. And when we get to our three-year goal in a little bit, you’re going to be able to have a little bit more exciting goal.
Don’t worry about that, but year one is going to be just getting your foot in the door. If you’re in these other quadrants, the way I would think about it is try and figure out one, how many deals you can realistically do and at what point. So if you’re in quadrant one, you’re doing these rental properties with low leverage, putting 25% down for cosmetic jobs, I would say maybe you could do one of those is a realistic goal. One deal at, I’m going to target a 15% annualized return. I do deals like that all the time. If I don’t have a lot of time right now and I find a decent deal, 15% annualized return, that’s fantastic. The stock market averages 89%. It’s having a good year this year, but 8 to 9%, if I can make 15% on a low effort deal, I’m pretty happy about that.
That’s just an example. That would be one goal I would say. If you’re going to do BERS, I would say maybe try and do two deals and try and get maybe a 40% annualized return because you’re going to be able to hopefully do a BER, maybe you do two of them. They take six months each, maybe they take nine months each. So let’s just say you get into two deals at an annualized rate. You might not realize all of that in one year, but just say an annualized rate of 40%. Or if I’m wholesaling and I’m in this third quadrant, remember that one is with low money, but high time, I would try and figure out how much more money you can make. How much can you save would be my year one goal. Not necessarily how many deals I can do, but if I’m in quadrant three and I have 20 grand, my goal would be something like $50,000 to invest next year.
I know that doesn’t sound as exciting as going out and buying a deal, but I promise you, if you save 50 grand, next year you’re going to be able to do a great deal and it’s going to accelerate your career probably faster than it is than trying to like get a little piece of a random deal or doing a really risky flip. That’s my honest advice. That’s what I would do if I were in that situation. Now going back to our example of having $75,000 to invest and 10 hours a week, I’m going for the BRRR. That’s what I would personally try and do. And so my goal, my one year goal would be two BRRS and then on my first BER, I think I’ll only be able to sell that first one or refinance that first one in the year. Maybe I’ll start my second one within one year, but realistically at 10 hours a week, I can only do one at a time.
So I’m going to think about, that’s probably a nine month project and I’m going to say, I want to earn at least 40% on that deal. I want a 40% annualized return on that first deal. That’s huge. 40% is awesome. That actually would come out to for $75,000. That’s a $30,000 return, right? So already in year one, we’ve gone from $75,000 in equity that we need. We’re trying to get to two million and we’ve already gone up to 105,000. If you’re able to do that, I promise you, you are going to be able to hit your goal and I will do the math for that. When we come back from this quick break, stick with us. Welcome back to the BiggerPockets Podcast. Now that we’ve done our long-term goal and our year one goal, let’s just extrapolate this out because you can basically do the strategies that I just said well into the future.
And I know, like I said, you’re going from 75,000 to 105,000 your first year. I hope that sounds like a lot because it is. That’s an amazing return. If you’re making a 40% return, you should be super happy. But I just want to extrapolate this out a little bit because there’s this kind of magical thing in math called the rule of 72. And this says that if you take the number 72 and you divide it by your rate of return that you’re earning, that’s how many years it will take your money to double. If you take the number 72, you’re earning on average an annualized return of 10%. It’s going to take you 7.2 years to double your money. Now, if you’re doing the BRRR or cosmetic rehabs, which is what I think The majority of our audience should be doing. I think hitting 24% annualized returns is very practical.
It’s not going to take so much time. You’re going to still need to be able to put in some work, find great deals. But if you can get, let’s just round it to a 30% annualized return. That’s going to take work. You’re going to need to do cosmetic rehabs. You’re going to need to do BERS to earn at 30%. You can’t just go buy a regular rental property and 30%. But I’m just going to show you, this is what I would do if I was starting with $75,000. I would just try and target this 30% annualized return every single year because I’m starting in year zero with 75,000. Then in year three, we’d have 150K. In year six, we’d had 300K. In year nine, we’d have 600K. See how this thing starts to compound? And then in year 12, we’d have 1.2 million. And then in year 15, we’d have 2.4 million.
So this is actually a really good example. I kind of set our goal arbitrarily earlier. I was kind of just coming up with this example as we go. And what I came up with is I said I wanted $2 million in 12 years. Well, now I’m looking at this and I’m thinking that’s probably a little unrealistic. In 12 years, even if I earned a 30% return, which is good, I would be at just $1.2 million in equity. That’s still a great place to be, but it looks like my time horizon is going to be closer to 14 to 15 years. That’s still awesome. I’m talking about being able to replace my income and earn $1120,000 in after tax income. That’s just 10 grand to spend every single month in 14 to 15 years. I’m just starting with 75 grand, which takes time to build up, but it’s not like you’re starting with a millionaire’s amount of money.
And I’m only putting in 10 hours per week into these deals. If you want to accelerate this, you can find ways to make more money and put more investible assets, save more money. Remember, this, what I’m doing right here, 14 to 15 years, assumes I put no new money into my investments. I’m taking the 75K and I’m just extrapolating that. But for most people, you’re going to be able to save money every month, put more money back in. That’s going to help you get to 12 to 15 years. But that’s what I want you to do at the end of this exercise is to be able to say, “Yeah, I gut checked this and I think that this is reasonable.” For me, I would say now at the end of this exercise, my long-term goal is $2 million. I’m actually going to say still in 12 years, because I said 14 to 15 years would take it with no new money into it, but I think I’m going to be able to add some new money into it.
So I actually do think 12 years is realistic. That is my long-term goal. My one-year goal is going to be, I’m going to round to 100K in equity. And my three-year goal, remember, I think that I want my money to double in three years. My three-year goal is going to be $300,000. That’s my example. This is what I want all of you to get to. Know these three numbers for yourself because once you do, you can already start to figure out what deals you should be doing. If these are my goals, I know that I can’t just go buy on- market MLS deals. I am not going to be flipping. I probably don’t want to do short-term rentals because although they can offer more cash flow, my goal is building equity. I know that my goal is building equity. And so that allows me to hone in on projects where I can do a BRRR or a cosmetic rehab for you.
See how this is already helping me set my strategy just by knowing these numbers? There’s so many great ways to make money in real estate, but I know my goals. So I know I’m going to do BERS and cosmetic rehabs and I’m going to look for a market where I can do that for my 75K because I have enough money to get into a deal. And so I’m specifically going to look for markets where I can put in $75,000. For me, that’s probably going to be somewhere in the Midwest or Southeast. If I put 25% down, I’m probably going to target a deal that is like $250,000 with a $50,000 rehab. Like that is something you can go out and achieve today. So I’ve basically backed into my buy box for next year. I know that if I want to hit my goal, I’m going to look in the Midwest for a Burr cosmetic deal that is in the 200 to $250,000 range with a $50,000 cosmetic rehab.
That’s amazing. So many people spend so much time trying to figure out what their buy box is, all these different strategies. I’m coming up with this example in real time, just using these numbers that I’m making up. I already was able to figure out my buy box just by backing into where I want to be 20 years from now. And this is why I say that knowing these financial goals is the number one key thing that investors need to do that most of them miss. Spend 30 minutes right now figuring out what these numbers are for yourself. And I promise you, your plan for the rest of 2025 and 2026 and the rest of your investing career is going to become so much easier. Now, I think in this podcast episode, I’ve given you enough to be able to do this, but if you like this concept and you really want to get a crystal clear vision of where you want to go in your investing career, I’m going to be a little bit of a pusher and recommend my book, Start With Strategy.
Literally, the whole book is kind of about this idea that if you set your long-term goals well, you can back into the right strategy. So if you want to go deep on this, you can check out my book on BiggerPockets. It’s called Start with Strategy. It’s also on Amazon, but hopefully this has been enough for you to just do this by yourself. The book is just for people who want to go a little bit deeper. That’s what we got for you guys today. If you have questions about this, please let me know. Or if you want to hear more content about this kind of stuff, we always talk about tactics and strategy, but I think this stuff is so important, which is why I wanted to do this episode today. If you want more content like this, please let us know in the comments or hit me up on Instagram or I’m @thedatadeli.
Thank you all so much for listening to this episode of The BiggerPockets Podcast. I’m Dave Meyer. I’ll see you next time. To just do this by yourself, the book is just for people who want to go a little bit deeper. That’s what we got for you guys today. If you have questions about this, please let me know. Or if you want to hear more content about this kind of stuff, we always talk about tactics and strategy, but I think this stuff is so important, which is why I wanted to do this episode today. If you want more content like this, please let us know in the comments or hit me up on Instagram or I’m @thedatadeli. Thank you all so much for listening to this episode of the BiggerPockets podcast. I’m Dave Meyer. I’ll see you next time.

Starter homes have become nonstarter homes for many Americans. Three-quarters of the homes currently listed for sale are out of reach for median-income earners, according to a recent analysis from Bankrate. 

The lack of buyers, however, is reshaping the investment landscape for small investors, who are buying up single-family homes in record numbers.

Affordability Is Slipping Away

Using the metric that standard housing costs should not exceed 30% of gross income (before taxes), according to Bankrate, the typical U.S. household earns around $80,000 per year, but would need to make around $113,000 to afford a median-priced house. This, according to brokerage Redfin, is about $440,000, a figure that varies markedly by city. With mortgage rates just above 6%, affordability is pushing buyers out of the market.

“The people who you know are finding homeownership to be easier either have higher income, or they have family members who can help,” Chen Zhao, head of economics research at Redfin, told Bankrate. “There are also those who bought a home before 2022. If you were part of that group, you got pretty lucky.”

According to the National Association of Realtors, only 24% of housing sales in 2024 were by first-time homebuyers. In 2010, the number was 50%.

“Only a sliver of the housing market is affordable to the typical household,” Bankrate data analyst Alex Gailey told CBS News. “That’s when homeownership starts to feel less like a common middle-class milestone and more like a luxury.”

Behind the affordability issue lies a severe lack of supply, which, according to investment bank Goldman Sachs, is short by around 3 million to 4 million homes beyond normal construction.

A Renter Nation Mindset

The affordability issue has been prevalent for the past three years, since interest rates first started to climb. Now, the renter nation mindset appears baked into many who have given up on owning a home. 

According to a study by Northwestern and the University of Chicago, Americans who were born in the 1990s “will reach retirement with a homeownership rate roughly 9.6 percentage points lower than that of their parents’ generation.”

A Pew Research Center analysis examined where younger Americans, aged 25 to 34, still lived with their parents in 2023. Unsurprisingly, expensive cities in Texas, Florida, and California showed the highest percentage of young adults living at home, with young men more likely to do so than young women.

Luxury Condos Aren’t Helping

Although adding new housing has alleviated the supply issue in some areas, particularly the Sunbelt, many of these new condos are too expensive for first-time homebuyers, who can do without a slew of amenities and luxury finishes that push the units out of the “starter home” price range.

The Renter Sweet Spot

For landlords to appeal to the vast swathe of renters unable to get on to the property ladder, they must speak directly to their wallets. 

In 2024, USAFacts estimated that the U.S. renter household paid a median of about $1,490 per month in rent, which equaled 32.8% of median renter income, though these figures varied by location. Mortgage trade publication Scotsman Guide, citing the Census Bureau, said that over half of all renter households (50.3%) are burdened by housing costs and spend over 30% of gross income on housing.

To work out how much a prospective tenant can reasonably afford, the simple rule of thumb for landlords is to multiply their gross monthly income by 0.3%. So if they earn $5,000 (before deductions), they should be able to afford around $1,500 in rent. For many landlords who ignore what prospective tenants can afford, the rude awakening of a vacant apartment, followed by a drop in rent, is a reality in many cities.

“Rent continues to fall in many of the major metros across the United States for a variety of reasons,” Joel Berner, a senior economist at Realtor.com, said. “The biggest one is that rent is still correcting itself from the dramatic run-up of 2021 and 2022, when several years’ worth of rent gains were seen over the span of a few months.”

Renting Is Still Cheaper Than Buying

Even if prospective tenants could afford the down payment to buy a home, renting is still cheaper than buying. Realtor.com quotes a median mortgage payment of $2,040 versus $1,693 for rent. Only a sizable drop in interest rates and greater supply will bring about some parity.

For minimum-wage earners, the situation is even more dire, with just five of the top 50 metros being affordable for those earning minimum wage. Escalating rents have not, for the most part, been due to small mom-and-pop landlords, who own the majority of rental housing in the U.S., but rather to corporate landlords.

Rents Are Down

“The corporate landlord invasion or the financialization of rental housing is the most significant factor fueling these rental housing challenges,” Dr. David Jaffee, professor of sociology at the University of North Florida and founder of Jax Tenants Union, told Realtor.com of his local market in Jacksonville, Florida. 

“Add on the rising cost of the other basic necessities, and workers will still be falling behind,” adds Jaffee. “At best, rents will stabilize at their already inflated levels.”

Overall, rents are down. Apartment List says the national median rent dropped 1% in November to $1,367, around $300 less than Realtor.com’s present-day figure, marking the fourth consecutive month of decline.

“That 18-to-34-year-old group … I think it’s up to 32.5% of those now are living with family, and that’s the highest it’s been in a while,” Grant Montgomery, CoStar’s national director of multifamily analytics, told CNBC. “I think it reflects high rental costs that have risen over the years, as well as the tougher job market for young folks just coming out of college.”

Strategies for Investors to Find Deals and Increase Cash Flow

For smaller landlords to compete with Wall Street for investments, the key is to be nimble, think outside the box, and act fast. 

These are a few strategies to employ. Some of these techniques have been around for a while and have run aground amid the inventory drop, but many buyers are still finding some success:

• Look to off-market deal flow: Run direct-to-seller campaigns (letters, SMS, door knocking) targeting absentee owners, older landlords, and properties with liens or code issues that are not yet on the MLS.
• Use data tools like PropStream to build lists.
• Work with specialized agents and wholesalers to find distressed or hard-to-sell homes.
• Use creative financing: Sellers of hard-to-sell properties may be willing to entertain seller-financing terms if it helps move their problem properties. Consider subject-to and conventional note-holding deals.
• Add ADUs to single-family homes: ADUs have been a game-changer for many people, allowing them to earn more income without altering the structure of an existing home. The good news is that Fannie Mae has broadened its financing options for single-family homeowners who wish to add an ADU.
• Other options to increase income include converting basements, attics, or garages into existing buildings, or renting by the room, so long as it adheres to code.

Final Thoughts

There’s no getting around the supply issue, but not every young adult has a parent they can stay with, and neither, for that matter, does an older adult always have a place they can afford.

Being a successful landlord in the current cash-squeezed environment means knowing how to compromise on rents by buying under-market, adding sweat equity, or adding additional units for minimal cost. The government is also bending over backwards to bring more housing to the market and has a number of different loan products worth investigating.

The best strategy is to live to fight another day and weather the current affordability storm, while making the most of tax advantages, equity appreciation, and loan paydown.

Dave:
Hey friends, it’s Dave Meyer, host of the BiggerPockets Podcast. I hope you are all enjoying the holiday season. To close out the air here on the BiggerPockets podcast, we’re republishing a few of our most popular episodes this year from across the entire BiggerPockets Podcast network. Today, it’s an episode of On The Market originally published back on October 30th. This show is me breaking down Zillow’s 2026 Metro level price forecast. So if you are curious whether Zillow thinks prices are going to go up or go down in your region of the country, or maybe you’re looking for a new market to invest in, or maybe you just want to nerd out with me because you love looking at which cities are trending up and down, the next 30 minutes has all of that. So enjoy and I’ll be back with fresh new episodes starting January 2nd.
Hey, everyone. Welcome to On the Market. Thank you all so much for being here. I’m Dave Meyer, and today sort of going back to my roots, this is one of my favorite things to study and talk about real estate markets. We’re going to talk about the regional trends that we’re seeing, the opportunities to be had, and the risks you probably want to avoid. You might already know this, but there isn’t really such thing as “the real estate market.” On the show, we cover the national market a lot because it’s helpful to understand some big macro trends, but what really matters most to your actual portfolios, to the profits that you’re actually generating is what’s happening on the ground in your local market. And of course, we cannot cover every market in the US and today’s show alone, but in this episode, we are going to do a deep dive into housing prices into different regions, different states, different cities across the US, and help interpret what it all means.
We’ll start with just talking about what has been going on in 2025 and what we know about regional markets as of today in October 2025. Then we’re going to talk about this sort of interesting and fascinating paradox that’s going on in the investing climate right now. Next, we’ll talk about rent growth and how regional variances there should factor into your investing decisions. Then we’ll even talk about forecast because we just got brand new forecast showing where prices are likely to go by city across the US into 2026. And lastly, I’ll just go over my thesis about markets in general and just remind people what I recommend you do about all the information that we’re going to be sharing in today’s episode. Let’s do it. We’re going to start with the big picture. You’ve heard this on the show a lot recently, but everything is slowing down.
That’s what’s happening on a national level. Of course, we’ve seen regional differences across the years, but the main thing I want everyone to know is even the markets that have been growing the last couple of years, these are your Northeast, your Midwest, places like Milwaukee and Detroit and all across Western New York and Connecticut. They are still up year over year in nominal terms, but their growth rate, which is something we’re going to talk about a lot today, is slowing down. And in case you’re not familiar with the difference, when I say the growth rate is going down is that maybe last year Milwaukee was up 7% year over year and now it’s up 3% year over year. So still positive growth, but the amount of growth is less and the trend continues to go down. That is the big broad trend that we’re seeing pretty much everywhere in the United States.
And just to hammer home this point, I want to show that in previous years, well, obviously during the pandemic, we saw places with 10, 15% year over year growth. That’s not normal. Actually, normal appreciation in the housing market is about 3.5%. And so what we’re seeing now is the hottest markets are now at normal. For example, I call that Milwaukee. That’s been a really hot market the last couple of years. That’s now at 3.2%. Detroit’s at 3.7, Rochester, New York at 3.2, Hartford, Connecticut, which has been on fire at 4.2%. So I’m not saying that there’s no pockets of higher growth. I’m just showing that these years of abnormally high growth appear to be over in almost every market in the United States. There are obviously smaller markets, but I’m talking about big major metro areas and almost all of those are now at normal or below average for growth.
And as we’ve talked about in recent episodes where we talked about the difference between nominal, not inflation adjusted prices and real prices, we are also seeing that almost every market is negative in terms of real prices. Inflation right now is 3%. And so any market where prices are up less than 3% nominally, you could argue is actually down because it’s not growing as fast as the pace of inflation. So that’s where we’re at right now with the hot markets, but obviously there’s the other end of the spectrum too. And I hate to pick on Florida, but when you look at what is going on with Florida, it really is getting pretty bad. I am pretty measured, I feel like about these things. I have not called for a crash the last four years like everyone else has, but what’s going on in Florida specifically is getting to that territory in some areas.
You see in Punta Gorda, for example, it’s down 13% in just a year. Cape Coral is down 10% in just a year. And we’ll talk about forecasts in just a little bit, but they’re not forecast to get better. And when I’m looking at a map right now as I talk, it’s from Zillow. It just shows basically what’s happened year over year in all these markets. And a lot of states are a mixed bag. Even states like Texas, which has a lot of declining markets, a lot of them are just kind of flat. And there are still some markets that are positive. There are pockets of good. That’s not happening in Florida. Florida has been just hit by so many different things, whether it’s the oversupply issue, the insurance cost issue, the special assessments going on with condos there, the overbuilding issue. There’s just so much going on there that I think it would be safe to say that Florida is on a statewide sort of crash watch.
It’s not there yet, but I think there is a decent chance that we will see double-digit losses across the state of Florida from the peak of where they were to the bottom where they will eventually bottom out, but I don’t think we’re close to that right now. Other areas of weakness, like I said, are Texas and really along the Gulf Coast with Louisiana seeing pretty weak areas too. Arizona has also been struggling. And then on the West Coast, it’s kind of just all flat. There are some markets in California that definitely aren’t doing well. There’s some that are mildly up. Same thing’s going on with Oregon, same things going on with Washington, Idaho. All along there, you’re kind of seeing just a mixed flag of mostly flat stuff. I want to also just talk quickly about a recent report that I saw from realtor.com talking about the hottest markets in the US because realtor.com, they can look at this stuff in real time, which properties are getting the most listings, have the shortest inventory, shortest days on market.
And so they put out this report for the hottest markets in the US. And I want you all to think about what the common thread is while I read off a couple of these things and we’ll talk about it. Number one, Springfield, Massachusetts, then we have Hartford. So again, Hartford hottest growth last year, still really hot. Kenosha, Wisconsin, Lancaster, Pennsylvania, Appleton, Wisconsin, Wassaw, Wisconsin, Racine, Wisconsin, Rockford, Illinois, Beloit, Wisconsin, Green Bay, Wisconsin, all in the top 10. Then we have a couple others. I’m not going to read them all, but in the Northeast, like Manchester, New Hampshire, Providence, Rhode Island, Worcester, Massachusetts, Milwaukee, all of this. So what do you notice about these markets? Well, yeah, a lot of them are in Wisconsin. Wisconsin is on fire right now. But what I notice here and has been my thesis about the housing market for, God, years now, is affordability.
All of these markets, all of the markets that are still doing well, that are still hot, are relatively affordable. Meaning the people who live in that market can afford to buy homes. It’s not like you need inbound migration or you need massive amounts of job growth right now. It’s just that regular people who are gainfully employed in this market can go out and buy a home. Those are the markets that are doing well, and I believe it’s the markets that are going to continue to do well. And you might be thinking, wow, the Northeast is very unaffordable. Why are you calling those markets affordable? It’s all relative because even with a generally expensive region like New England or the Northeast, there are more affordable options that are hot right now. For example, New Haven, Hartford, Connecticut, New London, Connecticut. All these places in Connecticut, why are they so hot right now?
Well, they’re directly between Boston, an enormous economic hub that is very expensive, and New York City, an enormous economic hub that is very expensive. So if you’re looking to live in this region and maybe you only have to go into the office a couple of days a week, Connecticut is looking like a very attractive option because it is relatively far more affordable than these other options in the Northeast. That’s why I say it’s all about affordability. Providence, Rhode Island been a very, very hot market the last couple of years, same with Worcester, Massachusetts. And yeah, the median home price in those markets is way above the national average at $550,000, but it’s not Boston where the median home price is over $800,000. So to me, what’s happening is it’s all about relative affordability. And this is a really important takeaway because people say things like, “You can’t invest in the Northeast or California or Washington state.” Well, clearly there are pockets of places that are growing.
And I am not saying that affordable markets are going to be completely insulated from the correction that we’re in because I believe a lot of these markets are going to decline, but affordable places in my mind are going to see the least dramatic dips in the coming years. So look at Austin. That is an awesome market, but it got way more expensive for the average person who lives there over the last couple of years, combined that with supply issues and you see a big correction. Same thing went out in Boise, same thing going on in Las Vegas. And actually that brings us to the next thing I wanted to talk about, which is the other side of the coin. We just talked about the top 20 or so markets that are the hottest right now. What about the coolest? Or if you want to frame it in positive terms, you could call it the strongest buyer’s market in the United States right now.
Number one, I didn’t even plan this, but is Austin, Texas, shocking, shocking, where you are in a place where sellers outnumber buyers by 130%. This is wild. Think about this. So this is a report that came out from Redfin and it shows that right now in Austin, there are 17,403 sellers right now. How many buyers are there?
7,568. That’s a difference of nearly 10,000 buyers. There are 10,000 buyers missing in Austin right now. So if you want to just peek ahead to what we’re going to talk about soon about where these prices are going, in a market like that, they’re going down. See similar things in Fort Lauderdale where it’s 118%, West Palm Beach, Miami, Nashville, San Antonio, Dallas, Jacksonville, Las Vegas, and Houston. Those are the top 10. So pretty much all in Texas and Florida. You also have Nashville and Las Vegas thrown in there, but those of the biggest markets in the country are seeing the biggest imbalances right now, which means buyers have the most power, but prices are also likely to drop. And this situation actually brings up this kind of interesting paradox that’s going on in real estate right now where there are some really good markets that are in deep corrections.
So does that make that a really good opportunity or a lot of risk? We’ll get into that right after this break. Stay with us. This week’s bigger news is brought to you by the Fundrise Flagship Fund. Invest in private market real estate with the Fundrise Flagship Fund. Check out fundrise.com/pockets to learn more. The Cashflow Roadshow is back. Me, Henry, and other BiggerPockets personalities are coming to the Texas area from January 13th to 16th. We’re going to be in Dallas. We’re going to be in Austin. We’re going to Houston and we have a whole slate of events. We’re definitely going to have meetups. We’re doing our first ever live podcast recording of the BiggerPockets Podcast. And we’re also doing our first ever one-day workshop where Henry and I and other experts are going to be giving you hands-on advice on your personalized strategy. So if you want to join us, which I hope you will, go to biggerpockets.com/texas.
You can get all the information and tickets there.
Welcome back to On The Market. I’m Dave Meyer going over some regional trends that we’re seeing in the housing market right now. Before the break, we talked about what’s been going on with prices. We talked about some of the hottest markets mostly in the Northeast and in Wisconsin specifically. We talked about the coolest markets, which are mostly in Florida and Texas. We had Vegas and Nashville on top of that. But I wanted to talk about this a little bit more because I think there’s this interesting paradox that’s been going on for a couple of years, and I think it’s just going to get more dramatic, which is that some of the markets that are experiencing the biggest corrections and are likely to go into further corrections are markets with pretty good long-term fundamentals. Austin, Texas, it gets picked on a lot because it’s been beat up for three years right now, but there’s still a lot of good stuff going on in Austin.
It’s still a very desirable place to live. It has good job growth. It’s the state capital. There’s a giant university. There are a lot of things to like about the Austin market. The same thing goes with Nashville, right? That’s been one of the hottest, most popular cities in the country. Dallas has a lot of great fundamentals. And the list goes on. I invest in Denver. It’s not on this top 10 list, but the same thing is absolutely going on in Denver where prices are going down a little bit. Rents are even going down in Denver, but it’s a city with really good long-term fundamentals. And so this is something I just think that you should consider as an investor. I’ll talk about this a little bit more at the end when I talk about what to do about this. But if you are an investor who is willing to take risk and wants to take a big swing, you’re going to be able to buy good deals in these markets.
Good deals are coming in Austin. They’re coming in Nashville. They’re coming in Dallas. I can tell you that. If you are looking at a market like Dallas where there’s 32,000 sellers and only 16,000 buyers, you’re going to be able to negotiate because for every single buyer, there’s two homes. So there is going to be tons of opportunity to negotiate. Now, of course, you’re going to have to protect yourself and you do need to take a long-term mindset because we don’t know when these markets are going to bottom out. But I do think this situation is going to become even more dramatic where I’m going to borrow word from the stock market, but some of these markets might become what you would call oversold. The supply and demand dynamics just shift in a way where prices go down probably more than they should. A lot of these markets do need to come down in terms of affordability, but I think you’re going to be able to find good deals in these markets in the next couple of years if you are willing to take on a little bit of extra risk to realize what will potentially be some outsized gains in the future.
Now, I want to turn our attention now to some forecasts for what is likely to happen over the next year because Zillow actually just put out their forecast for metro price changes between September 2025, September 2026. And I know people like to hate on zestimates, but Zillow’s been pretty good about this. They’ve been pretty accurate about their aggregate macro level forecasts, and it’s something I definitely look at. And what they’re forecasting is a lot more of a mixed bag. So we are going to see the Northeast and the Midwest that have been pretty good, still be pretty good. They’re probably still going to lead the country regionally, but it’s going to come a lot closer to flat in the next year. And they’re also forecasting that even the markets that are down, Austin, for example, they’re also going to come closer to flat. Just as an example, Zillow believes that the fastest growing market over the next year will be Atlantic City, New Jersey with 5% growth.
We have Rockford, Illinois and Concord, New Hampshire at 5%, Knoxville, Tennessee at 5%, Saginaw, Michigan at 5%. Fayetteville, Arkansas, shout out to Henry at 4.8%, Hilton Head, Connecticut, and then more places in Connecticut, but we’re getting some other places towards the bottom of the list. Jacksonville, North Carolina. We’re seeing Morristown, Tennessee. So a lot of places in the Northeast. They’re projecting that the Midwest cools down a little bit, but the Carolinas and Tennessee, which have been really strong for the last decade, but a little weak in the last year starting to rebound. Meanwhile, if you look at what they’re forecasting for the lowest performing markets, it doesn’t look good for Louisiana. The bottom five markets are all forecasted to be in Louisiana, Huma, Lake Charles, Lafayette, New Orleans, Shreveport. You skip a couple and then Alexandria, Louisiana, Monroe, Louisiana, all told seven out of the top 10 are in Louisiana.
The rest are mostly in Texas. We have Beaumont, Odessa, Corpus Christi. Then we see San Francisco, California, Chico, California, Punta Gorda, Florida. Mostly what they’re projecting is a year of more flatness. They’re not projecting most markets to go down by more than one or 2%. The majority of markets in Zillow’s forecast are between negative 2% and plus 2%. So that’s where Zillow thinks we’re going in. Most other forecasters don’t put out monthly forecasts like Zillow. That’s why I like this is they are just constantly looking at new data, taking it in and updating their forecast, whereas a lot of the other companies put this out annually. And so we will get a lot more forecast towards the end of the year, but this is the most recent one we have. And I do think it’s pretty reasonable. Obviously, they’re not going to be right about everything, but I think they’re generally in the right direction based on the other data that I’ve been tracking, inventory levels, housing dynamic levels across the country.
I think they’ve done a good job here. All right, we got to take one more quick break, but when we come back, we’re looking at rents and how that factors into the equation, regional differences there. And we’ll talk about what you should do about all this and how you should be making investing decisions based on this information. We’ll be right back.
Welcome back to On The Market. I’m Dave Meyer going over regional data that we’re seeing in the housing market. We’ve now gone deep into prices in the US. We’ve talked about what happened over the last year, what’s happening right now in the hottest markets, biggest buyers markets. And then we looked at Zillow’s forecast for what’s likely to happen over the next year. I want to turn our attention to one more dataset before we do the whole so what of this whole thing and talk about what you should be doing about this. And that’s rent because obviously this is going to matter a great deal in your own investing decisions. What we see over the last year is largely similar regional trends. There are some differences that we are going to talk about, but if you look at where rent growth has been the hottest, it has been in the Northeast and in the Midwest.
I’m looking at a map of it right now and they’re showing they’re using a color code where anything that grew is red. It’s all red. There’s no place in the Northeast or the Midwest, maybe one place in Iowa, but the rest are all positive. Meanwhile, if you look at the place where rents are declining the most, you see Arizona and the Phoenix area is bad. The west coast of Florida, which is just getting hammered, Denver, which I alluded to before, Houston and Dallas, and in places like Georgia and in Tennessee as well. If you want the official list, the fastest year-over-year rent change, this is going to surprise you guys. You are not going to guess this because it’s not in the Northeast and it’s not in the Midwest. Fastest year over year rent growth in the country goes to San Francisco, California at 5%.
It’s interesting because prices are going down there, but rents are going up. We also see Chicago at 4%. I am always boostering Chicago. This is why 4% year over year. Other rent growth, really strong in California, Fresno and San Jose, Providence, Rhode Island, Minneapolis, Virginia Beach, Pittsburgh, New York, and Richmond, Virginia. So not huge surprises there, but I didn’t expect San Francisco and Chicago to be at the top of that list. Meanwhile, the slowest year over year rent growth, this one doesn’t surprise me at all. Number one. Sorry, Austin, but you are taking the top spot again, or I should say bottom spot because negative 6.5% year over year. My own portfolio’s feeling it with the number two spot in Denver, Colorado, negative 5%. Then we see Arizona, Phoenix, and Tucson, New Orleans, and San Antonio at negative three and a half. And we have Memphis, Orlando, and Dallas as well.
Now, I’m calling this out because I think, again, there are some really interesting dynamics here. I’ll call out my own portfolio and just admit that I am seeing rent declines in my bad apartments. Any of my units that are really great, unique properties that have a lot of value, those are renting fine. Nothing has happened to those. But for example, I was just renting a basement unit. It’s just kind of a bad unit. I’ve tried renovating it. The layout just doesn’t work, but it’s a basement and I can’t move the walls and it just kind of stinks. And the rent has fallen there from 1,900 bucks a month to 1,700 bucks a month. That’s what I was just able to lease it out for. So that’s a pretty significant decline. I could have maybe held on longer, but I didn’t want vacancy, but that’s the kind of stuff I’m seeing in my own market.
Now, that worries me about buying in Denver right now because I am not really that worried about price declines, but price declines combining with rent declines, it’s not the best, right?That’s not exactly what you want to be investing in. Now you still can find pockets where things are growing, for sure. There are going to be neighborhoods and areas for sure. But if I’m just looking on a metro level, that worries me a little bit. Meanwhile, when you look at some markets like in California or in Washington, or actually a bunch of markets in Texas, for example, or South Carolina, we’re seeing this as well. Prices are flat to falling, but rents are still going up. And this is something that I feel like is lost in all this discussion about what’s happening in the real estate market right now, is that in some of these markets, arguably in many of these markets over the next two to three years, cashflow prospects will finally be getting better after years of getting worse.
We are definitely seeing this across a lot of the country, and I think it’s a trend that is going to continue. So I really recommend as we sort of move into our next section here talking about what to do about this, looking at these things in conjunction, because again, you can invest in a market with declining rents and declining prices, but you got to get a killer deal. You have to get a smoking deal for that to work. Meanwhile, if you’re buying in a market that’s flat, which I think is going to be the majority of markets for the next few years, I think they’re going to be relatively flat. If you’re buying in a market that’s flat, but rents are going up, that’s still a good deal to me. Obviously, you still want to try and get a great deal, but if you can buy something at a good price and prices maybe don’t appreciate for a couple years, but rents are going up, I still think that has a lot of upside potential, and those are the kinds of markets and deals that I would still personally be interested in.
So that is one of my takeaways, but just a couple other takeaways before we get out of here. I personally believe affordability is going to continue to drive market divergence. This has been the thing I’ve been harping on for years, and I’m sorry if you’re tired of me saying it, but it’s still true. I will be wrong about many things, but I have been accurate about this, that affordability is going to drive market divergence, and I think this is still going to be true. And I encourage you to not just look at home prices, but look at total affordability because again, people might look at a $550,000 home in Providence, Rhode Island and say that’s not affordable, but for people who live there who make good salaries and where the tax burden isn’t as high as certain places, it is relatively more affordable. And I think this is what’s happening to Florida right now.
Prices went up, insurance went up, special assessments went up. It is expensive in Florida right now, and that is a major reason that we’re seeing those corrections there. So I would really, if you want to be a conservative investor, and if you’re worried about price declines, I really think affordability is probably one of the two best ways I would look at data to try and mitigate risk. So affordability is one, the second one I alluded to a minute ago, which is supply. You need to look at places that are not going to have massive increases in supply. The reason we’re seeing bad conditions in Florida or in Nashville or in places in Texas because they’re also overbuilt. They are having the combined issues of affordability and too much supply. That’s why they’re seeing corrections. And so if you want to find places to invest, I think looking for places that are affordable with limited supply risk is probably going to be the lowest risk potential for deals over the next couple of years.
But I want to call out that that’s not the only way to invest right now because if you’re a buy and hold investor, it really is a question of preference because with bigger risk often comes bigger reward. If you want to take more risk and pursue more reward with your own investing, now is a decent time to do it. There’s going to be risk, but can you buy something in Austin 10 or 15% off peak? Maybe. What about in California? In Florida, you might be able to buy something 20% off peak. I don’t know for sure, but those kinds of numbers are intriguing. And of course you’re going to have to set yourself up so that you have cashflow, you have sufficient reserves so that you can hold onto that for a long time, but that is not an unreasonable strategy right now. I think we’re probably going to see institutional investors that have a lot of capital start to try and do these things.
Looking at markets like Nashville that have been super hot over the last couple of years, if they could start buying those at 10%, they’ll wait three or four years till the appreciation returns. Not saying this is for everyone, but that is an option that you have as a buy and hold investor. Now, I’m not saying just go and buy in any of those markets. Don’t just buy the dip. Don’t buy in Punta Gorda, Florida right now. One of the reasons Punta Gorda is going down so much is because it doesn’t have an economic engine. It was a lot of people moving during COVID for the lifestyle, which is fine, but when that pulls back, when there’s return to office, that market got hit. Nashville, Austin, Denver, these are places with very strong job markets, right? These are places that have a high quality of life that people want to live there.
And so if you want to take these risks, look for the ones that have these strong fundamentals like the ones I mentioned, and those can be decent options for investing right now. That’s buy and hold. I think flipping is going to be risky right now, especially in correcting markets. But an interesting thing happens in flipping during corrections like this where the price of distressed C class homes go down more than A class homes. And so actually sometimes you get a widening margin, so the opportunity for flipping actually gets better. You just have to prepare for your property to sit on the market for three months or six months instead of two days or three days like we’ve seen over the last couple of years. Last thing I want to say is that I think just generally over the next few years, we’re going to be going back to more normal regional variation because we’ve seen some very, very abnormal stuff over the last couple of years.
It is not normal for all markets to be going up all the time. It is not normal for any market to be growing more than 10% year over year. It’s not normal for most markets to be up over 7% year over year. This stuff that we’ve seen over the last four or five years is not normal. I think instead what we’re going to see is a move back to sort of this traditional trade off that has almost always existed in real estate investing, which is the trade off between appreciation and cashflow. I think Midwest affordable markets are going to go back to being better for cashflow. They’ll still have slow and steady appreciation, but I’m not Sure, we’re going to see this outsized appreciation for years in the Midwest. I think if you want to sort of summarize it, I’d say the Midwest is going to be easier doubles, harder home runs.
Then you look at these other markets like the ones we’ve talked about in Austin and Denver and Vegas and Phoenix, these are markets where you could take bigger swings right now. You might hit a home run, but you could strike out. So you definitely need to mitigate risk in those markets, but I think that’s sort of what we’re going to get to. So that’s what I would prepare for. And to me, that’s good. I want that. I would love to just see a market that we could say for the next three to five years, we’re probably just going to see normal three to 4% appreciation. That would be fantastic. We’re not there yet. We’re in a correction. We don’t know when it’s going to bottom out. But my hope is that because this correction exists because affordability needs to be restored, that once we’ve been in this correction for a little while, we can get back to a normal housing market on a national level.
And to me, that also means we’re going to return to those normal regional variances where markets that have strong economic engines, strong population and household growth are going to see the appreciation, where the other markets that are still good markets are going to be more cashflow centric markets and that’s okay. And as investors, if it becomes predictable again, we can absolutely work with that. I would love to work with that. Let’s all hope that’s what we see after this correction in the next couple of years. All right, that’s what we got for you guys today on On The Market. I’m Dave Meyer. Thank you all so much for listening. If you like this show or think that your friends would benefit from knowing some of this information, please share it with them. Thanks again. We’ll see you next time.