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House flipping can make you wealthy. Everyone has seen the TV shows, podcast interviews, and the high-priced renovations, even in their own neighborhoods. But what if where you live is WAY too expensive to flip houses? The home costs are high, the labor costs are high, and underpriced, outdated homes are hard to find. Thankfully, you’re not out of luck. Today, we’re teaching you how to flip houses from a distance, even thousands of miles away!

Dominique Gunderson is currently flipping 12 houses from 2,000 miles away. Yes, it’s possible (and profitable), and Dominique has made it her full-time business. As a Los Angeles native, Dominique couldn’t afford anything in her home market, but through visiting family in New Orleans, she realized it was the perfect place to flip. So, she slowly started scaling a team that would allow her to be anywhere in the world while she ran her business.

In only her mid-twenties, she’s been able to build a team that takes care of the renovations and rehabs for her while she handles finding the deals and getting the funding. Today, she’s teaching you how to do the same: build your out-of-state team, scale the right way, and when (and how) to delegate so you don’t do all the work. She’s even breaking down her profit margins and revealing how much you can actually make flipping in affordable markets.

Dave Meyer:
Flipping 12 houses at a time while living 2000 miles away. It sounds impossible, but today’s guest is doing it right now. She’s going to tell us how she got there after starting with just a single property she bought for less than a hundred thousand. What’s up everyone? Welcome to the BiggerPockets podcast where we teach you how to achieve financial freedom through real estate. I’m Dave Meyer, head of real estate investing here at BiggerPockets. Our guest on the show today is Dominique Gunderson, an investor who focuses on flips in New Orleans but lives a location flexible lifestyle, traveling around the country in an rv. Dominique was previously on the BiggerPockets podcast back in 2022. It was episode 5 87 and at that time she was about three years into her flipping career and was already doing five or six projects at once. Super impressive at that point. But today we’re going to hear about how she’s scaled up even further. She’s doubled that volume of flips even while managing her business from across the country. We’ll also talk to her about why she’s added a rental property portfolio in addition to her already successful flipping business. This is a very fun conversation. I think you’re going to learn a lot. So let’s bring on Dominique. Dominique, welcome to the BiggerPockets podcast. Thanks so much for being here again. Appreciate it.

Dominique Gunderson:
Yeah, thanks so much for having me back. I’m really looking forward to diving into some fun topics today.

Dave Meyer:
Yeah, you have such a cool story and approach to investing. Can you just give us a little bit of background for those who haven’t heard your previous appearances on any of the BiggerPockets podcasts?

Dominique Gunderson:
Yeah, absolutely. So I got into real estate super young right out of high school. I graduated at 17 and just knew that this was what I wanted to do and so jumped right in out of high school, got my real estate license and started learning some of the basics of just sales and marketing. From there, I jumped into the investing side and did wholesaling for a little bit to get started and build some capital, and then jumped into running my own investment company in 2019. So I have been running that since then in the New Orleans market and I don’t and have never lived in that market. So my main focus is out of state flipping own some rentals out there as well, but have pretty much just been growing in scaling since 2019

Dave Meyer:
Out of state. Flipping is just a term we don’t hear very often, so I am really eager to talk to you about that because I know a lot of people who want to get into flipping are interested in doing it passively or in a less expensive market than where they live. So what led you to going from what you were doing, which was wholesaling agent to wanting to be more active of an investor, primarily focusing on flips now,

Dominique Gunderson:
I think for me, going into getting my license and starting doing the wholesaling, that was always a means to an end for me. That was to just really learn the game and build capital. But even just from a young age, being in high school and getting interested in real estate, I always knew that I wanted to run my own company. I wanted to flip houses. I wanted to own rental properties instead of just being a middleman, whether that be an agent or a wholesaler. So for me that was just a great way to get started and to learn, but the goal of that was always to fund my future operation and vision.

Dave Meyer:
So tell us how you started long distance or out of state flipping, because it almost sounds like an oxypro, not something that you could actually do.

Dominique Gunderson:
So for me, it honestly combines the best of both worlds. I love that you can pursue an active strategy where you can make a lot of quick cash and really build your overall equity and wealth, but doing it in a more passive way where you don’t have to be on the job site every day. So that’s something that I’ve learned over time after doing it and have come to really love. But honestly, it all started just almost out of necessity. I was 21 back in 2019 when I first started my own company
And I had all my experience in Los Angeles area, southern California. So it only made sense that I would just start flipping here where I had all my contacts, but it was so expensive and just felt so out of reach for me being so young knowing that I would have to be all into a deal for minimum three or 400,000 on the low end. I didn’t have that much cash saved up, and so it just felt a little overwhelming and so it was almost a necessity for me. I had to start looking what market could I afford? What market would this be feasible for me? And New Orleans was one of the only markets that I had really good trusted contacts in. Not that they were in real estate, but my dad and his wife lived in New Orleans, and so that was just the one outstate market that I said, you know what? Even though I don’t know anybody in the game out there, I know someone. I know someone who has probably called a plumber to their house or maybe knows a person down the street that’s a real estate agent or something like that. I had some little bit of edge on the building the team side just from knowing people in the area.

Dave Meyer:
That’s awesome. So when we talked a couple years ago and when you were on the show, you were doing a lot like five or six flips at a time, right?

Dominique Gunderson:
Yes, correct. How did

Dave Meyer:
You pull that off? Is it just all networking where you just have so many GCs and contractors that you can do that kind of volume?

Dominique Gunderson:
So there’s a couple different avenues to that. I mean, one is the deal finding side, right? Keeping a good steady stream of deals coming in. Then it’s also what you mentioned, the management side, having a team to actually execute those deals. So there’s a lot of components to that. A couple years ago when we chatted, I was doing probably five or six flips at a time. We’re running 12 flips right now, and so scaled up even more and something really cool happens when you start to scale, which it sounds kind of crazy, but it actually gets easier in a lot of ways because you’re in this whole different boat of it’s not just a side hustle or a hobby, it’s a full-time business. And so in every area you have to put in full-time effort. And so let’s just say on the deal finding side, you’re going to be making connections with people who know that every time they have a deal available, you will buy it.
You are always looking for deals. You have to feed your pipeline just to keep the business going. Where if you’re only doing a couple flips a year, it’s a timing thing. You can make great networking connections, but if you’re not in that time slot of a couple months, a year where you’re looking for a new deal, you’re going to have to say no. And so your contacts aren’t as strong. They can’t be because you’re not as reliable. And same with your team members. I have multiple crews, they’re always working, always working just on my jobs and I can keep them busy. And so you build that loyalty and you can create really strong teams of people that are trusted and can do your jobs over and over again and you start creating systems and processes. And so in a lot of ways, scaling up can make things a little easier as far as the systems and teams go, but obviously it takes a lot more management and there’s a lot more headaches and problems that come up. So it’s a balancing scale

Dave Meyer:
For sure. Yeah, that’s amazing. Honestly, I’m so impressed that you said that becomes easier. It sounds so difficult to me. I want to learn more about your systems, but I think that there’s probably a lot of people listening to this right now who are really interested in this idea of out of state flipping. I’m personally interested in it. If I could figure out how to do this in a reasonable way, I’d be interested. So maybe we can actually go back a little bit and just talk about what were the first steps you took and maybe you could just provide some advice for people who would consider this strategy.

Dominique Gunderson:
Sure. Yeah. I think the absolute biggest thing, whether you’re doing one flip out of state or 10 is your team, your team on the ground because you aren’t going to be there for practically any of it. You may check in every other month or something, but you have to know in every aspect between real estate agents, contractors, project managers, lenders, everything has to be in place to make sure that the process is flowing just as well when you’re there or not there. And so that was some of the first steps for me is, okay, how can I build a team of people? Who do I need on my team and how can I find them that I can trust without me being there all the time? And that is much easier said than done it sounds like. Okay, sure. Just go start networking with people and it’ll happen, which is kind of true, but it truly is.
Looking back now from where I started, it’s such a trial and error thing. You just have to know that going in that you’re not going to just find the perfect team and everything be the same from day one and you’ll just move forward seamlessly and always work with the same people. It’s just not going to happen. You always have to be networking. You always have to be looking to build and expand your team because people will maybe be good for a couple deals and then they’ll fall off or have a personal issue come up and they can’t work with you as consistently anymore. So the networking I think was one of the big places that I started attending any sort of networking groups, whether they be digital or in person that I could and just start meeting other investors, other people in the space that I could ask for referrals or I could just meet contractors. I could meet people that I’d need to work with in person at some of these networking groups. So just thinking about who I needed and how I could find them was definitely the biggest first place I had to start.

Dave Meyer:
And so how did you find them? Because for me, I can understand and sort of wrap my head around how to network with agents. We have tools in BiggerPockets for that or even network with other investors. I’ve done some out of state brewers where I’ve networked with some contractors, but those were smaller in scale and I felt that the project scope was very clear and I knew that this contractors working with had this expertise. But how do you even go about networking with GCs in another city? Were you going to New Orleans frequently?

Dominique Gunderson:
Yeah, it’s funny to say, but I think it can be simpler than you may think. It’s obviously easy in your own market because you can just meet people randomly like you said. But
I always had somewhat of a presence in New Orleans. I mean today I go there at least once every other month for five days to a week just to kind of check in and meet people face to face. So there’s always opportunities when you’re there in person, but there’s so many online groups even that you can join today. For me, I mean the Facebook groups in the local New Orleans market are really a big thing. There’s a lot of great investing groups and like you mentioned too, BiggerPockets stuff, there’s always different groups that you can kind of join and get in to just get the conversation started with people. You may not necessarily meet the contractor that you’re looking for, but you might meet someone who’s one step away from getting you to introduction. But I mean, I’ve met some of my contractors super randomly. Some of them have literally just been working at a job across the street from my property, and you just go over there and start talking to them and ask if they’re looking for more work, if you get kind of a sense of their quality of work since they’re on another job site.
I’ve had contractors literally just walk up to me and introduce themselves to me at meetup groups. It’s been just random interactions that seem to come more and more frequently. The more you open yourself up. My team is not closed. I am not one and done set. I’m always looking to network with more people.

Dave Meyer:
Yeah. Alright, we ought to take a quick break and then we’ll be back with more of my conversation with Dominique Gunderson. We’re back talking with Dominique Gunderson on the BiggerPockets Real Estate podcast. Maybe you could just tell us Dominique, a little bit more about your first deal and how you pulled that off that might help me and maybe some other people extrapolate how you did this once and then now how you’ve sort of achieved this amazing, very impressive scale of doing it, like 12 of these at a time.

Dominique Gunderson:
Yeah, absolutely. I wouldn’t say my first deal was perfect by any means. It was far from it, but a lot of people will say it’s your first deal and it’s the best one because you got started, you made the mistakes and now it leads you to go do a hundred more. So my first deal I bought on the MLS, nothing crazy or fancy about the strategy to find it paid 51,000 for the house and ended up putting in about, I think about 45,000. We were all in just under a hundred thousand for the house and only sold it for 115,000. So after realtor fees, closing costs, stuff like that. I mean hardly made anything, made a little bit of profit but not much on the deal. But again, learned invaluable lessons that I can’t put a price tag on from just getting started and doing a deal and meeting people even. I called and talked to so many different people just on the contracting side just to give me bids

Speaker 3:
And

Dominique Gunderson:
Just learn about numbers and how people are projecting scopes of work out there. And even though I didn’t use all of them, that already gave me a bunch of different sets of numbers of how to analyze rehab costs and what things are going to cost. And funny enough, even one of the contractors who gave me a bid on that first house that didn’t do the job I reconnected with later down the line and he did probably 30 flips for me thereafter.

Dave Meyer:
Wow.

Dominique Gunderson:
So you get started somewhere, you have an actual property where you’re actually doing something with it and that’s your in to start making a lot of these connections. You have something you can talk to people about that you’re actually working on. You have a property you can ask different agents to come walk and what can I list this for? You’re making relationships and same on the contracting side. So that was my first flip again so far from perfect, but it’s such a great starting point.

Dave Meyer:
That point about having something tangible to center your conversations around is so important. I’ve stumbled into that as well. Just talking to a contractor about some theoretical property or do you want to work together? I was like, yeah, of course I want to work together but not having something to point to, can you do X job? Can you do this job by this date? It really adds a sense of urgency and tangibility to a conversation that I think makes the relationship move a lot faster. So I think that’s great advice. That deal seems great, relatively cheap, buying it for 50, 60,000. Now fast forward to today when you’re doing 12 of these, can you tell us a little bit about what your average deal in this kind of market looks like

Dominique Gunderson:
Today? I’m kind of buying in two different buckets. One would be the more entry level price point, which is more similar to that deal I just described to you my first deal. And that would be anything that’s worth when it’s done 200,000 or less. And so those are a lot of the deals that I keep for rentals and do the burr strategy on because they have good cashflow numbers at that price point. Sometimes I’ll flip them if it has a really good spread. And then the other bucket of deals I’m buying are the ones that I’m more so fixing and flipping, and those are the slightly higher end ones. Some of them have a 300 K ish resale value, but more so they’re in the four to 500 K resale value where you’re purchasing it between 202 50 and putting in 80 to a hundred. So those higher end ones are more so what I’m flipping right now,

Dave Meyer:
What’s your average margin then on these kinds of deals?

Dominique Gunderson:
So the target is always 15% return on investment, so 15% of what I put into the property. Obviously sometimes you make 10, sometimes you make 2025, but target for me is always

Dave Meyer:
15. Okay, that’s quite good. And how long are these deals taking you?

Dominique Gunderson:
That’s super dependent on the market right now. I have some that still sell in your average 30 to 45 day timeline, and we’re all into the deal from start to finish in five or six months. And I have some deals right now that the market’s slow and it’s just taking several months on the market just to get an offer

Dave Meyer:
Really.

Dominique Gunderson:
And so some of those deals are taking more like eight to nine months start to finish to be done and sold.

Dave Meyer:
And has that changed your approach, I assume if you’re continuing to do them that they’re still profitable enough to the point where you’re taking on the same volume of deals as you were maybe a year or two ago, or are you trying to scale up more?

Dominique Gunderson:
I like this range. It’s a good enough scale to where you’re doing a lot of volume. You’re able to keep your teams busy and keep people loyal to you. But it’s not so big that I’m trying to do a hundred deals a year and it’s just super unmanageable and I have to make a bunch of partnerships and have W2 employees and stuff like that. So my goal isn’t to necessarily get that big, but right around this range of having 12 to 15 projects at a time, mostly on the fix and flip side and kind of keeping the best ones for long-term rental properties.

Dave Meyer:
Awesome. Wow, and that’s incredible. Congratulations on all the progress you’ve made in just a couple of years. I’m actually curious though, you said that you’re holding some rental properties. What led to that shift?

Dominique Gunderson:
I think that’s something that’s always been a goal of mine from the beginning as well, and it was more a capital and experience thing. The more deals that you’re doing and you don’t necessarily need to flip so many per year in order to just pay your bills and live off of the income, you can kind of start thinking about holding some of the better ones for longer term rentals. And so buy properties and let the tenant pay down your mortgage for 30 years, and I’m still pretty young, so for me that’s a decent strategy to be mid fifties to 60 and have a bunch of properties that are now paid off and that can be something that I retire on.

Dave Meyer:
How are you choosing which ones you’re flipping versus holding onto if you’re, it sounds like going through somewhat of a similar process, at least on the front end of the deal.

Dominique Gunderson:
I pretty much will hold any deal that does pencil as a rental. So in my market there’s a lot of deals that pencil as flips because you may not have quite enough margin in the deal to pull out all of your capital and make it a perfect burr,
But you still have a really nice profit margin for a fix and flip opportunity. Or it might be in that slightly higher end price point that I mentioned before where even if it was a perfect burr, you could pull all your cash out, it just wouldn’t rent for enough to cashflow and make any positive cash flow. So for me, any property that is in a price point where I can realistically pull out almost all of my cash or all of my cash with a cash out refinance and it’s still cash flows at least a couple hundred dollars a month, I will always keep it as a rental.

Dave Meyer:
And how are you sort of managing the capital side of that then? Is it just making it more complicated for you in terms of getting different loans and managing your inflows and outflows of cash? Because I would imagine that it’s just adding a whole layer of complexity in another sort of business line.

Dominique Gunderson:
Definitely. It’s different and has different components for sure. On the fix and flip side and even the bur side a little bit upfront, when I’m buying the properties for and renovating with cash, I pretty much exclusively use private money. So these have just been people that I’ve connected with over the years that have cash and want to invest passively. They act just like a bank, just like a normal lender, but they’re just an private individual. So I’ll use those types of loans to purchase the properties and renovate them. Then if it’s going to become a rental and hold it long-term, we put long-term financing with a 30 year mortgage, that would be the cash out refinance. Once the property is fully stabilized and rented out, we’ll put that long-term financing on the property and use the money that you get from the cash out refinance to pay off the private lender, so that way it’s just me left on the mortgage and you’re dealing more with just a institutionalized bank or lender that you’re making the mortgage payments to every month for a 30 year mortgage.

Dave Meyer:
Dominique, I want to ask you more about how you are able to scale this business with a bigger team and more systems in place. But first we need to take another quick break. Thanks for sticking with us. Here’s more of me and Dominique talking about scaling an out-of-state fix and flip business. I want to get back to some of the stuff that you talked about earlier with achieving this level of scale. You obviously talked about systems, you talked about teams, but could you tell us a little bit about the order of operations because I am curious, you can’t do everything at once. What are some of the first steps when you said I want to go from five or six deals at a time to 12 that you’re doing now, who are the people you brought on and what systems, what software, what other tools did you need to bring on in order to ramp up each subsequent deal?

Dominique Gunderson:
I will warn you with this question, I am a very simple person. I’m not one that has all the fancy softwares and systems put together and built out all these different apps and stuff that we’re using. I’m pretty simple. I keep a lot of things on spreadsheets and just simple easy tools that anybody can build and do. But from an operation standpoint, what it looks like, and this is a big mind shift that I had to make from going from five to six to 10 to 12, is you have to build out your teams. So when you’re doing maybe like five at a time, it’s actually probably more beneficial to find one great team, one great set of everything, and just feed them as much business as you can. Keep them loyal. You can probably have a contractor. The projects are going to be at different stages that can handle that much volume. Same with the real estate agent, same with the lenders, everything. You can probably find one great team and really keep them loyal and hone in on them,
But when you scale up, you just can’t. It becomes way too much and too overwhelming for just one great set of people. So you really have to shift to that mindset of like, okay, my team is built, everything’s closed to what we were talking earlier where you’re always looking to build new teams, you’re always looking to improve, who else can I start working with and how can I make my teams better? You have multiple open slots for every position, and so there’s just more opportunity to there refine and really work with the best of the best. So for me, what that looks like is I have a couple of GCs who run all my projects, so I don’t work directly with any subs, I just work with a couple of GCs who are managing everything on the ground, and that just keeps things a lot more streamlined too.
Even just on the accounting and invoicing side, I’m just getting one to three bills throughout the projects, pretty much larger chunks. They’re keeping track of receipts and buying materials and things like that. So it just keeps things really streamlined. I just have one point of contact that I can keep in touch with daily or every other day to get updates on the jobs. And each of those GCs are managing three to five different projects all the time. And then I have a project manager role at times. I’ve had two people in this role, but I think even with a larger scale, you can probably just keep one person in this role, but this is somebody who is kind of like a third party to all of the other roles. They’re not just your contractor, just your agent. They’re not specialized in one thing, they’re just doing any and all tasks that might come up on a day-to-day basis. So it might be making deliveries, it might be putting up a lockbox, it might be turning on utilities, like anything. It could be just I’m sending you to the property to get me update photos and videos so that I can keep a tab on what’s going on or clean up if it’s a vacant house that’s been listed a couple weeks, like sweep the floors and stuff like that. So it could be anything.

Dave Meyer:
Does that person work exclusively for you?

Dominique Gunderson:
No, I’ve had a few different people in this role and it’s usually been kind of part-time.

Dave Meyer:
So

Dominique Gunderson:
I’ve typically worked with people that are within the real estate space doing something else within the space, and they’re just looking for some side part-time work.

Dave Meyer:
So I guess that role seems super crucial to me because you always have a contractor who they’re on your team, but they also, they won’t run their own business. And so I feel like it’s kind of essential to have sort of a neutral party in there who works for you and can report back on the real state of things. And not that people are being dishonest, but it’s helpful to have someone who is looking at every deal through your perspective, not just hearing it filtered through the lens of an agent or a contractor who are probably trying to do the right thing, but just have their own perspective and biases.

Dominique Gunderson:
Absolutely. And yeah, just having more eyes on things is always helpful because people see different things and it’s just like a checks and balance system for keeping tabs on things. Like you said, I can’t tell you how many times we’ve done a final walkthrough with the contractor, the project’s done, it’s ready for photos, and then I send my project manager through and I get 10 more pictures of touchup things that need to be done.

Dave Meyer:
Right. Yeah.

Dominique Gunderson:
So just having the extra set of eyes is super, super important.

Dave Meyer:
So how has this changed your role in your own business?

Dominique Gunderson:
Yeah, absolutely. I think it’s in a lot of ways doing this out of state will do this to you, but as you scale up, it’ll also do this to you. You have to force yourself to be more hands off and to delegate. Even if I was on the ground, I don’t think I would spend my time doing the project manager role, for example. Those are all things I could easily do if I was on the ground, but it’s not the best use of my time. And so whether I’m on the ground or not, it’s a great role to delegate. And same with general contractors. I could, if I was on the ground, run my own projects and save money, but even if I was, I don’t think that would be the best use of my time because I have to do all these other things to keep the operation growing and scaling.
So it really helps you put into perspective just being out of state what things are really important to delegate and what things are really important for you to do. So for me, the acquisitions, that’s probably the most important, super important in any fix and flip operation where you’re making your money or if you make a mistake, it’s probably made there once you bought the do for a certain price, if you were wrong about anything, you can’t fix it. I spend a lot of my time overseeing the acquisition side of things and making sure that we’re not overlooking anything on the rehab scope projections, a RV projections, and ultimately just making the final decisions on what we’re buying. And I spend a lot of time on the capital raising part as well, making those connections with individuals who are going to lend me funds. I always have funds available to be buying more and more houses. Those are two things that I would say are really important for me to make that connection for people to know me and my face and my name to continue sending me deals and continue giving me capital.

Dave Meyer:
And do you like it? It sounds just such a big shift. You’ve had to sort of almost reinvent your own business and you’re doing so much different stuff. At least in my career, I’ve found times where that happens. I just do it out of necessity and then you kind of come back and figure out like, oh, I actually should be doing something. I enjoy more. Do you feel like you’re in a place with your business that’s sustainable and that you’re enjoying?

Dominique Gunderson:
It’s such a great question. And I toy with this a lot too because on one hand I love that I can be fully remote and running this business. That’s the greatest gift to be able to have built something that I can travel, I can do whatever I want to do all the time, be my own boss at this age, what a gift to have been able to do that. And so I love that aspect of it. But at the same time, when I do get to spend time in New Orleans and I go to the ground and I’m present, I’m like, wow, this is so cool to be here.

Dave Meyer:
Yeah, it’s fun

Dominique Gunderson:
To walk my own jobs and to see what’s going on. You really feel like you’re actually a part of it instead of just kind running this remote thing from somewhere else and not hands-on seeing it. But ultimately, I think for me, it makes my business better, I think for me to not be there, to be

Dave Meyer:
Honest. Interesting. Yeah,

Dominique Gunderson:
It does. The part that has forced me to delegate and to bring on really strong team members that are great in each individual role, I think has made my business better instead of me trying to do things that I’m ultimately not best at and then just be kind of mediocre across the board.

Dave Meyer:
I resonate so much with what you said. I understand the feeling of it making you better. When I moved abroad, I had sort of the same experience, just this forcing function where you recognize what you’re good at, you are forced to become more efficient, it does make you better. But having just moved back to the us, I love being at properties. I’m so happy being able to go check out my deals and go even deals. I’m not necessarily going to buy, just going to open houses or looking at being with other investor friends who are doing deals. It is fun to be a part of it. So Dominique, in two years, you’ve made incredible progress. Again, congratulations. What’s next for you? You’ve scaled up, you’ve doubled your volume. Are you just going to keep going or what’s next?

Dominique Gunderson:
For the foreseeable future, I see myself really trying to stack up and build more rental properties and just keep the flipping operation decently stable as far as the current volume that we’re doing. And hopefully just continuing to build relationships to getting better, more consistent deal flow, continuing to make sure that we’re on top of the renovations and we’re refining, making better design decisions so that we sell faster and how can we cut our rental budgets back. So efficiency is the overall goal, I think right now.

Dave Meyer:
Well, that’s awesome. Congratulations on scaling and we’d love to have you back in a year or two or whatever just to hear what you’re up to. This is such a cool, unique part of real estate investing that we don’t hear about very often, but you’re doing it so well. So thank you so much for coming and sharing your insights and your story with us, Dominique.

Dominique Gunderson:
Yeah, absolutely. Thanks so much for having me,

Dave Meyer:
And thank you all so much for joining us here on the BiggerPockets Podcast. We’ll see you again soon.

 

 

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Short-term rentals (STRs) have become an increasingly popular investment strategy, with platforms like Airbnb and VRBO making it easier than ever to generate income from vacation and short-stay properties. Many investors are now looking for ways to incorporate STRs into their retirement portfolios using a self-directed IRA (SDIRA).

By investing in short-term rentals with an IRA, you can take advantage of tax-deferred (or tax-free) growth while leveraging the potential for high rental income. However, this strategy comes with specific rules and considerations that investors must understand before getting started

Here’s what to know about how STRs work within an IRA, their potential benefits, and key pitfalls to avoid.

Why Consider Short-Term Rentals in an IRA?

Short-term rentals can enable you to receive higher nightly rental rates compared to long-term rentals. For investors using a self-directed IRA, STRs can provide a way to diversify their retirement portfolios beyond traditional stocks and bonds.

Potential benefits of investing in STRs with a self-directed IRA include:

  • Higher income potential: STRs have the potential to generate higher returns per night than long-term rentals, especially in high-demand locations.
  • Tax-advantaged growth: Income generated within an IRA grows tax-deferred (traditional IRA) or tax-free (Roth IRA), helping you maximize long-term wealth.
  • Portfolio diversification: Real estate can provide a hedge against market volatility and inflation.
  • Flexible investment strategy: Depending on location and demand, STRs can offer seasonal income surges and dynamic pricing advantages.

How It Works: Buying an Airbnb/VRBO in an SDIRA

Purchasing a short-term rental through a self-directed IRA follows a structured process to ensure compliance with IRS regulations. Here’s how it works.

Step 1: Open and fund a self-directed IRA

To invest in STRs, you must first establish an IRA with a custodian that allows real estate investments, such as Equity Trust Company. You can fund your self-directed IRA through rollovers, transfers, or new contributions.

Step 2: Identify a short-term rental property

Choose a property in a desirable location with strong short-term rental demand. Popular areas include vacation hot spots, urban centers, and event-driven locations.

Step 3: Purchase the property through the SDIRA

The IRA—not you personally—must be the buyer of the property. All purchase transactions must be completed using IRA funds, and the property title must reflect IRA ownership.

Step 4: Hire a third-party property manager

IRS rules prohibit self-dealing, meaning you cannot personally manage or perform maintenance on the property. A qualified third-party property management company must handle bookings, maintenance, and other operational tasks.

Step 5: Ensure all expenses and income flow through the IRA

All property-related expenses (maintenance, taxes, repairs, insurance) must be paid using IRA funds. Likewise, all rental income must go back into the IRA, maintaining tax-deferred or tax-free growth.

Key Considerations & IRS Rules

While investing in STRs through a self-directed IRA has potential advantages, there are essential rules and tax considerations to be aware of.

1. No personal use of the property

IRS regulations prohibit IRA owners and their immediate family members from staying in or personally benefiting from an IRA-owned property. Any personal use of the STR will be considered a prohibited transaction, potentially disqualifying the IRA and triggering taxes and penalties.

2. Expenses must be paid from the IRA

You cannot personally cover maintenance, repairs, or management fees for an IRA-owned property. All expenses must be paid directly from the IRA’s funds to maintain compliance.

3. Unrelated Business Income Tax (UBIT) considerations

If the SDIRA-financed property uses a non-recourse loan, rental income may be subject to Unrelated Business Income Tax (UBIT). This tax applies when IRA investments generate income through leveraged financing, potentially reducing overall returns. Investors should consult a tax professional to understand UBIT implications.

4. Research short-term rental regulations

Some cities and HOAs have strict rules regarding STRs, including permit requirements, rental restrictions, and taxation policies. Always check local regulations before purchasing a property to ensure compliance.

Learn More About Real Estate in an IRA

Investing in short-term rentals through an SDIRA can provide benefits, including tax advantages. However, it’s crucial to understand the IRS rules and regulations to avoid penalties and maximize returns. Working with a custodian with extensive experience in self-directed real estate investing, like Equity Trust, can make the process much smoother. 

If you’re ready to explore how STRs fit into your retirement strategy, connect with an Equity Trust IRA Counselor today.

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

Equity Doc Prep, LLC (formerly Midland Forms, LLC) is a document preparation company and is not authorized to advise you as to which documents you should use or may need; such advice would be considered the “practice of law.” Please consult your legal or financial advisor before making any financial decisions. Under the guidelines for legal document preparation services, you must make all legal decisions yourself—including decisions about the type of documents you need.

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



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Immigration is a particularly contentious issue these days. It came in second amongst Republicans and fifth overall as the most important issue for voters in the 2024 election. (Unsurprisingly, the economy came in first.)

Immigration itself, however, is a broad term and can really be split into (at least) three subgroups: high-skilled immigration, low-skilled immigration, and illegal immigration.

The United States issues about 1 million green cards (legal permanent residence) per year. In 2022, there were 12.7 million lawful permanent residents in the United States, of which about 1 million are granted citizenship each year (after an arduous process). Currently, the foreign-born population in the United States stands at a record, both in terms of the number (51.5 million) and percent of the population (15.6%), with both of those numbers expected to increase in the years to come.

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Center for Immigration Studies

Regarding illegal immigration, the population has moved substantially to the right on this issue over the past few years, with one New York Times poll finding that 55% of voters support “deporting all immigrants who are here illegally.” This includes 32% of Democrats, by the way. Such a policy was once considered extreme, but given the chaos on the southern border in 2022 and 2023, opinions shifted quite dramatically.

This is true even for legal immigration. According to Gallup, in 2021, there was virtual parity between those who wanted to increase immigration and those who wanted to decrease immigration. In June 2024, 55% wanted immigration reduced, versus only 16% who wanted it increased. 

Of course, such a policy would have an enormous effect on the economy. The usually quoted number of 11 million illegal immigrants is almost certainly too low. Indeed, that’s the same number that has been given since the early 2000s! A 2018 Yale study used mathematical models of various demographic data to estimate that there were 22.1 million immigrants living in the country illegally at that time. 

Between 2022 and 2023, the number of migrants illegally crossing the southern border skyrocketed. There were an unprecedented 7.2 million encounters at the southern border, with 1.8 million known and likely millions of unknown “gotaways.” Indeed, it got so bad that even liberal bastions such as New York were complaining about being unable to handle the influx

The Congressional Budget Office concluded that “the net immigration of other foreign nationals exceeds that rate by a total of 8.7 million people over the 2021-2026 period.” Thus, in all likelihood, there are somewhere between 25 million and 30 million people living in the United States illegally. 

Deporting at least 5% and possibly almost 10% of your population would be incredibly difficult, prone to abuse, and would almost certainly throw the United States into a recession. (Although it should be noted that the Dominican Republic did something like this in 2024 without much media attention.) Of course, in contrast to the acute problems such deportations would cause the economy, such large levels of illegal immigration can create chronic economic problems, which will be discussed, along with the benefits and costs of legal migration, particularly for the real estate industry.

First, however, we should address Donald Trump’s policies regarding immigration. It will likely aggravate those on both sides of the aisle to say so, but it’s quite clear that most of what Trump’s administration has done thus far is merely theatrical. 

Trump’s Mostly Rhetorical Immigration Crackdown

Dr. Phil tagging along for a televised ICE raid might make for an entertaining (or disturbing?) video, but it’s hardly emblematic of what is currently happening. No, the deep state is not being rooted out, nor is a fascist government being erected. But the 24/7 news cycle is certainly being filled.

In fact—contrary to a fake chart claiming that the daily encounters of migrants at the border were somehow negative—the Trump administration is on pace to deport fewer people in 2025 than the Biden administration did in 2024. The incredible surge happened in 2022 and 2023. In 2024, Biden tightened up border security, which has continued into 2025 under Trump.

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Axios

In fact, ICE has apparently marked almost every press release of a major immigration raid as “Updated: 01/24/2025,” making any Google search look, depending on your perspective, as if law and order has finally returned or a fascist police state has been erected, while really nothing out of the ordinary has actually taken place. 

For example, I searched “big ICE arrests,” and the second result was a press release from ICE stating, “ICE arrests more than 1,700 during largest-ever nationwide gang surge.” At the bottom, it notes the story was updated on 01/24/2025, but it actually happened on Sept. 30, 2008.

As for Trump’s flurry of executive orders, all of them on immigration have been blocked by injunctions. The most newsworthy one—ending birthright citizenship—while much more defensible than most pundits say (and what’s most common throughout the world) will almost certainly be overturned by the Supreme Court

With that out of the way, let us now look at how immigration—both legal and illegal—affects the economy in general and real estate in particular. 

Immigration and the Economy

Right off the bat, immigration’s effects on the economy are muddled by the difficulty of assessing causation. For example, when free-market economist Milton Friedman was making the case for laissez-faire, he would often say how people “vote with their feet.” In other words, people tend to move to places that are doing well economically in search of opportunities. So, countries doing well are (more likely) to seek immigrants, and migrants are more likely to want to go to such countries. 

Thus, almost by definition, countries with a lot of immigration do better economically than countries without. But what is the cause? Does the economy bring immigrants, or do immigrants improve the economy? Both, perhaps? 

More accurately, it depends—both on that country’s situation and regarding whom you are speaking of. As with most things, immigration has both winners and losers.

Ironically, the broad economic effects of immigration are contrary to the economic priorities of the parties that ostensibly want more or less immigration. Republicans tend to prioritize economic growth over equality, which liberalized immigration policies encourage. Democrats prioritize equality and poverty alleviation, which large-scale immigration undermines. (Although, of course, this has nothing to do with the desires of any individual immigrant.) 

There are certainly some exceptions. A good number of those on the libertarian right (like the Cato Institute and the Koch brothers) basically support open borders, and Bernie Sanders, at least used to be, a skeptic, calling “open borders” a “Koch brothers proposal.”

But today, Senator Sanders has moved to where most liberals are. Such liberals tend to discuss the humanitarian aspects of a more open immigration system but also note what some libertarians emphasize: the boon to GDP immigration provides. Free market economist Michael Clemens describes a highly liberalized immigration system as “trillion-dollar bills on the sidewalk”:

“For labor mobility barriers, the estimated gains are often in the range of 50%–150% of world GDP. In fact, existing estimates suggest that even small reductions in the barriers to labor mobility bring enormous gains. In the studies of Table 1, the gains from complete elimination of migration barriers are only realized with epic movements of people—at least half the population of poor countries would need to move to rich countries. But migration need not be that large in order to bring vast gains.”

There’s no doubt that people moving from low-income to high-income countries will boost the GDP of the country being immigrated to, and almost by default, the world GDP as well. However, there’s a lot wrong with this analysis. 

For one, to judge a country’s economic health, we should look at GDP per capita more than GDP in general. If both the population and GDP go up 5%, no one is any better off than before. Second, we should be looking at purchasing power parity, not just GDP. (Poor countries are cheaper to live in than rich countries). 

But more importantly, such economists tend to hold things constant, assuming immigration won’t affect the underlying dynamics of an economy and society. In his paper, Clemens notes that “more than 40% of adults in the poorest quartile of countries ‘would like to move permanently to another country.’” That is over 1 billion people. Would simply relocating them all massively increase GDP? Or would it, more likely, cause the infrastructure to collapse and break the country up into civil war? 

Such destabilizations are not unprecedented. Indeed, the Völkerwanderung of Germanic peoples into the Roman Empire is partially credited by many historians for the collapse of the (Western) Empire in 476. With a more moderate influx, we would likely just see a stress on civil services, which we have seen in multiple states. 

The dynamics of the countries being emigrated from should also be considered. The so-called “brain drain” can harm poor countries as many of their brightest move abroad.

Immigration as a poverty relief mechanism is also woefully inadequate. Roy Beck’s gumball demonstration makes this quite apparent, as even the 1 million immigrants brought into the United States is nowhere near enough to even slightly ameliorate the condition of the 3 billion people worldwide making less than $2 a day. 

The conclusion for rich countries also seems highly questionable. For example, China has seen enormous economic growth—way outpacing the United States—despite having a net immigration rate of –0.1%

image6
Wenzel America

The same comparison could be made between China and the European Union

In addition, we could look at American history, where economic growth was extremely robust during the migration boom of the mid-to-late 19th century, the lull between 1924 and 1965 when immigration was notably restricted, and afterward when it was once again liberalized.

The connection between immigration and economic growth is muddled, to say the least. However, still, most research concludes that increased immigration increases economic output

The downstream effects are more notable. A basic analysis of supply and demand would conclude that increasing the supply of something—in this case, labor—would decrease its demand and thereby put downward pressure on wages.

A common complaint from many corporate lobbies is that they “need more labor.” This is most commonly heard regarding STEM professions. But labor is (mostly) like any other good. If you want more labor, you could always raise the price, i.e., wages. Likewise, it shouldn’t be surprising to find that the supposed STEM shortage is a myth.

One could counter that immigrants also become job creators. However, such immigrants would rarely become job creators the moment they stepped off the boat. So, for any equilibrium effect on employment between immigrant employees and employers to be reached, immigration would have to stop (or be reduced) for a period of time. Anne Case and Angus Deaton reluctantly concluded this was plausible in their book Deaths of Despair, which was otherwise pro-immigration.

Indeed, most studies tend to find this effect, but only amongst low-skilled workers and only to a small degree, usually less than 1%.

image4
The Brookings Institute

However, it’s more complicated than this when you dig deeper and look at longer-term effects, particularly in industries with a large percentage of immigrant labor. It’s hard to explain various anomalies, like the fact that slaughterhouses pay 44% less today than they did in 1970, looking at the studies above. Liberal economist Paul Krugman pointed out back in 2006 that it was “intellectually dishonest” to simply say immigrations “‘do the jobs that Americans will not do.’” 

“The willingness of Americans to do a job depends on how much that job pays—and the reason some jobs pay too little to attract native-born Americans is competition from poorly paid immigrants.”

Harvard economist George Borjas’ research has found that “wage trends over the past half-century suggest that a 10% increase in the number of workers with a particular set of skills probably lowers the wage of that group by at least 3%.”

image1
George Borjas, Immigration and Economic Growth, NBER Working Papers

Overall, Borjas found that in 2015, immigration increased the nation’s wealth by $2.1 trillion. However, 98% of that went to the immigrants themselves, leaving the rest of the nation with about $50 billion above what they would have otherwise had. This sounds perfectly fine, except the problem is there was a transfer of $515 billion from native workers to their employers.

There are many reasons why productivity and wages have decoupled, and wages have been relatively flat for many years now. And immigration is by no means the biggest cause. Outsourcing has had a similar effect, and technology is probably the biggest contributor, among many other factors. But immigration has clearly contributed. 

Immigration and Society

A major problem with the immigration debate is that it lumps every immigrant together into one amorphous blob despite the many different attributes of the many different immigrants. Indeed, 148 Nobel Prize winners were immigrants to the United States, as well as the founders or parents of the founders of 46% of Fortune 500 companies. 

On the other hand, all 19 9/11 hijackers were in the country on visas of one sort or the other, and the various ethnic mafias that terrorized many cities throughout much of the 20th century came over in the wave of immigration in the late 19th and early 20th centuries. 

Another problem is that the effects of policy (say, the mess at the border between 2022 and 2023) get blamed on people, namely, the immigrants themselves, who are usually just trying to make a better life for themselves and their families, and nothing to do with whatever nonsense was going on in Washington at the time.

Immigration does open a country up to new cultures, foods, and music, adding to the mosaic of our daily lives. Unfortunately, large-scale immigration likely reduces social capital (people’s network of relationships), at least for a time. If done poorly, it can create ethnic ghettos of what amounts to parallel societies within the same area. 

We saw this in the early 20th century (e.g., Little Italy, Chinatown, etc.). These ethnic groups amalgamated into a more cohesive whole during the mid-to-late 20th century, but today, we again see significant ethnic segregation in most American municipalities. 

Fortunately, in the U.S. at least, immigrants commit substantially less crime than native-born citizens. This even includes illegal immigrants. Unfortunately, part of the reason for this is that immigrants tend to be older than the most criminally inclined cohort (men between the ages of 15 and 25). 

The median age of a green card recipient is 35 years old. What we see with second-generation Americans is that their crime rate is…almost exactly the same as the rest of Americans

The median age of an immigrant in the United States is 47 years old versus 37 for native-born Americans. While that’s not a problem in and of itself, it does mean that our already underfunded entitlement systems will be stressed further by large-scale immigration. 

Thus, while legal immigrants tend to have a positive fiscal impact (at least those with a college degree), given the age distribution of new green card recipients, immigration itself won’t help alleviate the large fiscal imbalances we already have once more start retiring. Immigrants who come to the United States unlawfully tend to have a decidedly negative fiscal impact and exacerbate it. 

Immigration and Real Estate

That said, immigration’s effects on the real estate market can—as with the economy in general—be seen in either a positive or negative light. As Lindsay Frankel wrote on BiggerPockets:

“When immigrants move into a community, the demand for housing goes up. The expanded population also supports an increase in economic activity due to more demand for local goods and services. As a result, home values rise.”

One study she cites notes, “An increase in the number of immigrants equal to 1% of an MSA’s total population was linked with a 0.8% increase in rents and a 0.8% increase in home prices.” Furthermore, “[t]his same increase in immigrants was associated with a 1.6% rise in rents and a 9.6% rise in home prices in surrounding MSAs.”

Is this good or bad? Well, it’s good for homeowners and municipalities who see their wealth and property tax receipts go up. On the other hand, it’s bad for renters and aspiring buyers who must pay more for rent and find it more difficult to buy. (It should be noted that homeownership amongst the young is the lowest it has been in many decades, with affordability the primary reason.)

Like with the economy in general, immigration tends to boost economic growth but benefits capital over labor. 

Home prices in the United States have almost doubled in the last 10 years, and indeed, this is a phenomenon that has been seen throughout Europe.

image2
European Parliament

Many European countries have taken in many immigrants in the last decade, but not all of them have. Hungary, for example, took in relatively few, yet was No. 1 in housing price increase at 172.5%. So, this is by no means a 1-to-1 correlation.

There are many reasons for these price increases (including insufficient new construction). Furthermore, something like 34% of construction workers are immigrants, which would make any large-scale deportations slow an increase in new supply that could alleviate high housing prices. 

Final Thoughts

Immigration has a lot of varying effects on an economy, good and bad. Overall, immigration has played an important role in American history, and immigrants have played a valuable role in our society. That said, there are serious costs to large-scale migration that need to be considered when making policy.

The mess at the border in 2022 and 2023 was indefensible, and the border should be secured and illegal immigration curtailed. As for legal immigration, we have experienced one of the largest movements of people in history over three consecutive generations. And now, with artificial intelligence (AI) threatening many jobs among the young and low-income (so far), we should be very concerned about an admittedly yet-to-materialize labor glut that could cause all sorts of economic pain and social problems. 

As an owner of real estate, upward pressure on prices has certainly benefited me personally. But the affordability crisis is causing widespread social harm, and addressing it in multiple ways is, in my judgment, the appropriate response. 

That being said, when it comes to immigration policy, there are many pluses and minuses to consider, and despite the heated rhetoric on both sides, rarely a simple answer. We should all do our best to remember that.

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Every year, Zillow releases its list of the top U.S. housing markets for 2025 based on projected home value growth, job trends, and buyer competition. For traditional real estate investors, these cities might seem like gold mines. But for short-term rental (STR) investors, the questions are entirely different:

  • Are STRs legal and sustainable in these cities?
  • Will demand hold strong despite regulation risks?
  • Can you actually generate positive cash flow, or will home prices eat your profits?

Many of Zillow’s picks aren’t vacation rental hot spots—they’re growing, high-demand residential markets where regulations, taxes, and competition can complicate STR investing. So, do any of them work for STRs?

How Zillow Chose These Markets

Zillow’s 2025 hottest markets were ranked based on:

  • Home value growth: Projected appreciation for 2025
  • Owner-occupied household growth: More permanent residents moving in
  • Job growth vs. new construction: Demand for housing outpacing new builds
  • Speed of home sales: Markets where homes sell the fastest

These factors signal strong home appreciation and buyer demand, which is excellent for house flippers or long-term landlords. 

However, STRs’ success relies on entirely different factors: occupancy rates, seasonality, legal restrictions, and affordability. We use data from AirDNA and Zillow (data from March 13, 2025)  to develop our ranking system and compare it to other markets.

I refer to a “regulation overview,” which links to each respective city’s online regulation information and provides my overview of how strict its regulations may be compared to those of other markets.

  • Light = STR-friendly: A simple permit is the highest regulation.
  • Moderate = Proceed with caution: You can do STRs, but it becomes more difficult with cap limits, permits, and restrictions, and it could switch at any moment.
  • Heavy = Strong opposition to STRs: Higher fees and more requirements to be allowed to operate.

Without any further ado, here’s a breakdown of Zillow’s top 10 markets and their viability as STRs.

Buffalo, NY

Market performance metrics:

  • AirDNA score: 41/100 (Low)
  • Annual revenue (AR): $29,500 (+11% YOY)
  • Average daily rate (ADR): $186.5
  • Occupancy rate: 51%
  • RevPAR: $99 (+10% YOY)
  • Active listings: 1,273 (+5% YOY)
  • Zillow median home price: $224,133 (+5.5% YOY)
  • Yield: 14.3%

Regulation overview: Moderate

Pros:

  • Potential fallback plan: Could work as a long-term rental if STR fails.
  • Tourist demand: Proximity to Niagara Falls provides some demand.
  • Affordability: Home prices are reasonable, with a solid yield of 14.3%.

Cons:

  • Seasonality: Likely impacted by colder months, reducing occupancy.
  • Regulatory hurdles: Permit requirements and registration add friction for investors.
  • Booming market: As one of Zillow’s top markets, competition is rising.

Final verdict: C+

Buffalo presents moderate STR potential due to its reasonable home prices and yield, but regulatory constraints and seasonality risks hold it back. It may work better as a hybrid STR plus mid-term rental (MTR) strategy catering to traveling professionals, nurses, or college renters.

Indianapolis, IN

Market performance metrics:

  • AirDNA market score: 83/100 (Good)
  • Annual revenue (AR): $28.7K (+12% YOY)
  • Occupancy rate: 48% (+1% YOY)
  • Average daily rate (ADR): $200.57 (+11% YOY)
  • RevPAR: $98.58 (+13% YOY)
  • Active listings: 4,026 (+22% YOY)
  • Zillow median home price: $222,887 (+3.6% YOY)

Regulation overview: High

Pros:

  • High investability AirDNA score (77): Strong market fundamentals for real estate investment. This metric compares the cost of homes using Zillow home value data to the average income of full-time short-term rentals on Airbnb and Vrbo.
  • Revenue growth (92): One of the highest-growing revenue markets. We calculate this by looking at the change in year-over-year RevPAR for properties that received bookings in both periods.
  • ADR increase (+11% YOY): Daily rates are rising, suggesting more substantial host pricing power.

Cons:

  • Oversaturation risk: Listings grew 22% YOY, meaning competition could outpace demand.
  • Tourism drawbacks: No standout tourist attractions that drive year-round demand unless you are a race car enthusiast.

Final verdict: C-

Indianapolis has strong investment fundamentals and revenue growth, but strong listing growth and weak tourism appeal make STRs a high-risk play. The market could become oversaturated, making occupancy and pricing volatile. This market is best suited for mid-term rentals (MTRs) targeting traveling professionals, sports events, and conventions.

Providence, RI 

Market performance metrics:

  • AirDNA market score: 21/100 (Weak)
  • Annual revenue (AR): $47.4K (+5% YOY)
  • Occupancy rate: 59%
  • Average daily rate (ADR): $314.50 (-1% YOY)
  • RevPAR: $189.69 (+3% YOY)
  • Active listings: 2,016 (+4% YOY)
  • Zillow median home price: $403,947 (+6.3% YOY)
  • Regulation overview: High restrictions and zoning limitations

Regulation overview: Moderate to high

Pros:

  • High revenue potential: One of the highest ADRs in this ranking ($314.50) and solid annual revenue ($47.4K).
  • Growing rental demand: Occupancy rates are higher than many other cities on this list.

Cons:

  • High home prices: The median home price of $403K makes generating strong STR cash flow difficult.
  • Regulatory barriers: Strict owner-occupancy rules and zoning limits on multifamily STRs.
  • Seasonality and competition: Demand fluctuates outside of summer and academic seasons, making year-round bookings inconsistent.

Final verdict: D+

Providence offers strong revenue potential for the right property type, but the high cost of entry, regulatory complexity, and seasonal fluctuations make it a risky STR investment. Investors would need a waterfront or luxury listing in a prime location to make STRs viable here. For most, the barriers to entry and inconsistent demand make this a weak STR market. Mid-term rentals (MTRs) targeting college students, professors, or corporate travelers may be a better option in this area.

Hartford, CT

Market performance metrics:

  • AirDNA market score: 90/100 (Strong)
  • Annual revenue (AR): $26.5K (+10% YOY)
  • Occupancy rate: 55% (+6% YOY)
  • Average daily rate (ADR): $166.64 (+3% YOY)
  • RevPAR: $93.76 (+9% YOY)
  • Active listings: 939 (+17% YOY)
  • Zillow median home price: $179,170 (+8.2% YOY)
  • Yield: 14.7% (Good)

Regulation overview: High

Pros:

  • High AirDNA market score (90): Indicates strong demand, revenue growth, and investment potential.
  • Low home prices: Compared to other STR markets, leading to solid cash flow potential.
  • Annual revenue: For a low-cost market, it checks out, and the 14.7% yield is a strong return on investment.

Cons:

  • Listings increase: At 17% year over year, this could signal oversaturation in the near future.
  • Regulatory tightening: STRs will become more expensive, especially with licensing fees, zoning permits, and insurance requirements.

Final Verdict: C+

Hartford offers decent STR cash flow, strong appreciation potential, and a growing rental market, but incoming regulations could make it more costly and challenging to operate legally. Investors must be diligent about zoning, permits, and compliance to avoid fines or operational shutdowns. 

Given the rising competition and the potential for more restrictions, investors should carefully weigh long-term STR viability before entering the market. Mid-term rentals (MTRs) catering to professionals, traveling nurses, and students may be a safer, more stable option in this market.

Philadelphia, PA 

Market performance metrics:

  • AirDNA market score: 70/100 (Moderate)
  • Annual revenue (AR): $28.6K (+15% YOY)
  • Occupancy rate: 54% (+6% YOY)
  • Average daily rate (ADR): $172.70 (+9% YOY)
  • RevPAR: $95.29 (+16% YOY)
  • Active listings: 6,747 (+3% YOY)
  • Zillow median home price: $218,590 (+3.9% YOY)
  • Yield: 13.2% (Decent)

Regulation overview: Moderate to high

Pros:

  • Above-average tourism demand: Consistent year-round bookings driven by history, sports, business travel, and significant events.
  • Strong revenue growth: Annual revenue is up 15% yearly, and RevPAR is increasing by 16%.

Cons:

  • 6,747 active listings: Up 3% YOY, making it harder for new hosts to stand out.
  • Complicated permit process: Multiple licenses and zoning approvals.

Final Verdict: C+

Philadelphia’s short-term rental market offers strong revenue potential but comes with heavy competition, strict regulations, and tax burdens. Unique, high-end, and experience-driven properties have the best chance of success, while average listings struggle to stand out.

Investors looking at Philadelphia must be prepared to navigate zoning, permits, and compliance hurdles. The hotel tax and city enforcement of regulations add costs and risks, making this a better market for premium STRs or mid-term rentals (MTRs) catering to business travelers, medical professionals, and long-term tourists.

St. Louis, MO

Market performance metrics:

  • AirDNA market score: 71/100 (Moderate)
  • Annual revenue (AR): $29K (+7% YOY)
  • Occupancy rate: 54% (+5% YOY)
  • Average daily rate (ADR): $176.81 (+2% YOY)
  • RevPAR: $98.10 (+7% YOY)
  • Active listings: 3,325 (-9% YOY)
  • Zillow median home price: $173,661 (+2.4% YOY)
  • Yield: 16.8% (One of the best)

Regulation overview: Moderate

Pros:

  • High STR yields: These are at 16.8%, thanks to affordable home prices and substantial rental income.
  • Listings decline: This number went down 9% YoY, indicating a potential reduction in competition as new regulations take effect.

Cons:

  • New regulations: Could slow STR investment, particularly for non-owner-occupied properties.
  • Two-night minimum stay requirement: This could limit flexibility and reduce bookings from one-night business travelers in some areas.

Final Verdict: B-

St. Louis has been a top-tier cash flow market for STR investors, with low home prices, high rental yields, and steady demand. However, new regulations could make it harder for investors to enter and operate profitably in the long run.

St. Louis remains one of the best markets for STR cash flow. Still, investors should closely watch regulatory developments and ensure their STRs comply with new permitting and enforcement measures. Those who navigate the new rules could still see strong returns, but non-owner-occupied STRs will face increasing restrictions.

Charlotte, NC

Market performance metrics:

  • AirDNA market score: 92/100 (Strong)
  • Annual revenue (AR): $32.1K (+14% YOY)
  • Occupancy rate: 55% (+10% YOY)
  • Average daily rate (ADR): $195.07 (+5% YOY)
  • RevPAR: $109.82 (+15% YOY)
  • Active listings: 4,625 (+2% YOY)
  • Zillow median home price: $393,531 (+0.9% YOY)
  • Yield: 8% (Low)

Regulation overview: Moderate to high

Pros:

  • High revenue growth: Annual revenue is up 14% YoY, and RevPAR is growing by 15%.
  • Occupancy rate: Increasing, suggesting strong demand.
  • Growing tourism and business travel: Driven by Charlotte’s financial sector, sports teams, and events.

Cons:

  • Home prices: Generating strong STR cash flow is challenging.
  • Low yield (8%): Investors may struggle to break even, especially with mortgage costs.

Final Verdict: B-

Charlotte offers rising STR revenue growth and strong demand, but high home prices and low yield make it difficult for most investors to achieve strong cash flow. The market favors luxury, high-end STRs with unique amenities, while standard listings may struggle with profitability.

For investors considering Charlotte, be sure to factor in taxes, zoning restrictions, and home prices before entering the market. Mid-term rentals (MTRs) targeting business professionals, medical travelers, and corporate relocations may provide a more stable alternative in this growing city.

Kansas City, MO 

Market performance metrics:

  • AirDNA market score: 98/100 (Excellent)
  • Annual revenue (AR): $35.9K (+20% YOY)
  • Occupancy rate: 57% (+9% YOY)
  • Average daily rate (ADR): $206.41 (+11% YOY)
  • RevPAR: $120.25 (+20% YOY)
  • Active listings: 2,668 (-5% YOY)
  • Zillow median home price: $236,159 (+3.1% YOY)
  • Yield: 15.3% (Strong)

Regulation overview: Moderate

Pros:

  • High revenue potential: Annual revenue is up 20% year over year, and RevPAR is also increasing 20%—one of the strongest growth rates on this list.
  • Demand increasing: Occupancy is up 9% YOY, suggesting a healthy short-term rental market.
  • Consistent tourism: Strong local sports, music, and food scene.

Cons:

  • Kansas City is increasing STR oversight, and regulations may tighten further.
  • Zoning laws: Particularly in residential areas with STR limitations.

Final Verdict: B

Kansas City remains one of the strongest STR markets on this list. It is affordable, has high revenue potential, and has a strong yield. The combination of rising occupancy, strong revenue growth, and declining active listings makes it an attractive investment choice.

However, potential regulatory shifts and increasing city oversight mean investors must stay informed and ensure compliance to avoid costly fines or shutdowns. Those who secure the right property in a favorable zoning area could see substantial long-term success, but new investors should carefully evaluate neighborhood regulations before buying.

Richmond, VA 

Market performance metrics:

  • AirDNA market score: 89/100 (Strong)
  • Annual revenue (AR): $29.3K (+9% YOY)
  • Occupancy rate: 57% (+5% YOY)
  • Average daily rate (ADR): $173.70 (+3% YOY)
  • RevPAR: $100.32 (+8% YOY)
  • Active listings: 1,579 (+7% YOY)
  • Zillow median home price: $355,189 (+3.8% YOY)
  • Yield: 8% (Low)

Regulation overview: Moderate

Pros:

  • Strong STR demand: High occupancy (57%) and rising revenue (+9% YOY).
  • High tourism and rental demand: A growing arts, food, and history scene brings visitors year-round.

Cons

  • Home prices: Limiting cash flow potential and making it difficult to achieve strong ROI.
  • Low yield (8%): Most investors will struggle to achieve strong short-term returns.
  • Strict owner-occupied rules: In residential zones, it’s tough for full-time investors to operate STRs.

Final Verdict: C+

Richmond offers strong rental demand, stable occupancy, and rising revenue, but low cash flow, strict zoning laws, and high permit costs make STR investing difficult.

STRs only make sense for owner-occupied hosts or investors targeting nonresidential zones, where there is more flexibility. Due to zoning restrictions on multifamily buildings, Richmond is a tough market to grow in for those looking to scale STRs.

Overall, Richmond is better suited for mid-term rentals (MTRs) targeting business travelers, students, and remote workers rather than short-term vacation rentals. Investors should carefully evaluate compliance costs before entering this market.

Salt Lake City, UT

Market performance metrics:

  • AirDNA market score: 31/100 (Weak)
  • Annual revenue (AR): $36K (+3% YOY)
  • Occupancy rate: 61% (+1% YOY)
  • Average daily rate (ADR): $205.03 (+1% YOY)
  • RevPAR: $119.57 (+2% YOY)
  • Active listings: 4,740 (+4% YOY)
  • Zillow median home price: $559,027 (+2.7% YOY)
  • Yield: 6% (Low)

Regulation overview: High

Pros:

  • Strong occupancy rate (61%): Demand exists, particularly from outdoor tourism and ski season visitors.
  • ADR is high: Helping boost overall revenue potential.

Cons:

  • Home prices: A median price of $559,027 makes it difficult to achieve positive cash flow.
  • STRs are only allowed in commercial and mixed-use zones, significantly limiting available inventory for STR investors.

Final Verdict: D+

Salt Lake City’s short-term rental market is one of the riskiest on this list due to zoning restrictions, high home prices, and the looming threat of a statewide ban on STRs. While occupancy rates and daily revenue are decent, barriers to entry are steep, and legal risks could make STR investments unsustainable in the long run.

Final Ranking of Zillow’s STR Markets for 2025

  1. Kansas City, MO: B
  2. St. Louis, MO: B-
  3. Charlotte, NC: B-
  4. Buffalo, NY: C+
  5. Philadelphia, PA: C+
  6. Hartford, CT: C+
  7. Richmond, VA: C+
  8. Indianapolis, IN: C-
  9. Providence, RI: D+
  10. Salt Lake City, UT: D+

Should You Invest in These STR Markets?

If you’re new to STRs, I don’t recommend investing in any of these cities unless:

  • You fully understand local STR regulations and can navigate permits.
  • You buy an unrestricted property that isn’t at risk of future bans.
  • You know the market well and have a backup LTR plan.

I always prefer proper vacation rental destinations over cities like these. But if you want an exit strategy, high LTR demand and appreciation can be strong outs.

Final Thoughts

Regulations matter more than revenue potential. STR-friendly vacation towns tend to beat oversaturated metro markets. Choose wisely.

Find the Hottest Deals of 2025!

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Is your FI number TOO high? Whether you are ultra-conservative with your finances or want a lavish retirement lifestyle, setting a high bar could make your financial independence journey much harder…but not impossible. Today, we’ll provide a roadmap for building massive wealth!

Welcome back to the BiggerPockets Money podcast! With a six-figure income and a six-figure net worth at just 25 years old, Austin Crofoot should have no problem reaching financial independence by age 50, right? The only issue is that his FI number of $5,000,000 is much higher than most. As you’re about to hear, he’ll need to make several “bets” over the next few years, cross his fingers, and hope that at least one of them pays off in a huge way.

Like many in the FIRE community, Austin also wants to avoid the middle-class trap. Scott and Mindy will show him how to balance his retirement accounts with a mix of cash, brokerage accounts, and real estate investments—giving him the financial flexibility to pursue entrepreneurial ventures and retire on his terms. Stick around to hear how Austin can take advantage of a rebounding housing market by taking on assumable mortgages with rock-bottom interest rates!

Mindy:
Today’s Finance Friday guest is hoping to retire by the age of 50, but doesn’t have a clear understanding of the investing order of operations and what is best. Today we are going to break down the options that Austin has to make his five dreams a reality. Today’s guest is young, he’s 25 years old, so it’s a great episode for you if you are young and on your journey to financial independence. But it’s also a great episode for you to introduce the concept of financial independence to someone younger in your life. Hello, hello, hello and welcome to the BiggerPockets Money podcast. My name is Mindy Jensen and with me as always is my followed his own FI Dream cohost Scott Trench.

Scott:
Thanks, Mindy. Great to be here with you and looking forward to helping Austin dominate life money in the American dream. BiggerPockets is a goal creating 1 million millionaires. You are in the right place if you want to get your financial house in order because we truly believe financial freedom is attainable for everyone no matter when or where you’re starting, but it is especially attainable and let’s acknowledge that off the bat here. For a individual like Austin starting at a 25 with a solid six figure net worth and a solid six figure income worlds, this guy’s oyster, let’s help get after it as fast as humanly possible and know that he’s got advantages that other people don’t. Being a single man in his mid twenties with all these options, but let’s see how to maximize an advantageous set of circumstances and see how far he can get.

Mindy:
Yes, Austin, thank you for joining us today. We’re so excited to talk to you.

Austin:
Thank you so much for having me.

Mindy:
Austin. Let’s look at your money history coming up to today. Where does your journey with money begin?

Austin:
Well, really where my journey with money began starting in college, went through the local school, my hometown, got into a tuition discounts, received a large amount of scholarships that the majority of my expenses were covered with room, board, textbooks, food, everything like that. So was able to come out of college debt free, gave me extreme advantage to this day with that headstart. Studied finance and data analytics in college. But really what got me started was I did multiple internships that local wealth management firms, worked out local trust and just got me in really just interested in saving investing and overall my interest in personal finance started.

Mindy:
So are you working in finance now?

Austin:
No, no. I’m actually, so while I did do that for a few years, I just took kind of a leap there. I’m actually currently in software sales. I work for a publicly traded tech company that went bed with for about two and a half years now, located here in Austin, Texas.

Mindy:
Okay, and what is your retirement goal?

Austin:
I would say it’s more financial independence. I would love to reach financial in independence at 50 years old, have more passive income in my current income, replace my W2, but really have the option to retire at 50 with that passive income.

Mindy:
Well you’re starting at age 25, so unless I peek into your numbers in a minute and find some just massive amounts of debt or gross overspending, I think your 25 year timeline is probably going to be able to be compressed. Do you like your job?

Austin:
Yeah, yeah, it’s great. Really enjoy the day to day love the people I work with. Really rewarding process overall

Mindy:
And as you know, I still have a job. I’m financially independent. Well, you might not know, but I have said multiple times on the show I am financially independent and yet I still continue to work. So once you hit financial independence, you don’t have to quit. It just opens up so many more options because all of a sudden you get a new boss and you’re like, wow, we get along like oil and water, I’m out. And you don’t have to worry about, oh, I’ve got to find a new job or I have to slog along with this horrible boss now because you have set yourself up for this financial freedom, you can go if you still like it, you can go do a job that doesn’t give you any living wages and you’re not dependent on that because you’ve set yourself up. So I’m going to go out on a limb having not peaked at these numbers yet and say I believe you can do it in 25 years. Let’s go see where you’re starting. And do you have a FI number, a specific FI number that you’re thinking about?

Austin:
I would say it’s more of an estimation more than anything. Right now my expenses are pretty low. So when things coming up with wanting to start a family down the road, things like that, wanting to travel pretty much about 5 million, I would say shooting high for sure. But that’s where I would say it was a pretty more than comfortable lifestyle.

Mindy:
Okay. So that’s your end number. I would like to encourage you over the next few years to think about your bare bones number. I no longer have to work, so if something happens at work, I can casually look for a new job because 5 million is a lot, but also that affords you a lot and your 25, you have a 25 year timeline. I think you can get to 5 million in 25 years depending on how you’re investing. So that’s a question we’re going to come up with in a few minutes, but right now I want to look at your numbers. Are you ready?

Scott:
Perfect.

Mindy:
Okay. I see a total net worth of $142,000, which is awesome. At age 25, let tell you, 25-year-old Mindy did not have this same net worth. Not even close. I do see a large amount in cash. What are you doing with this cash?

Austin:
So it was a few things. I think when I first got out of college, the first thing I had an emergency fund already set up. Second thing was I just felt it was important just to set up a timeline for the next few years. I was already thinking of house hacking, knew I was moving to Austin, Texas, was just saving for a house hack and then just started saving more and more really was just going through my retirement accounts versus saving up for the next thing. Until this year, I pretty much stopped saving cash right there just down the road. But originally it was a house hack and eventually a house primary down for around 29 to 31 depending on where I’m at.

Scott:
But he did Mindy, what I love, what he did at this is he stockpiled a bunch of cash and then he left what I presume was a higher guaranteed based salary job in finance to go pursue sales with a much higher ceiling. That is the best possible use of cash at 25 and just I’m going to give a round of applause. That’s exactly right. That’s exactly what I would do in that situation and the return on that cash sitting in the bank account allowing you to feel comfortable with pursuing sales is a really high probability bet and you could lose, but in your situation you can afford to do that because of that. So I love that move. That’s what you did with the cash from my view is is that about right in your

Austin:
That was exactly right. I was 22 coming out of college. I had job opportunities to come into finance, go to CFA role that whole route. But then a family friend I talked to just more lifestyle mentor recommend joining a tech company first year out. But you’re exactly right, going for that route. And I will say they do offer a pretty competitive base salary as well to cover my basic living expenses, but that was really it just kind of betting on myself.

Scott:
Was it a reduction in base or was it actually an increase in base with commissions on top?

Austin:
It was a deduction in base than I would’ve gotten with a finance job for sure. First year finance. Yeah,

Scott:
Not a lot of folks do it. Love it. So you list your current income as 145 grand. What is realistic for you? Give us some bands on what this could look like over the next couple of years.

Austin:
So it’s definitely volatile for sure. It’s month to month, but from I’m seeing, I would say right now it could grow to 1 75, 200 within two to three years depending where I’m at. The companies stay at, but they’re plenty realistic to be in the 1 75 to 200. Pretty realistic within the next two to three years.

Mindy:
Way back on episode 32, we had Mr. And Mrs. Pop on the show, Mr. And Mrs Planting our pennies and Mr. Pop is in sales and he said, if you don’t know what you want to do, go into sales because there is no ceiling on how much you can make. It’s just what you’re doing. And anybody can do sales and I don’t know that I would say that anybody could do sales, but if you could do sales, holy cow, you can make so much money. So yeah, I love that you jumped ship to go to the sales department and your base salary covers everything. You’re not counting on bonuses and commissions and things like that to cover your living expenses. Is that what I heard you say?

Austin:
Exactly. Honestly more than covers. So my first year when I came out it was a, I’ll just say out loud, it was a base salary, 50,000. I was able to minimally cover everything more than cover everything. So I lived off that if not more, saved more and then every dollar in commission I made in my first two years was just getting saved, saved, saved in my cash pile.

Mindy:
Okay, so I will allow this cash and let’s continue with your numbers. I see $35,000 in a 401k, I think that’s awesome. You have 25 of that. 35 in a Roth. Yay. A Roth 401k means you have already paid the taxes on that and it’s going to grow tax free at your age. I love the Roth option for the tax savings because your income right now isn’t enormous, although it’s $145,000 at age 25, 20 5-year-old. Mindy was not doing that either. So I really love that you are thinking ahead in the Roth option and another you’ve got Roth IRA of $15,000 and a brokerage account of $10,000. Do you know what I don’t see on here, Scott Crypto. Yay. I don’t care if you put a dollar in crypto, but it really makes me cringe when I see people. They’re like, and 50% of my net worth is in crypto. Okay, that’s great for you

Scott:
Used to be 10% to be fair to the people.

Mindy:
Yes. Okay, so going over to the income side, as Scott said, you’re making about $145,000 a year. That’s not too shabby. Nice job.

Austin:
Thank you.

Mindy:
Expenses. Let’s look at these expenses. Scott, did you see this? $1,400 in rent? Holy crap. Do you have roommates? I mean holy cannoli.

Austin:
So a little bit of background there. So I do not have a roommate currently For my first two years I did have a roommate, but kind of a caveat there is I bike to work and I get a $200 stipend in kind of like a parking payment used downtown. I work downtown as well. So for me, being close to downtown found this great deal where I got one month off last year.

Scott:
It’s a good time to be a renter in Austin, Texas. It

Austin:
Really is.

Scott:
I would’ve done almost exactly the same thing Austin’s doing and probably would’ve lived a little larger if the market was as much of a renter’s market versus a landlord’s market in Austin, like Denver 12 years ago. This was not, I would not have been able to get a deal like that

Austin:
Exactly where I’m at a one bedroom apartment for 1400, it’s a pretty dang good deal and I got one month off, so it came out to like 1240 plus I get $200 a month in a stipend to pay for my parking, which I don’t use. So I buy to work. So that’s my little caveat for living alone for that deal. So it comes out to around a thousand give or take. So while I do love living around, definitely would’ve done it if I didn’t find this deal.

Mindy:
This is a sweet deal. I love that you’re only paying $1,400 a month in rent, especially at your salary. That’s awesome. I was shocked that it was so low.

Austin:
It’s very rare, but I will say what I’ve seen in the market just going on in here, people are offering one month off, two months off. They’re struggling to fill apartments for sure.

Mindy:
Yeah. Okay, well great. If you like your property, if like the place that you’re at that’s a great amount of rent and I would not be so quick to elevate your lifestyle while you have this very lofty goal. Well, I shouldn’t say very lofty, that sounds snotty. This goal of $5 million, your numbers are fantastic. I see $3,800 total in spending every month, four 50 on groceries, one 60 on restaurants, two 50 on travel and vacation. Nothing here freaks me out. The only thing I will say is that, and I’m sure these numbers are just rounded up, but everything ends in a zero. So I would caution you to make sure that all of these numbers are actually accurate and you just rounded them for sake of simplicity. But if you’re spending $3,800 a month, you’re doing great.

Austin:
Awesome, awesome.

Mindy:
Let’s move over to the debts. Wow, you have no debts. Okay, so that’s good. When you have a house you will probably have a mortgage, which is fine. I see no rental properties. I see no pension opportunity, which is fine. You’ll make your own. And then I see some questions, so let’s talk about these questions that you have for Scott and I.

Scott:
Now we need to take a quick ad break, but listeners, I’m so excited to announce that you can buy your ticket for BP Con 2025, which is October 5th through seventh in Las Vegas. And yes, we’ve got a BiggerPockets money specific track, especially helpful for potentially those of you trapped in the middle class trap where we’re going to be exploring different ways to get out of that. You can get early bird pricing for a hundred dollars off at biggerpockets.com/conference while we’re away.

Mindy:
Welcome back to the show. We are joined by Austin.

Austin:
The first question I have is more towards the retirement accounts focus with the path of financial independence on my mind. I constantly hear you both talk about the middle class trap and basically where I’m at where my contribution limit, I’m pretty close to that Roth IRA limit frankly based off the volatility of my income, I don’t think probably we’ll be able to contribute to Roth IRA this year. It’s be very close, but I plan on maxing out my Roth 401k this year, my health savings account. I plan on doing that for the next few years. I guess when should I debate on investing a lesson there and right now I’m very lucky where I can go outside of my retirement accounts, I can really invest everything and max it out, but I see when does it come to a point where maybe I should hold back and start. I’m really just investing out my brokerage real estate accounts, stuff like that.

Scott:
Yeah, well look, my bias is, and look, I know I’m the BiggerPockets real estate guy with all this, but I haven’t been as go by real estate the last couple of years in some situations, but I think in your situation here, it’s a really good match for what you’re doing in a lot of ways. There’s a little bit of market timing in this, which is I know going to rattle some people up, but I wanted to show you quickly on this front, this would excite me if I were in your situation starting over right now and trying to get going at 25, this is the Austin real Estate market in May, 2022 when the median home price was $667,000. Today in January, 2025, the median home price is $516,000. Median sale price, that’s something right there and that pain, Austin, Texas, I believe is going to see maximum pain in 2025.
I don’t know if we’re at the bottom or that could go much worse throughout the course of the year, but I would be really excited if I was sitting on 80 grand in cash at 25 years old in a market that is that desperate for competition and rents in there and no one, I could float a couple of good options there. I’d be really curious to see if you’d have your pick of the litter in small multifamily or some interesting single family rentals that come with consumable mortgages and you got all day, you had no rush. You can be super patient, you can take all year to look at that, but if you could get a three 4% mortgage on a duplex triplex quadplex, that’s consumable where someone bought with one of those assumable mortgages up here and you can defray a good chunk of that or literally any property that’s been bought in the last six, seven years that requires 70, $80,000 in cash to take over the debt, you’re going to have people willing to work with you.
That assumable stuff has been a pain in the rear for a lot of sellers who don’t like working with it, but you are in a deep, deep, deep buyer’s market in Austin, Texas, which I think is only going to get incrementally better for you as a buyer in the next year for it. So I’d be really tempted to start there with a chunk of that and you may or may not need a lot of cash to pull that off, but that would be the first hunch that I would say is one of the first big, big moves I’d be really thinking about potentially making in your situation. What’s your reaction to that?

Austin:
That’s interesting. That was actually one of my questions as well is about the house s hack here, but the assumable mortgage is something I never thought about, honestly. That’s something that’s interesting. I don’t think the classic house S hack here right now is, I won’t say it’s possible, but I had the idea, I’ve heard about the idea with adding an A DU. A lot of people turn into what they call a sneaky duplex where they add a second entrance Airbnb, the rest, and that was actually one of my questions as well is that seems like one of the, when you talk about Denver as a market as well, that’s very similar here in Austin I feel like with the current price of housing, but the receivable mortgages thing is something I’ve never thought about and definitely will check out.

Scott:
You only need one deal that works and there’s going to be one I think within the next year and one way to test that out, very simple exercise, use this all the time, but just go look at what’s for sale and go laugh at the absurdity of the sellers and obviously you’re not going to buy any of those and then look at what has actually sold in the last 90 days and you’ll find a serious difference between the two when you do that. I believe in a market like Austin, Texas, you can do that either by just going on Zillow and checking it out or you can do it by talking to an agent in a local market and asking them, show me all the properties here and give me the for sale and then do the sold, but look at those for sale ones and look at the bad first because they’re almost all bad if they’re on the market right now.
And then look at what’s sold. Big difference. There’s a lot of negotiating power and then you can use products like there’s a tool called consumable loan finder.com and a couple of other tools out there that you can look for that will have the mortgages that will list some of the properties that have assumable rate mortgages on there. That product I think, I’m not sure if still works in Austin, it’s kind of hit or miss in some markets. My experience, we have no affiliation with them, but there’s always something coming up that provides that information. So that would be the first instinct there and if that works, that’s a home run and you don’t need to rush it. You got a great deal on your rent, you’re probably loving life biking to work, probably close to sixth in downtown. Chill out for a little bit, but if that deal comes up, that would be fun.

Austin:
Yeah, that’s what it’s an eye into and the only thing I think it’s when I actually sent my original email to you was with the HAL act too have in mind is I just got to make sure I’m staying here for at least a couple years too. That’s something that’s also been on my mind that’s been, I’ve seen a couple opportunities come up maybe last year too, but I just got to make sure that I’m here for more than a couple years for the house sac, if that makes sense, if that’s the right idea.

Scott:
Well one of the things, and this is really macro and market specific, which could be completely wrong and inappropriate and inappropriate in some aspects, but when I think about a market like Austin, Texas, I think there’s every reason to believe in the long-term demand fundamentals in that market and every bit of reason to be super bearish for the last three years, and I’ve been picking on Austin as my worst market to invest in the country for the last two or three years, but that all changes at some point, right? At some point that slows down and I would also give you some homework of look up when the supply of single family units and multifamily units is going to hit in Austin, Texas. This is a simple Google search that you can do. I believe that Austin Texas saw about 10% increase in multifamily units hitting the market last year, which is absurd.
No metro the size of Austin, Texas will ever grow at 10% no matter how good you like. You want to talk about how good business friendlier inbound migration patterns are. Nobody grows 10%. That’s why you’re getting great deals as a renter right now and that should scare you as a landlord. It’ll take time for that to settle, but that new construction should be slowing. My guess is it will be slowing in the back half of this year or early 2026 at that point. And so if you can buy a property that has locked in leases for a year for example, that might be a way to defray some of those risks. You should also do that for single family homes. I don’t know the single family homes very well in there, but I think Austin, you’ll find Austin’s going to have similarly high multifamily supply delivered, especially in the first half of 2025, and that will abate towards the back half of the year and into next year. You should verify all that, but that will give you a little bit more comfort and when and where to. Should I just do some research for the next six months or should I begin maybe thinking about that a little sooner on that? So that would be where I’d go.
I would be curious specifically about small multifamily, duplex, triplex and quadplexes, seeing the most significant spread between in terms of the price to income that I’ve seen in my career, the best spread in Denver, Colorado, which I think is having a lot of similar dynamics to Austin. I’d imagine they’re very similar right now. So I wonder if you revisit that on that what is actually sold basis if your tune changes about how, oh, this doesn’t work, maybe that started to shift reasonably meaningfully in Austin.

Austin:
Definitely. Yeah, definitely check that out. I frankly the Summable loan is something I’ve never looked into but would definitely honestly never even heard a little bit about it.

Scott:
Sorry, that brings me to the last point there of you were talking about how you might not be in Austin a few years. That’s great. The house hack gives you the most flexibility of any option from an investment, from a living situation perspective. You have to break your lease and then your landlord’s got to be able to find a new tenant if you want to move right now, if you buy a place then that’s not a house hack, then you’re, you have a different problem if you buy a house hack and I believe as long as your intent, this is something we should confirm, please tell us in the YouTube comments, but I believe that if you buy a house hack and then have to get a new job for example, that that would void the part portions of the one year commitment for the loan. You should never go into it intending to do that. You should intend to live in the property for a year, but I believe that that is one of the circumstances that would allow for early exit and after that first year you have the most flexibility in life of anybody because you don’t have a lease with yourself. You can leave at any point in time on there if you’re a house hacker. So it’s way more flexible than even the renting setup even in a renter’s market.

Mindy:
Yes, Scott, you are correct. It is your intent at the time of purchase. You are intending to live in this as your primary residence and you’ll rent out the other portions. But if your job comes to you and says, Hey, we’re going to transfer you as long as you’re moving more than a hundred miles away, I think it’s a hundred miles away, but maybe that’s an FHA loan

Scott:
And also there’s other outs like your family member gets sick or whatever. It’s not like you’re just locked into this place, but you should intend to live in there for a year, right? Anything else is mortgage fraud, but it is not necessarily a prison for that period of time. If there is a truly reasonable reason to move out that is permitted specifically.

Mindy:
Yeah, case in point, Scott just bought a house. If he were to then go buy a duplex and say he was going to live in there but actually not have any intention of living in there and getting a mortgage on that, he is committing mortgage fraud. So just intend to live there. If that’s your intent, which it sounds like it is, and then you’re not committing mortgage fraud, your circumstances can change. They can’t hold you there forever. But I love this assumable mortgage idea because your in a great position, you’ve got a big bunch of cash so you can pay a difference if there is one, and in Austin there might not be one, a difference between what they owe on their mortgage and what you’re going to offer to pay them, but you would have to bring that cash to closing. So in a place like Denver where prices have continued to go up, let’s say I bought a house three years ago at 500,000 and now it’s worth six 50.
Sure, you can assume my loan, can you bring 150 to closing? A lot of people can’t. So you would be able to bring the chunk of difference to closing and then assume their loan. A couple of things about loan assumptions. You can only assume an FHA or a VA loan if you assume a VA loan and you’re not a veteran, then if you default, the veteran themselves loses their entitlement I think forever. The portion that you default on I think is lost to them forever. So I wouldn’t focus on VA loans, but I wouldn’t be opposed to them. The FHA loan, you assume it and now it’s your loan and you’ve got that suite 2.534% interest rate, which is really awesome. But assuming a loan is not just, Hey, I’ll assume your loan, great, here you go. It’s a process that can take three to six months.
The bank does not have any interest in you assuming that loan. They’d like that loan off the books because they can give you a new loan for 7% and you don’t want that. So you’ll need a company to help you with the loan assumption process. I have heard good things about assumption solutions.com. I have not used them. I can’t say anything about them. Definitely do your research, but finding a company to help you with this process because it is a big can of worms and it’s going to take a long time, but you’ve got a lease that you can continue with. If you’re in the process of negotiating your new property and just waiting for the assumption to take place, ask your landlord if you can go month to month at the end of your lease. Even if they raise your rent a lot, you’re not locked into a big long-term lease and then have to cancel that because canceling a lease is, I’ve heard two months is one of the most common amounts of rent that you are paying as a lease break fee. So I really like that idea of an assumable loan for you because you’re in such a position of power and the market that you’re buying into. But like Scott said, having a house hack is absolutely the most powerful position you can be in when it comes time to be transferred someplace else.

Austin:
No, that’s all extremely helpful. Thank you

Mindy:
My dear listeners, I am so excited to announce that we now have a BiggerPockets money newsletter. If you want to subscribe, go to biggerpockets.com/money newsletter. Alright, we’ll be right back after this.

Scott:
Thanks for sticking with us back to Austin from Austin.

Mindy:
Now I want to go back to that Roth IRA traditional Roth 401k thing. So if you are single and make up to $146,000, you can contribute to your Roth IRA between 146 and 161. You can contribute partially to your Roth IRA and then over 1 61 you’re unable to contribute, but what if you make a hundred and let’s say 150 this year? Oh, that’s 4,000 over. Why don’t you take 4,000 from your Roth 401k instead of contributing to your Roth 401k, contribute to a traditional 401k that reduces your taxable income, allows you to get into the Roth IRA.

Austin:
That’s good. Yeah, actually, and I’m glad you said that because I’ve done something really interesting this year and I didn’t know that off the top of my head. I’m glad you said that because I’ve been using the Roth about the last year is I received a bonus this month that I asked you was going to, we’ll see what you guys say about this, but front load my 401k for the year just to get it out of the way, if that makes sense. So I actually front load it at the start of the year. My company will still extend a match after I frontload it as well and that’s where I thought you were going to go. I checked on that, but if I did that, it’s something I haven’t thought about where I transferred it to the 401k, I’d be able to lower it by however X amount I haven’t already contributed to. So I was going to actually going to have a fully loaded, front loaded 401k by the end of this month.

Mindy:
Did you front load that 401k yet?

Austin:
I’m halfway, but that’s a good question there.

Mindy:
And when is your next bonus or commission check?

Austin:
Luckily, so that was last year’s bonus for an over quota bonus, so I get paid monthly on the commission, which is also nice, so I use that basically I use that bonus as to cover my next couple months of expenses and then I don’t see a paycheck for the next few months but

Mindy:
Oh, for the 401k contributions. Okay, I got you.

Austin:
Exactly, exactly. But that’s something that’s interesting. I’m wondering what the math is there. It’s like I have a good Vanguard fund in my 401k for my Roth. I was like, I wonder if that the difference there for the Roth conversion of the Roth 401k conversion and the Roth IRA for the total commitment, but would it make sense to bring that depth so I’m halfway loaded, bring that down to the 401k so it lowers my taxable income, then go to Roth ira, then max out the rest of my 401k. Does it math there with the taxes add up is my question. Actually

Mindy:
I am going to try to understand this question. Okay, so you want to maybe contribute to your traditional IRA, I’m sorry, your traditional 401k so that you could bring yourself down enough. I would actually wait until closer to the end of the year. Maybe you just crush it this year and you’re going to make 200 and it’s not going to matter. Although then you’ve got some in your pre-tax and you’re reducing your taxable income and then some in your Roth that you are contributing to. I still like the Roth for you because of your age, but that is a tax question. Scott, what do you think about that? That’s a touchy one.

Scott:
I think I’ve already kind of made my stance here of I’m on team max out your HSA take your 401k match, whether that’s if there’s a Roth option, put it in the Roth 401k if a company offers you the match option in either, if not, put it in your 401k and take the free money and pile up the cash because you’re going to just only increase your option. I would be in your situation, you don’t have to take this advice around there, it’s obviously going to be your call, but I would be chomping at the bit of like this is whatever the bottom is. I ain’t buying at the top here in Austin, Texas and there’s a lot of good reasons to believe in this market over a very long period of time and a lot of good reasons to believe that it’s a deep buyer’s market.
You’re going to have really a ton of options here. The more cash you have, the more power you’re going to have, especially if you’re going to go the suum loan route. So I would just be like, I’m going to take that, I’m going to maximize cash, I’m going to make at least one play in real estate Once that play is made, then towards the back half of the year I can make that decision to then max out these retirement accounts with any remaining cash that’s coming in. Or maybe in October you’re like, you know what? Okay, I made my real estate play. I have $20,000 left over 100% of my paycheck will now go towards maxing out these retirement accounts. You’ll have that option later in the year, so I would be just stockpiling cash right now. If you agree with the premise of the house hack, the buyer’s market and the assumable loan,

Mindy:
I would encourage you to look at, I just looked up large companies headquartered in Austin, Texas, Dell Technology, Amazon IBM, Oracle, Tesla, apple, I dunno if you’ve ever heard of these companies, but they pay their employees a nice salary so having something near where you are and near where they are. I don’t know anything about the Austin market. I don’t know where all these companies are located, but if you could be next to Dell Technologies and you’ve got a tenant roommate situation or multiple tenants that are working at these bigger companies, that’s just really nice to have that kind of optionality and you want a tenant who has the ability to pay you rent. You don’t want somebody giving you excuses on the first of the month. You want the check on the first of the month.
Oh, I had one last thing to say about Roth. Oh, I know what I wanted to say. Do not contribute to your Roth IRA right now and if you have, don’t put any more in there in the account right now. I am concerned that you are going to make too much money. What a horrible concern. But if you put too much in, let’s say you make $175,000 after you’ve done all this other monkey business, that’s a great position to be in. But if you’ve contributed to your Roth, you have to go back in and pull it out and there’s all this, well, you’re a math guy. There’s all this complicated math that you have to do to figure out exactly how much you put in and how much it grew and then you have to pull all of that out. So ask me how I know I did that once and it was kind of tedious to do so you can still max it out on December 30th, you’ll know how much you made for the year and then you can kind of avoid that.

Scott:
Make sure that you can’t contribute to the Roth this year that is within your control and power. That has got to be plan A in the event that things go very poorly max it out at the end of the year, but I wouldn’t put anything right now and you can do that in December if you find out, oh, I’m going to have a big loss or things are going to go very poorly, not according to plan.

Mindy:
Okay, we might’ve answered nine of your questions, but what other questions might you have for us?

Austin:
So right now a decent, not a large part of my salary but a decent amount is I every quarter receive vested restricted units and maybe it might be one of the only mistakes I’ve made so far in my journey, but I’ve quite a bit of money still sitting in my company E-Trade account. I’m sitting when I receive these units. I’ve done the ESPP before. I didn’t sell right after with this income as well. I’m currently sitting at about a $2,000 loss. Basically what I’m debating is do I sell for the $2,000 loss with that? I believe my company is really undervalued there or do I take this money out, take the unrealized loss and either put that in my brokerage, save the house tax from there. Basically I’m debating do I sell, do I risk holding this single stock I debate holding in? Does this all make sense?

Scott:
Yes, I would reframe this as your goal is to get to 5 million in wealth and you’re starting at 150 grand. So that decision is really immaterial to the overall thing. And then I’ll answer your question specifically in a second here, but what are the leverage points to actually get you there First flexibility, right? Something needs to go very right to get you to $5 million that is going to be turbocharging your success in your sales career or a pivot within the next five to seven years to an venture like a small business acquisition or something you start and found on your own. I think you know that implicitly coming into the call here. So if you agree with that premise right then the sales career, what I think you want to do is you want to generate so much cash and keep your expenses so low that you can go through the entire stack of tax advantaged investments next year or at the end of this year as we discussed earlier, and just max ’em all up, HSA 401k, Roth 401k if you prefer that.
And then if things go very poorly and you still have cash, the Roth IRA in a traditional sense, you can also think about back doors and stuff, but go down the whole stack and because you spend three grand a month, also accumulate 50 or $60,000 a year after tax in your brokerage. So you can go through both in this situation, but the goal will be to accumulate so much more outside of the 401k and the tax advantaged accounts because you’re rocking it so hard on the income front and spending so little that you’re still building most of your wealth outside of those. Then you got to figure out how you want to deploy that. If the sales career goes super well, keep plowing it into real estate would be is my bias or stocks or whatever. But that pick one concentrate for five to seven years and really kind of go big in that area.
Make sure you get you’re responsible. There’s no leverage that can kill you situation. Maybe even go a little light but plow the cash into something that you can control that’s scalable. Don’t buy 10 different properties scattered across the country and random geos on a keeper perspective so that you have problems in Cleveland, Ohio distracting you from your $400,000 a year future job in here. But if you have six properties in Austin, Texas that are reasonably compacted and one of them is a pain in the rear and the others have created a several million dollars net worth problem, I get that problem a lot from BiggerPockets money listeners, by the way. That’s a good problem, right? Oh, they made a million bucks or 2 million bucks and they got a couple of paint in the rears. They just want to sell. They’re so tired of dealing with that stuff.
Give yourself that type of problem rather than the one that’s halfway across the country or at least in several different geos. And then if the sales career is killing it and you’re earning so much money, that’s just a coasting to fi, that’s great, but if it’s not, then you’re going to want to pivot to entrepreneurship based on what I know, the few minutes of talking to you that I know about you. So make sure you accumulate enough cash, you keep emphasizing the cash accumulation in order to do that and I think that that will provide tremendous optionality within the next three to five years. It’ll be a grind, but you’ll have to perform really well. Sell hard, keep reading, keep communicating or keep really, really good professional cadence with your clients. But that’s the general framework that I’d be thinking about going here and I could see a series of house hacks or plus a couple of rental property investments or a business all being in the cards there that will have to go better than what you can put into a spreadsheet and there’s a very good chance that a business, for example, could do better than what’s going on in a spreadsheet.
So give yourself that option and as a byproduct of this situation, you’ll naturally also be building a stock portfolio that will carry you a big chunk of the way towards 5 million at 50 on its own. That’s the strategy in a nutshell. Sorry I went on a rant there, but I see you nodding. Does that resonate with you and seem right?

Austin:
Yeah, yeah, exactly. That’s my thought too is we’re lucky in a position where go after my retirement accounts early, you saw my coast fire question there is like I’m front loading them for a reason. Let those build up everything outside, build up for that middle class trap, whether that’s business, real estate portfolio. I know I’ve asked about turnkey properties as well, but no, this is all exactly what I came on here for.

Mindy:
Okay, I have a question about your employer. Do you believe in the long-term viability of your company?

Scott:
Oh, sorry, I lost the whole point of the question there. Good point, Mindy. Yes. Let’s answer a specific question here. I’m so sorry Austin.

Austin:
Yeah, no, I do. Yeah, I

Scott:
Really

Austin:
Do and it’s something that where I get paid out every quarter, it’s not a crazy amount of money, but

Scott:
Yeah, keep it in if you think they’re going to win. If think I went back a bunch of years ago and I was like, oh, I’m going to sell all my positions in BiggerPockets. Oh my gosh, I would regret it, right? You could still lose it on there, but it doesn’t sound like it’s a huge chunk of your net worth right now and if you believe in the company, keep it in. You’ll be putting so much more cash over the next couple of years into either real estate or stocks that your portfolio will diversify unless this thing does super well, in which case that’s why you’re leaving it in

Mindy:
And this is currently a $2,000 paper loss. You haven’t actually lost the money until you sell it for less than what you bought it for, right?

Austin:
Yeah.

Mindy:
Okay. Does your company have any unfair advantages and I’m going to go on a little bit of explanation here. Looking at the large companies headquartered in Austin that I know about, Tesla has the unfair advantage of having a charging network across the country, which makes travel really, really easy and it’s very difficult for other companies to come in and compete with them. That’s a huge advantage. Amazon has this whole, we’ve been doing it since 1999 or whenever they started, so they have a huge network. They’ve got all these local distribution companies. That’s another unfair advantage because they have so much money they can do this and they can kind of squash competition. And I’m not saying this as I’m supporting either of these companies. I am a shareholder in both of these companies, but does your company have any unfair advantages? And if you can’t think of anything right now that’s a homework assignment because if they’re just doing WeWork went out of business because all they did was rent properties and then sublet to other people. Well, there’s no moat around that. Anybody could do that and they went out of business. I think they coincided with Covid but they didn’t have an unfair advantage.

Austin:
Definitely not an unfair advantage. I would say we’re not the market dominator in my industry. We’re definitely leading, not to go in sales here, but leading in AI integration story, that’s something I believe in and where actually our stock price, it was about 10 times what it used to be. It’s 10 times less what it used to be, so it dropped significantly. The covid software tech industry hit hard and I came in at a good time with my bestest docs in my head to where we were actually around maybe 50, 60, $70 a stock and now we’re much less and I bested at a good time. In my head that’s where it’s really been like, okay, maybe I should keep this for the long term. It’s a bet. It’s really just a bet.

Scott:
I think you make 10 bets like this over the next three years. I love one every 90 days is my framework. If you think about it, this is one of ’em layer in a house S hack or whatever it is in the next 90 days. You just keep layering those on. One of them is going to, some of them are going to flop, one of them is going to take off and as long as your fundamental core strategy of either real estate or stocks, you might say I’m going to avoid that entire house hacking nonsense entirely in a real estate investing. Just go straight into stocks on there, but as long as your core strategy is seeing a huge plowing of most of your dollars taking shots, this could absolutely result in one or two out of 10 paying off over the next three years and you having a nice couple of wins that jump, that formula that I know is probably buried in the spreadsheet somewhere with you with your finance background that propel it forward to some degree. So I am totally aligned with this and you seem to be interested in it, do it. It’s not a core of your strategy it sounds like. It’s just really a side bet. So I think that’s great.

Mindy:
I would continue to, I wouldn’t sell what you’ve got and I would probably continue to invest in the company stock because you believe in the long-term viability of the company and I think it’s a fun bet and you have other things you’re going to be putting your money in other places. I wouldn’t just do that and be like, oh, I’m investing.

Austin:
Yeah,

Mindy:
See and run employees.

Austin:
The way I look at too is every quarter I get that payment. I would be selling it, doing it in the future, but it’s just my current stock right now taking that income. That’s way it’s worth savings. Yeah,

Scott:
Awesome. I had a similar situation 10, 12 years ago. In fact, many of the aspects of your situation are similar to where I was around 25 and before I was at BiggerPockets, the company I was at offered an employee stock purchase plan and I did not believe in the stock price of that company and so I just took the 15% discount. They were able to buy shares basically at a 15% discount and arbitraged that if I believed in the company, I would’ve taken the discount and held onto them for a very long period of time. I think that’s the only difference. And if I think I was generally right in that particular choice, and you probably should go with your instincts on this particular one. If you were saying I’m going to have 80% of my net worth in the company over the next five years, maybe I’d have a different with a base case plan, I might have a different opinion, but that’s not going to happen unless things go super well.

Austin:
It’s only maybe four to 6% right now. Maybe quick math and then one thing I brought up is I’ve just stacked up this money for that down payment that 60, $70,000 I have in cash for whether house hack, whatever it maybe after I’ve been front loading for the rest of this year, it’s going to happen this month. I’m going to stock about cash. My plan right now is Austin, besides the Assumable loan is a house act. It’s a high barrier entry for someone my age. I’ve been looking to a more turnkey real estate out to southeast. It’s something I’ve been referred to. I see you shaking your head

Scott:
No, I don’t like turnkey rentals in your situation. And the reason for that is because your earnings potential is so large and your goal is so big. Let’s play this out, right? Let’s say you buy a turnkey rental in Cleveland, Ohio with $50,000 down and 150,000 mortgage, the best you can reasonably hope for is $250 a month in cashflow, right? That would be an excellent situation. And now you own a property in a C-Class neighborhood in Cleveland, Ohio. You can replace Cleveland with any of the cities that you are likely looking at here right now, let’s decide how do we get to $20,000 a month in income, which is your goal, right? So $20,000 a month divided by 250 is 80 units. You’re going to do that 80 times.
That is kind of a truly absurd statement when I frame it that way. In order for that to be a position about a part of your portfolio, and guess what? In five to 10 years, if you are successful in your sales career, it is a very reasonable possibility in the upper bound that you’re earning $500,000 a year in income. So now in order to replace $500,000 or $45,000 a month in income, you need 180 of those units. You’re going to build 180 unit portfolio in Cleveland or insert parallel city external to that. I don’t think that’s a great move. Now, if you’re saying I want to buy 10 paid off rentals in one location because that’s all I want, okay, we have a different discussion there, but I don’t think that’s your plan. I think you have an aggressive, I want to drive, I want to drive ROI to get to my $5 million net worth number in parallel and my investment.
So I think that’s owned and operated real estate or stock market in your situation on this. So I would steer you away from that turnkey strategy unless again you said, Hey, I have a tie to Cleveland or Columbus or whatever the city I’m trying to invest in. I may even raise a family there in the future because that’s home and I’m going to buy 10 paid off properties that are in a tight kind of concentrated area where I’ll have my pick of the litter with property managers who would love to have 10 properties in the same block. Okay? Now I have a different approach to that, but I would be averse to that strategy. In your situation, what do you think, Mindy?

Mindy:
I agree completely. I have not dived dove deep into the Austin market, but I know that Scott has and he doesn’t love it for other people, but you live there, you have the opportunity to A, assume a mortgage or B, have roommates in your property or you have the ability to potentially assume a duplex, triplex, quadplex mortgage, and I really like the Assumable mortgage option for you. I definitely want you to do some research into that because that could be a great way to get a lower price property with a killer interest rate that you, that’s going to make the difference between making money and not making money and that assumable thing that Scott is going to send you is going to be a pretty sweet thing for you to look into.

Scott:
Yeah, you can imagine, let’s say best case scenario is the Austin market goes down for the next three years, a couple percentage points a year. That’s a best case scenario for Austin, for you Austin, not the city Austin, very confusing, but that’s best case scenario for you because you buy one property, you’ll be like, oh no, it went down. But you buy the second property also with a receivable mortgage potentially a year later and a third one. And then if that situation were to transpire the next 10 to 20 years, almost certainly would see a reversion to the mean of 3% appreciation and you’d have a bunch of properties locked in at low interest rates where the people who originally locked in those mortgages actually took all the hit for the last couple of years so that you could get that locked in financing, for example. So again, I’m not in Austin right now, but Austin is one of those markets where I may look at the odd syndication or whatever deal in the next year or two because I think the situation there is so is one of the most extreme in the country and there’s an opportunity for someone who’s smart and really kind of gets to know it well, to make some money in there.
Austin is not a bad market. Just the supply dynamic was so absurd that it’s caused the current problem. So anyways, I’ve harped on that enough here, but Austin, was this helpful? We’re coming up on time here. Was this what you were looking for today?

Austin:
Yeah, this was extremely helpful. I’m just giving you ideas here. It’s just bouncing ideas off, but really just need to make my money work, make a couple bets, whether that’s a house hack, getting everything into stocks, everything. Just really just keep throwing in everything out there.

Scott:
That’s right. As long as you don’t put yourself in a leverage position where things are going to get wonky and force you to abandon the high upside approach that you’re taking here the day you need to generate an a hundred thousand dollars base salary to float your portfolio is the day you’re losing this flexibility. So as long as you’re making bets that do not remove that, like the house hack for example, that has a super high probability of getting most of the rent in there and that’s conservative or stocks or whatever, and you keep those expenses low, you’re going to pile up some really good options. And yeah, you’re going to have to just make bets. The also other thing to think about is none of these are all in for you, and this is really hard framework from vantage point of 25, you spent your entire life accumulating $142,000, your goal is 5 million. You are less than what, 3% of the way there. So you need to make big chunk bets as you described it in order to do that. And you’ll have another crack at this every two or three years to rebuild the existing position the way the compounding will likely work in your career. And I think you should go big and bold and aggressive and you can because your expenses are so low.

Austin:
No, this is really great. Super helpful.

Mindy:
Austin, thank you so much for your time today and we will talk to you soon.

Austin:
Thank you so much, both of you, Scott.

Mindy:
Alright, Scott, that was Austin and that was awesome. I really love his trajectory and I love that he’s 25 and he’s thinking about this stuff. I could have learned a lot from him if I was in his same boat, if he was next to me in my same boat at 25, whatever. I didn’t do what he did and I still got here. I think he’s going to get here too. What did you think of the show, Scott?

Scott:
I love Austin from Austin and his situation and all the choices he’s made, this guy has every option in the world. He should keep those options open. He should never put himself in a position where he is locked into an all in bet that’s outside of his work unless he chooses one entrepreneurial venture in the next couple of years. He says go in, all in on. But he has a very high probability of success. Yes, he can lose in any of the paths that we discussed there, but I am super optimistic that Austin has a shot at becoming a millionaire, if not in the next 10 years, within the next seven, maybe even by the time he hits 30 with a little bit of luck. So this is the type of position that you can’t really model out and you shouldn’t lock yourself into a long-term financial model. You should stay flexible, chase that income and go after it. And by the time he’s again, hitting his thirties, he’s going to have a lot of options and a lot of really good choices that he can make in his life.

Mindy:
Yeah, I love that he’s in sales because literally the sky is the limit on your income there. You are limited by your own creativity and your own drive. So he has the drive. I think he is going to hit it and hit it hard and hit it early and I’m super excited for him. I want to check back in with him in six months or a year, see where he is at then.

Scott:
Absolutely. I’m also very curious, I’ve been really, really dunking on Austin as the worst place to invest in America for the last several years, and at some point you got to start changing your tune and say, well, if it’s gone this bad for this long, is it time to start buying? I think it’s about time to start buying and I would be really interested if I was in that 25-year-old house hacking serial house hacking range there. But I would love to see what you guys think. Tell me about it in the comments and let me know if you think I’m crazy or if I’m spot on and you agree that it’s buy time in Austin, especially with that assumable rate mortgage strategy.

Mindy:
I’m really surprised that the Austin market is so down because Austin has traditionally been a really great market and with all of those giant companies in the area, they’re going to be employing people who may or may not want to own properties. It seems like, Scott, I hope you’re, you’re starting to be wrong.

Scott:
Yes. Well, lemme be clear. I get it. I told you so on the market went down the last two years and I think it was the worst place to invest and now it could be the best place or one of the best places to invest is what I’m saying. So hopefully I’m right for Austin’s sake, both the individual and the city.

Mindy:
Yeah. So let us know what you think in the comments below. We really appreciate it. Alright, Scott, should we get out of here?

Scott:
Let’s do it.

Mindy:
That wraps up this episode of the BiggerPockets Money podcast. He is Scott Trench. I am Iny Jensen saying, see you around the playground. I.

 

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Is it time to SELL your rental property? Not so fast! Bad cash flow isn’t the end of the world if you’re banking on appreciation, and there are several ways to increase your cash flow. But certain problems aren’t worth the headaches, and in this episode, we’ll share some telltale signs that you should sell!

Welcome back to another Rookie Reply! Today’s first question comes from a new investor who’s looking to go from buying beginner-friendly, turnkey properties to scaling with the BRRRR method (buy, rehab, rent, refinance, repeat). Is this a doable next step or should they stick with what’s been working? We’ll show you why this investing strategy isn’t as intimidating as it might seem!

Next, we’ll discuss what you should do if your property is bleeding money. At what point should you move on? Maybe you’ve already decided to cash out but are struggling to sell your investment property. We’ll show you how to move that stubborn listing!

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, right? 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 cashflow 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 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 appreciation, 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 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 of 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:
Yeah, 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 cashflow, you have the appreciation, you have tax benefits if you’re doing something like short-term rental until you have maybe owning cool vacation properties and 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 make a mistake is that they don’t make that decision and then they’ve just 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 overstock 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 or your property as to what can you afford, what can you be looking for?

Tony:
I think the last thing that rookies 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 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 to pool because it’s going to drive up my cost of insurance, having long-term rentals in there and a pool. So making sure 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 short-term rentals, you can have a single family short-term rental, which is the asset class. Short-term rentals of the strategy, single family is the asset class. You could have a quote, short-term rental with aids, 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, right? A hundred units and up. Still long-term rentals, but 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 are kind of putting all 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:
Alright guys, we’re back. So we talked about the foundational stuff. Now let’s get into the good stuff here, right? 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, right? Your lender is going to be one of your best friends as you look to scale up your real estate portfolio. And I think Ash 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 make it more difficult for yourself because every lender has something that’s slightly different that they can offer to you.

Ashley:
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/lender 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 on the lending side, and we’ve talked about this a lot in 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 on to.
So when you’re looking for your market, the best place to go to actually find it is to go to the bigger package forums, go to the real estate rookie 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, which 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. Okay? 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 cashflow. 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, and 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 for 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:
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, 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 to, 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 that are listening, if you want to find some of the best investor friendly agents on the planet, head over to biggerpockets.com/agent finder. Okay, biggerpockets.com/agent finder. Super quick, super easy, fill out a quick form and you’ll get all the top rated agents in whatever market it’s that you’re searching in.

Ashley:
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 like 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 experience doing a lot of deals because of those connections they have.

Tony:
Yeah, Ash, great example of the power of a good agent. So again, if you guys, ricky’s biggerpockets.com/agent finder, best place to go once you’ve got your team built out. The next step, I think we’re on step number five now, right? So step 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 a box of we want a property that’s between the purchase price of 1 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 rural, and we wanted something that offered seller financing, that was our type 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 buy box. And we got really, really good at underwriting things that were within our buy box. 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 in the 7 11 0 5 or 7 11 0 4 zip codes in Shreveport, Louisiana, single story. And I think I wanted to build 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 7 11 0 5 zip code. So the better you get it defined on your buy box, the easier it becomes to really scale up the property identification and the property analysis. I dunno, 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, Ricky Resource, and it’s a template and it basically asks you questions as to everything you should be looking at when building out your buy box. 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/rookie resource, 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 buy box 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 to 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 of 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 is 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 rickeys that are listening, you might be asking, well, how do I know what my buy box should be? And a lot of it’s you asking the questions or maybe answering the questions that we’ve kind of been talking about. Like Ashley 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 buy box 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 second 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 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 are paying these days, but a couple of percentages, percentage points. So just know there’s always risk. The goal 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 sounded 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 you’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 it 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. 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 initial lists for close to 2 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 it this so that I am 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 a hundred thousand dollars, you do seller financing, I’ll give you $115,000 as the purchase price.
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 like, I’m willing to pay this amount, and on this one I’m willing to close on the property in this date, 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 we’ll 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 Jay 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 5 25 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 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, it’s like an inspection contingency. You have a financing contingency. Those are two 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. People who were like, Hey, all I need is help moving. If you can help me move, I’ll give you a really good deal, right? 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 the point here is that there are more things to negotiate than just the 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 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 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 actually said about having the systems, the processes, everything from making sure you turn on the utilities and turning ’em off. Those are the things that’ll save you 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 say 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’ve 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 BiggerPockets Rookie you’re watching on YouTube. Make sure you let us know in the comments what you want to learn or investing in 2025. Thanks so much for joining us. We’ll see you guys next time.

 

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Stock prices are falling, and Americans are fearful. Tariffs, trade wars, economic tension, and interest rates are putting pressure on asset prices. Commercial real estate has already crashed, but the worst may be yet to come. Home prices aren’t growing; in fact, small multifamily prices may even be declining. What should you do? We can’t provide financial advice, but Scott Trench, CEO of BiggerPockets, is revealing how he’s protecting his wealth in 2025.

A recession could be coming; we’re all aware of that. But what does this mean for real estate, stock, crypto, and gold prices? The “irrational exuberance” bubble seems to have popped after stocks hit wildly high price-to-earnings ratios, Bitcoin soared to six figures, and gold began a massive runup. Things are about to change very quickly.

Scott is putting his money where his mouth is, revealing the contrarian moves he’s making to his portfolio to keep his wealth growing during this increasingly volatile period. He’s giving his stock market prediction, interest rate prediction, and home price prediction and sharing where real estate investors should look for stellar deals as everyday Americans run away in fear.

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Listen to the Podcast Here

Read the Transcript Here

Scott:
What’s going on everybody? I’m Scott Trench, host of the BiggerPockets podcast today. You may also know me as the host of the BiggerPockets Money podcast over there with my co-host Mindy Jensen and CEO of BiggerPockets. I’ll be filling in for Dave today who is out on a personal matter and I couldn’t be more excited to share with you today my thesis for what’s going on here in 2025. I’m a pretty big bear in many sectors of the economy and I hope that today’s discussion will give you insight into how I break down the opportunities to invest across most of the major asset classes that are available to ordinary Americans. What I’m doing in response to that analysis with my personal portfolio and the tax considerations that are in play in the context of me making real moves here in Q1 2025 with my portfolio that involve realizing gains in some cases to reallocate funds to different asset classes and sectors.
So spoiler alert, again, I’m a big bear. It’s written right there on this top of the screen here. I think we’re in a period that I’m calling irrational exuberance 3.0 and irrational exuberance refers to a state where investors are wildly overvaluing assets relative to their intrinsic or fundamental value. This book was written by a very famous economist called Robert Schiller and then published I think March, 1999, right before the.com crash. He posted an update to that book in 2008 and then he posted another oane I think in 2014. Might have to go back and check that one, in fact, check that, which obviously did not happen, but the guy is two out of three and I’m thinking about these irrationally exuberant areas of the economy across real estate stocks and other asset classes, and I think as we head into 2025, we’re seeing a lot of similarities to what Professor Schiller from Yale University called out multiple times throughout his career.
Guys, this is a presentation I prepared a slide deck. I’m going to be referring to charts and graphs throughout this discussion. I will try to be mindful of those of you who are listening in your cars via the podcast feed, but this may be one that you’d want to go back and check out on YouTube because I will be referring to these charts and graphs and you’ll be able to see where the source data comes from in many of these cases. What I’m going to do today is I’m going to do a two-part walkthrough for my macro thesis. First, I’m just going to talk about what’s happening in the major asset classes that are available to most Americans and those asset classes are cash, treasuries or bonds, residential real estate, commercial real estate stocks, Bitcoin and gold. I understand that there are many other alternatives, but those are the ones that are widely available to most Americans most of the time.
And then I’m going to talk through the areas where I see the biggest risks and opportunities in the context of what’s going on in these categories, and then I’ll talk about what I specifically have done, which is major serious, more than 50% reallocation across my holistic personal financial portfolio, the tax impact of making those changes and how I’m thinking through that. And then I’ll wrap it up by inviting feedback, debate and dialogue, and I’m sure many of you will refer back to this next year to make fun of me for how wrong I am on some of these things and how expensive my set of moves are. Alright, let’s start off with my predictions, fears, and optimism, and I’ll just get right to the headlines and come back and give you all the detail shortly after previewing those first headline. I think that interest rates are going to remain stubbornly high here in 2025 unless there’s a deep recession or we get a new fed chair appointment.
Even if that fed chair will be appointed in 2026, the simple headline of a dovish fed chair could be amid again for that. The second headline here is I fear a sharp pullback or even a possible crash in US stocks for a great number of reasons that I’ll get into in detail as we come back to this section. The third headline is that I think that residential real estate and specifically small multifamily residential properties could have already seen a serious correction in prices. For example, I just bought a property that was originally listed at $1.2 million in February, 2024 and after six price reductions, I bought it for less than the last price reduction for 20% less than its original list price, which I think they would’ve gotten in 2023. Is that a buying opportunity? The last major headline is that I believe that commercial real estate has seen significant losses and devastation in terms of valuation and that a sophisticated buyer may have major opportunities to buy at the bottom in what could be a once in a generation opportunity here in 2025.
I believe that that opportunity set will hit regionally for different markets at different times and you really got to have a pulse on whatever region you’re investing in order to take advantage of that timing in the commercial real estate sector specifically with regard to multifamily in 2025. So those are the headlines. We’ll also talk a little bit about other asset classes like Bitcoin and gold briefly. Alright, so let’s get into it and start with interest rates. What’s going on with interest rates? Well, in order to understand interest rates, we have to talk about the 10 year treasury yield, which is a key correlate to 30 year fixed rate mortgage rates and to mortgage rates in the commercial real estate sector. What I’m showing on this slide is a chart of the yield curve at two different times. One is a normalized yield curve from 2018 and you can see that the federal funds rate the overnight rate for US treasuries was 1.25%, one and a quarter, and the 10 year treasury was about 2.85%.
That’s a 160 basis point spread, 150 basis point spread. That’s a normal yield curve. You’d expect interest rates to be higher on long-term debts than on short-term debts. What we see today is a slightly inverted or flat yield curve. We see that the federal funds rate is four and a quarter today, and we see that the 10 year rate is also four and a quarter. So what’s going on here is that the market expects the Federal reserve to lower rates, so they’re buying the 10 year at a four and a quarter rate expecting that the Fed will lower rates. The problem with this is that for the yield curve to normalize such that 150 basis points separate the 10 year yield from the overnight rate, the Fed will have to lower rates six times in 25 basis point increments in order to make that happen.
If the Fed lowers rates six times in the context of current inflation numbers, it means something very bad is going on elsewhere in the economy where millions of people literally are losing their jobs. That is not a fun environment to be in. If you own assets that are correlated with interest rates, almost certainly if rates come down that rapidly and that steeply, you will see asset prices coming down with that. So I am a big bear on this. I think that a much more likely scenario is that the Fed will lower rates one, two or maybe up to three times over the next year and that the tenure will actually slowly rise another 50 to 75 basis points hovering around 5% throughout the course of 2025. That’s my base case. A ton of things can come in. This could get worse than that, right? So the Fed could lower rates no times and you could see this thing go up to 5.75% for the 10 year yield.
You could see inflation remaining stubbornly persistent with long-term inflationary pressures like boomers exiting the workforce and slowing population growth, driving up wages and prices. In many cases, you could see near term inflationary pressure also put upward pressure on interest rates. Those threats are acute from slowing inbound migration. We’re not seeing any illegal immigration as we saw that slow dramatically with the new administration. The threat of forced deportation could also reduce the population and put upward pressure on wages and therefore prices last. We could see tariffs impacting the CPI, right? When you charge people more for imports into the United States and when goods from the United States are seeing tariffs put in place as a countermeasure, you could see the cost of many goods and prices increasing here all as a reminder. If inflation is high, the Fed will tend to increase interest rates to put downward pressure on prices.
Again, the offsets of this are recession or a new fed share appointment. Next, I want to discuss the money supply here. M two specifically. I think there’s a narrative out there that it’s okay to buy assets even at extraordinarily high prices that they’re at today because of this narrative that governments just printed money and the dollar is losing all this value and so that those prices do not actually reflect the massive expansion of the money supply. I think this is a misnomer and I want to go into this briefly here. M two is a measurement of short-term liquidity positions held by America, so the cash and bank accounts, savings accounts, money market accounts, and other near-term liquidity positions here, and this did grow substantially. It grew about 39% from January, 2019 to January, 2022, and prices reflected that inflation wages and many asset prices including real estate prices reflect that expansion. But from 2022 to the present, there hasn’t been a material increase in the money supply and from 2023, January, 2023 to January, 2025, the money supply has only increased by 1.6% while inflation has materially outpaced that. So something other than the money supply is driving asset prices in the last couple of years and I think it’s a speculative bubble or worry that it’s a speculative bubble in many of those asset classes. So I wanted to preview the next section with that. All right, we got to take a quick break. We’ll be right back.
Okay, we’re back on the BiggerPockets podcast. Let’s go to the s and p 500 next here. As a first example, the s and p 500 has grown 51% in terms of market capitalization from January, 2023 to January, 2025. Remember, the money supply increased 1.6%. This went up 50%. The s and p 500 is up 2.35 times since January, 2019. As of February, 2025, the s and p 500 is trading at a 38 times price to earnings ratio per the Schiller PE index. What is the Schiller price to earnings ratio? It takes the average real inflation adjusted earnings of every company in the s and p 500 over the last 10 years. It averages out over the last 10 years and then it divides that by the current market capitalization of the s and p 500, the current price, and that normalizes all the fluctuations from wild years like 2021.
There’s always a wacko year in any 10 year period, and what you’re seeing is that the market is priced higher relative to historical earnings than at any time prior to 1999 in the.com bubble. I believe that this is a major problem here and that 2025 poses serious risks to investors in stocks, which I’ll get into here, so I will make no bones about it. I fear a potential sharp pullback or even a possible crash in US stocks in 2025, and I think the risks in this world far outweigh the possible ance for stock investors right now. Some of those risks include those historically high priced earnings ratios I just discussed slowing GDP growth we’re expected to see per the Atlanta fed a 3% first quarter GDP contraction, we’re seeing inflation remaining stubbornly high. I think the February inflation report is going to have a high 5% or even the low 6% year over year inflation rate, and that is due to factors other than the money supply expanding and specifically and in the near term, I think that the risk of inflation due to just the threat rather than necessarily the implementation of tariffs is a major issue there.
Alright, I think I told everybody at the beginning of this presentation that I’d be wrong about a few things. We recorded it on March 7th and here we are on March 12th and of course the CPI inflation report came out and came in better than expected, so completely wrong on the inflation report item here. I’m surprised I was not expecting to see February inflation come in with this kind of good news. I thought it would actually spike pretty meaningfully on tariff news, but shows you what I know and how I can be wrong immediately on many of these items here. This does not change the overall thesis that goes around with the rest of my analysis. I do believe that we are in for steadily rising inflation and a lot of upward pressure in a long-term sense and that this might’ve been a blip, but I’ll be watching it carefully and watch me be wrong on that one too.
We’re seeing rising layoffs not just across the federal government, but in many private companies. We’re seeing many companies in the s and p 500 with material earnings misses through this point in the first quarter 2025, and then there’s CNN puts together a pretty good fear and greed index, which is in the extreme fear territory right now. These are the risks that I see, and like I said, I think that they overwhelm the possible risk litigants here like AI increasing productivity and corporate profits to the tune that it wipes out all of these other things. I think that there’s a lot of benefits that AI can bring to the United States of America and to its people in terms of productivity, but I’m not convinced that those will flow directly through to the bottom line in corporations to justify this level of prices. I think that there’s a potential for a US golden age, absolutely that’s an item here, but I think that some portion of the population literally believes that all of these things will come true, and I will tell you what, we are not going to see an environment in 2025 where we have zero inflation and we implement tariffs and we have full employment and we get lower interest rates and we balance the federal budget and we see record corporate profits and we see lower taxes and we increase military spending and we have world peace and all asset classes soar in value bringing about a new American golden age.
Maybe some of those come true, maybe most of them, maybe one or two, but no way do all of those things come true. And if that’s your portfolio plan, I want to scare you a little bit. I don’t think that that’s a realistic assessment of what’s going to be happening over the next couple of years and I think that’s what this pricing level suggests. The market believes. I don’t see what else you can really assume here with a historically high price to earnings ratio, you are betting on record corporate profits likely in combination with many of these items. That’s my stance. That’s how I feel. Understand that that’s going to anger some people or make some people anxious, but it’s just how I feel. So one of the other risks I want to point out here is I think that a large portion of the United States population is investing with this VT Saxon chill mentality where it’s set it and forget it invested in index funds.
They always go up in the long run. I believe that on top of the risks that I just outlined on the prior slide, that about 50% of the US population who lean liberal, who by the way are pretty meaningfully more likely than their conservative counterparts to invest the majority of their wealth and index funds. I think a good chunk of those people are going to be asking themselves the following question, am I comfortable with leaving my portfolio, which today is 100% allocated to largely US based stocks? Am I comfortable leaving that in place at current pricing given the actions of the new Trump administration through its first six weeks? And I believe that the answer to that question is going to be no for an increasing number of those people as the months and portions of 2025 proceed here, and I think that’s a material risk to sustaining very high price to earnings ratios in the event that the right hand side of my chart here, all of the things that I just said, that good things that had to happen in 2025 don’t happen.
So again, I’m pretty worried about that and I want to put out that data. This is BiggerPockets money data. I’d love a better data set. I couldn’t find anything on the internet that discussed different investment patterns between liberals and conservatives besides my polling of the BiggerPockets audience here on YouTube. So if anyone has good data on that, I would love to see that. I also want to point out that investors are very sparingly allocated to bonds. The yield to maturity on bonds is very low. Bond yields are about 4.3% for the Vanguard total bond market index fund, which is not interesting to many of the people on BiggerPockets. It’s not interesting to younger investors, and that’s a yield to maturity. The actual income that one realizes from a bond fund is actually lower than that. And one of the reasons why bond yields are so low is because they’ve been declining for nearly 50 years on a continuous basis until the last two or three years when the feds started raising rates.
But I want to remind folks that bonds are a hedge against downward pressure and other asset classes. They’re a hedge against the Fed lowering rates in a hurry and normalizing this yield curve. If the fed lowers rates, we could see the equity value of some of those bond funds go up sharply. And so I repositioned to bonds even with those low yields as a hedge against some of the risks that I see in the current market here. We’ll talk about that in a minute. Let’s talk about residential real estate. Next, what’s going on with residential real estate, residential real estate in terms of single family homes? The case Schiller National Home Price Index, which measures the value of existing home sales over time. So it excludes new home sales. Home prices have gone up about 50% since 2019. 50% is a faster relative growth rate than the money supply.
So I do think that there is some risk in the residential real estate sector, but that 50% increase in absolute value is dramatically less over the six year period from 2019 to 2025 than the 2.3 times growth in the s and p 500. For example, in the last two years, while the s and p 500 rose 50%, the K Shiller National Home Price Index rose 5%. So housing is kind of like this Sturt in the economy. You could argue that it’s a little overpriced and that it should be more responsive to rising interest rates, which is a direct correlate to affordability in housing for this. But in terms of absolute dollars relative to the money supply housing has outpaced the money supply, but not to the dramatic degree of other asset classes, at least in the single family home price index category here. Rents have been another story here.
Rents grew about 30% between 2019 and 2022, and they’ve come down a few percentage points in terms of median rent across the United States over the last couple of years. One of the major drivers of rents coming down over the last two years in particular has been a flood of supply. We’ve actually added the most multifamily apartment units in American history in terms of supply in 2025. This impact has obviously felt differently in different regions, but it’s been an important headline here. So what I’ve found is that I have not seen major opportunities in buying single family rentals in my hometown of Denver, but I have seen as I previewed earlier, what I believe to be a big difference in the purchasing power of the buyer’s market with respect to income properties here in Denver, Colorado. So again, this is the vplex that I just purchased in a part of Denver called Barnum, which is an up and coming neighborhood that I think is going to see a material amount of appreciation over a multi-decade period.
I’ve crossed out any personally identifying information about the listing agent or the listing brokerage, and I’ve also crossed out some of the detail about the specific asset here, but I want to point out that this asset was listed at $1.2 million and again, dropped in price six times from 1.19 to 1.175 to 1.145 to 1.1 million in July of 2024 to 1.08 in November to 1.69 later that month to 1,000,050 in December, and I went under contract for this thing on January 16th for $1 million even. So that’s a decline. I believe that this property would have transacted for 1.2 to 1.25 million as recently as 2023. And if you believe me, if I am right on this, that’s a 20 to 25% drop in the value of this asset over a three to five year period. That’s a crash. I believe that income property specifically duplexes, triplex, and quadplexes, and specifically those in the $750,000 plus price point for multifamily right now in Denver is in a crash or a deep recession here, and I think it’s a great time to buy those properties.
I also worry about the value of my existing portfolio. Should I try to exit some of the properties that I bought several years ago? I wonder if I’m actually not evaluating them as conservatively as I’ve told myself I am for the last couple of years. So something interesting there. I’m cautiously optimistic that we’re at or near the bottom with respect to income properties, at least here in Denver. I would hypothesize that that same reality may be true in places like Austin, Texas, like Phoenix, Arizona, like Atlanta, Georgia, like Raleigh, North Carolina, like parts of Texas and parts of Florida and other parts of the Southeast as well. Okay, next step. Let’s talk about commercial real estate. I believe that this asset class has been absolutely devastated during the same period where the money supply increased 40% commercial real estate has declined a few percentage points. It’s down 18 to 20% from its peak valuation.
It’s down at least two to 5% from 2019 before the pandemic. So this asset class has absolutely gotten wrecked. Now, there’s a couple of different sectors within commercial real estate. So this is a chart from statista.com talks about retail office, industrial multifamily, but you can see that in every single one of these asset classes you’ve seen cap rate, which is a way to value multifamily assets increase by in some cases 30 to 40%. That’s a devastating loss. That means that the asset value normalized for income has decreased by 30 to 40%, and that is projections are actually fairly rosy. They think that the prices are going to come bouncing back in 2025 and 2026. I’m not quite as convinced by that for the projection years. So this is a deep, deep crash and I think that multifamily is going to face a toxic brew in 2025 of load maturation.
A lot of the loans that were taken out five, six years ago matured in 2024, and there’s a lot of extend and pretend going on, a lot of concessions granted by lenders. I think that at some point in 2025, as that has continued to ramp, and as we come up on one year anniversaries of extensions and those types of things, we’re going to start to see action being forced on the owners of these apartment complexes and they’re going to be forced to sell, just like the person who sold me that quadplex was forced to sell it, I believe due to market conditions here. The second thing that’s going on in addition to these load maturities wall, which by the way, a lot of people thought that was going to happen last year because that’s when you see a lot of those low maturities were actually stuck in 2024.
There could absolutely be further delays in that. Lenders are reluctant to have to foreclose on properties, so there could be a lot of noise in there. It’s going to be really hard to time this thing precisely, which is why I think you really have to know what you’re doing and really going to learn how to train yourself to spot a distressed deal or a really great deal in a lot of these markets around the country. The other thing that’s compounding the problems here in multifamily is the declining rents that we talked about when rents go down and people are willing to pay less per dollar of income that destroys asset values Here in the multifamily sector, one of the things that keeps rents from growing is when new apartments are constructed, when a new apartment is constructed, that’s nice and new and swanky in downtown Austin, the wealthiest or highest earners who are willing to spend on luxury apartments and move into that vacating the next apartment down, then the next people move into that and that chain reaction results in lower housing costs all the way down the stack.
And that’s why you’re seeing Austin, Texas rents reportedly down 22% year over a year. Austin, Texas is a lot of good things going for a lot of people will move into Austin, Texas over the next five to 10 years, but no metro grows at 7% per year. And when you increase your housing stock and multifamily by 7%, you will see rents coming down within that year. Last year they added 10% of their existing housing stock with a similar number of units here. So that’s going to take a toll on apartment valuations and you’re going to see rents go down in Austin. You’re going to see valuations for apartment complexes go down, and that could be a major buying opportunity for folks who go in now as opposed to a few years ago. So I think that’s going to be one of the most extreme examples in the country.
But you can see that Phoenix also is going to have a high percentage of its existing housing units added in terms of new multifamily stock. You see Charlotte way up there, you’ll see Raleigh, North Carolina way up there and in other markets, this impact will be negligible, right? New York is not going to see the same problems for downward pressure on rents as a place like Austin, Texas, or Phoenix, at least not from supply. Other considerations with demand come into play, but you won’t see massive supply forcing rents down in some markets around the country. So it’ll be a mixed bag regionally, but I think this is a big opportunity and you can bet that I’m starting to look at as many offering memorandums from syndicators and apartment complex buyers who are purchasing these types of assets in Austin, in Raleigh, in Phoenix, here in Denver, in my hometown and in a couple of other markets around the country because of this dynamic. All right, we’ve got to take another quick break. This week’s bigger news is brought to you by the Fundrise Flagship Fund, invest in private market real estate with Fundrise flagship fund checkout fundrise.com/pockets to learn more. We’ll be right back.
All right, thanks for sticking with us. Let’s jump back into my macro market outlook for 2025. Alright, last asset class I want to touch on is Bitcoin. I’ll also throw gold into this discussion. These assets are exploding in value and let’s be very, very clear. This is not just a response to the money supply. If Bitcoin and gold were truly inflation hedges, they would be rising in conjunction with the money supply and holding their value relative to inflation. They are not. They’re far, far outpacing growth in the money supply. In terms of asset appreciation, Bitcoin has grown 900% in the last five years. While the money supply has grown 40% gold has paced the s and p 500 in terms of the rate of its price growth over the last five, six years. And it has grown about 40, 50% in the last two years.
Actually had a big spike here in February and March in addition to being up almost 30% year over year, January, 2024 to January, 2025. So whatever these assets are, golden Bitcoin, they are not stores of value or hedges of inflation right now. There’s clearly something else going on. I’d call it speculation. I’m worried about it. I own no gold. I own no Bitcoin. Let’s talk next about my portfolio, the response to these situations and my tax philosophy. So what am I doing? I’m playing a lot of defense, by the way, this excludes my primary residence. So my financial portfolio is 30% in residential real estate, essentially all here in Denver, and including another major piece that is a rental property that I just purchased here in Denver. That property I just showed you there, the quadplex in downtown, I’m still 30% in index funds, but that’s a major departure from what was previously almost 75% of my portfolio and index funds.
I’m 30% in cash. That’s a huge cash position for me, and I’m 10% in bonds having reallocated 40% or 50% of my respective retirement account portfolios and HSA investment portfolios to bonds. I’ve stopped buying stocks and I’m stockpiling additional cash. I sold a huge percentage of my after tax index funds and I will pay taxes on those gains I told you about that paid off quadplex, reallocated those properties. I will likely take some of this cash and return it to private lending. I was doing hard money lending or private lending last year. I’ll likely do another one of those. And I’m reviewing every commercial real estate pitch I can get my hands on for office or apartment complex acquisitions in the hardest hit markets. Okay, let’s talk about taxes here. If you rebalance or reallocate your portfolio, you need to understand that there will be tax consequences for that, and those are real.
If one has a hundred thousand gain, for example, and you pay tax and you invest a $65,000 after tax balance into the market, it’s not one-to-one after tax, it’s much worse. That tax drag will grow that $65,000 to $168,000 over the next 10 years. The a hundred K, if you just never realized the gain would grow to $259,000 over that same time period. And if you were to pay tax at the same marginal rate, you would not be left with $168,000. You’d actually have more at this point. So it is a real inefficiency to make moves in your portfolio willy nilly here. I made my moves despite knowing this for three reasons here. First, I’m optimizing for post-tax net worth that I can spend or use today, not the terminal number 10 years or 30 years from now in my portfolio. That’s a major factor.
I want this number because the $65,000 after tax is what I can actually use to pay for trips or vacations or those types of things today in my personal life with complete freedom. The second reason I was willing to make this tax consideration is because I believe that in the future, taxes will go up, and that will also include adjusting for inflation here. So I believe that, for example, when I go to sell this $259,000 portfolio in 10 years, my tax rate could be 30, 40% at that point, which actually makes this a better after tax move in some ways, or at least minimizes that tax impact. So that’s a fundamental long-term bet. About half of the BiggerPockets money. Audience agrees that tax rates will be going up long-term and a slightly less than half think I’m crazy and think they’ll be about the same.
I also only realize these gains. I’m only doing these moves because of how I feel about the broader market, and I believe that I’ll be getting a better risk adjusted return with the reallocation, which will offset some of that tax impact over the next couple of years. Hopefully that makes sense, everybody. But yes, I thought about taxes in this. If you are considering making big portfolio moves, you definitely want to talk to a tax planner. We’ve got a bunch on BiggerPockets. You go to biggerpockets.com/taxes or you go to biggerpockets.com and on the nav bar it will say Tax pros. Just click on that and you’ll be able to find several to interview and think through any considerations. You also find financial planners who can talk to you about certain moves. So that’s the show. That’s what I have today. I know that a couple of the moves that I’m making could be missed opportunities.
If the market continues to compound for the s and p 500, I could be way less wealthy over the next 10 to 20 years having sold. Now, I know that people will disagree. I know that some people will laugh at me. I know some people will get angry with me, and some people will do the digital equivalent of telling me that I should know better than to attempt to time the markets or make drastic moves like this based on macro conditions. And I also know that now that I’ve actually acted on these and now that I’ve actually given this presentation, they are sure to be immediately wrong and I’ll be humiliated and embarrassed by market behavior over the next year. I hope that at the very least, I get some thoughtful and realistic challenges from everybody who’s watching this. And I specifically and am most for challenges to my fundamental observation about the money supply.
This money supply observation is really driving a lot of the rest of my thesis here. I believe, again, that the growth in asset values in the last two to three years is due to an extraordinary amount, amount of speculation and not growth in the money supply. And if somebody has a counterpoint to that specifically with a different definition of the money supply, I’d be very grateful to hear that and could update my thoughts and feelings on the market accordingly. So please link to that in the comments section here on YouTube or again, send me an [email protected]. Thank you so much for listening to me today. It’s a true honor and privilege to step in for Dave and to share my views on the macro environment with you. Again, please feel free to reach out with any questions.

 

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In This Episode We Cover:

  • Scott’s exact portfolio allocation: what he’s selling and what he’s holding NOW
  • The speculative bubble that could be very close to (if not already) popping
  • Will interest rates rise further despite market volatility?
  • The biggest buying opportunities for investors to score killer deals on investment properties
  • The critical risk to index funds that investors MUST be aware of
  • Could commercial real estate prices crash even more, creating substantial potential margins for investors?
  • And So Much More!

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Is the mortgage industry still safe? The Consumer Financial Protection Bureau (CFPB) has been ordered to halt all work while awaiting a new Trump-appointed director. While you may not often hear about this government agency, the CFPB plays a huge role in the mortgage industry and is the reason 2008-style lending practices have not been brought back to the market.

With uncertainty surrounding the CFPB—will it be downsized, shut down, or remain unchanged?—many in the mortgage and real estate industries are concerned about what’s next. Chris Willis, host of The Consumer Finance Podcast, joins the show to share how the Trump administration is thinking of restructuring the CFPB and limiting the scope of its protections.

Will the new CFPB director scale back some of the more inclusive mortgage lending practices or keep them the same? Could your bank account and credit card fees change due to a less strict CFPB directive, and what does this mean for YOU getting your next mortgage? This agency has bigger effects than many Americans realize, so we’re sharing what’s coming next.

Click here to listen on Apple Podcasts.

Listen to the Podcast Here

Read the Transcript Here

Dave:
Hey everyone, I’m Dave Meyer and welcome to On The Market. Today we’re tackling the looming question, what happens if the Consumer Financial Protection Bureau is dismantled or limited in scope and what it means for the real estate industry? Because if you’re unaware, the CFPB played a big role in regulating the mortgage industry after the 2008 crash and changes could mean big changes for the mortgage industry and housing market altogether. Joining me today is Chris Willis, partner at Troutman Pepper and host of the Consumer Finance Podcast to give his insights into how the CFBs fate could reshape real estate financing. Let’s jump in. Chris, welcome to On the Market. Thank you for joining us today. It’s my pleasure. Thanks for having me on. I’m really excited about our discussion today. Me too. I am eager to learn from you about this important topic. So I’m hoping we can start with the origins of the CFPB. Can you just tell us a little bit about when and how it was created?

Chris:
Sure. It’s a pretty new agency. Actually. It didn’t exist 15 years ago. It was created by a piece of legislation in 2010 called the Dodd-Frank Wall Street Reform and Consumer Protection Act or something like that. And that was a statute that Congress passed in 2010 in the aftermath of the subprime mortgage crisis and the recession that we had starting in around 2008, the Dodd-Frank Act was 2000 plus pages long, but one portion of it created this new federal agency called the Consumer Financial Protection Bureau, and it was intended to do a couple of things. One is to transfer the primary authority for consumer financial protection away from the federal banking regulators who had had it prior and consolidated into a new agency, but also to give the agency powers over non-bank consumer financial services companies too. So it was supposed to cover both banks and non-banks.
And so it really was designed to cover the entire waterfront of consumer financial protection in the United States with the theory behind it being that we had that recession in 2008 because of irresponsible lending behavior by mortgage lenders, which caused a real estate bubble, and then the recession that we all lived through starting in 2008, and that we needed a very powerful, very well-funded and well-equipped regulator to prevent something like that from happening again. That was the concept of Dodd-Frank. So the statute was passed in 2010 and the CFPP began its operations a year later in July of 2011.

Dave:
Alright, great. And what protections specifically were in mind here?

Chris:
So there were one specific to mortgage lending, but then the drafters of the legislation didn’t stop there. They essentially thought about every potential thing that consumer advocates would want an agency to be able to do, and they put all that in the legislation. So specific to mortgage, there was a whole section of Dodd-Frank that imposed new requirements on mortgages, most specifically a requirement of having an ability to repay analysis. In other words, you can’t make a mortgage loan to someone unless you figure out and document that they have the income to repay the loan. That was one of the faults that everybody thought had led to the subprime mortgage crisis before. But the CFPP had much more power than that. It had the authority to take enforcement actions against all the preexisting federal consumer protection statutes, which cover a lot of areas, credit reporting, debt collection, electronic fund transfers, everything.
It had the ability to engage in rulemaking, it had the ability to do supervisory exams to come into companies and do these very thorough examinations of their operations. And then overall, it also was given a brand new power and that was the power to conduct both enforcement and rulemaking and supervision with respect to any practice that the agency deemed unfair, deceptive, or abusive. So it had really a license to seek out any behavior in the market that it felt was harmful to consumers and take action against it, whether there was a specific law prohibiting it or not, and it could impose enormous fines on industry players for violating any of those laws, including this unfair and deceptive practices stuff.

Dave:
Okay. So it seems like, and correct me if I’m wrong, Chris, in summarizing this, that there is two sort of things going on. The first was a consolidation. It sounds like there was previous regulators who were doing some of the loan protections and some of the more banking related things, and then the new part of the CFPB was this regulation and enforcement of fairness within the consumer finance world.

Chris:
That’s right. Yeah. The regulatory scheme was fragmented between the federal banking regulators, like the OCC has authority over some banks. The FDIC has authority over others. The Federal Reserve has authority over others, and then non-banks were really governed just by the Federal Trade Commission, and so they consolidated those powers in an agency and then increased its powers a whole lot.

Dave:
Okay. So this was 14 years ago. What has the CFPB been up to in those 14 years and has it been

Chris:
Effective? Sure. So the bureau has had three different directors. So the way the bureau works is there’s a single director who’s appointed by the president and confirmed by the Senate who is the one and only leader of the agency. So the original leader of the agency from 2011 to 2017 was a man named Richard Cordray. He had previously been the Attorney General of Ohio, then he was the CFPB director. Then when President Trump was elected and took office in 2017, there was an acting director and then another permanent director named Kathy Kraner. And then during most of the period of the Biden administration, the director of the CFPB was a man named Rohit Chopra, who had formerly been an FTC commissioner before that. And so the agency has focused on different things in different administrations, as you might expect of any federal regulatory agency during its early days.
Right after it stood up, there were a lot of required rulemakings that the CFPB had to do. They were ordered by Congress, for example, to do a comprehensive set of mortgage related regulations, and they had to do those at the very inception of the agency. So they wrote those rules, but then started taking a lot of pretty aggressive enforcement actions because again, it was a democratic administration and Rich Cordray was a pretty vigorous consumer advocate during the Trump administration. The agency continued to do all of its work and still was doing a lot of supervision and a lot of enforcement, both with respect to banks and non-banks, but there was a little less sort of fury around it, I would say. And then during the Biden administration with Rohit Chopra as the director, the agency became very, very aggressive towards industry in terms of creating a lot of new requirements and duties that were said to be required by law, which the agency was just sort of coming up with and calling them unfair or deceptive or abusive practices. And the agency had a very sharp tongue, I would have to say, in its public statements towards industry. Now you ask whether the agency’s been effective. So that’s kind of an ideological question.

Dave:
Sure. Yeah.

Chris:
So certainly the consumer advocates in this country would say it’s been extremely effective in providing protections to consumers and getting money refunded from financial services companies who allegedly violated the law. But there’s also a cost side to the agency. If you look at it from the industry standpoint, the agency imposes a huge amount of cost on the industry and creates a lot of uncertainty when it gets in these very aggressive posture like we’ve had for the last four years, because a financial institution can get afraid to do anything to launch a new product to anything for fear of how the CFPB may react to it. And it does stifle a lot of innovation and product availability and makes the products more expensive. So it kind of depends on which side of the ideological camp you want to be on in terms of saying was the agency effective or not.

Dave:
Got it. Okay. I do want to get to in a couple of minutes the current situation and what’s going on with the CCF PB now, but let’s just imagine it was a couple months ago before all of the current changes are going into place with the Trump administration, how has the CFPB in recent years been involved specifically in housing? Because really what our audience here on the market is most interested in probably. Sure, of course.

Chris:
And the ccf PB isn’t really a housing regulator, like HUD is a housing regulator. The CFP B’S touch with housing is really because they’re a consumer financial regulator, is on the mortgage lending
Business and everything related to mortgage lending. So the CFPB, as I said early in its existence was required by Congress to promulgate a big series of mortgage lending related rules. And so if you got a mortgage loan before 2010 and then you get one today, you’ll notice there’s a pretty big difference in the underwriting process and all the documents you have to sign and the disclosures and all the information you have to provide to your lender. Those are all required by the CFPB mortgage regulations that were passed in an effort to make sure mortgages weren’t made to people who can’t afford to pay them. And so the CFPB did a lot there. And then they also did a lot of rulemaking with respect to mortgage servicing. So remember in 2010 when the agency was created, we were having a lot of mortgage foreclosures in this country. And so there was a great desire to create more protections for consumers whose houses might be foreclosed on. And so there’s a whole series that’s called Regulation X of mortgage servicing regulations that are designed to create alternatives to foreclosure for people to avoid having them lose their homes if there’s any way they can reach some sort of accommodation or a payment plan or things like that. And so in the mortgage world, the CFPB was responsible for creating and then monitoring for compliance with those mortgage lending rules.

Dave:
So let’s shift gears now to talk a little bit about what’s going on with the current administration and the CFPB, but we do have to take a quick break. We’ll be right back. Hey everyone. Welcome back to On the Market. I’m here with Chris Willis. We’re talking about the CFPB, and Chris gave us an exceptional background about the CFPB. Chris, I’d love to now just talk to you a little bit more about what’s going on with the current administration. Can you fill us all in?

Chris:
Sure. Well, and actually the situation is somewhat fluid and still changing,
And even today the day we’re recording this, there was a preliminary injunction hearing in a court in the District of Columbia where the two sides were arguing about what the administration is actually doing with the CFPB, with the CFPB employees union, saying essentially that the administration is trying to completely shut the agency down, which they claim is illegal because it was provided for by an act of Congress versus the administration saying, no, we’re not really shutting it down. We may have said something like that at the beginning, but now we have decided we’re going to keep the agency open, we’re just going to rightsize it and make it more efficient and focus it more on what its actual statutory mission is. So there’s mixed signals being sent.
What has happened so far is all of the CFPs probationary employees that is people who’ve been hired within the last two years have been laid off. That happened a couple of weeks ago, and the CFBs staff was told also a couple of weeks ago just to stop working on almost everything. And so the agency’s not doing anything right now or hardly anything. They’re not answering their emails, they’re not answering the phone, you can’t get them. And all the matters that we have with them are just sort of sitting in limbo. They seem to be dismissing some of their enforcement cases and not dismissing others. And supervisory examinations are on hold right now, and the administration is certainly reevaluating a number of the rulemaking efforts that the CFPB did in the past couple of years, none of which is mortgage related, but they’re revisiting those as well.
So it’s not clear exactly how all of that is going to come out. But the administration has nominated Jonathan McKernan to be the director of the CFPB. He had his senate committee hearing last Thursday and said he wasn’t going to shut down the agency and he would follow the law and running the agency. Our suspicion is he came from the FDIC, so he’s already a regulator, is that he’ll run the agency more like what we saw during the last Trump administration, which didn’t involve a shutdown of the agency at all, but just having the agency prioritize on more mainstream enforcement of the laws that we have rather than creating a lot of new duties and requirements for industry like we saw during the past four years.

Dave:
I see. So it seems like it’s going back to sort of the ideological breakdown that you mentioned earlier, that perhaps they’re just installing someone who’s more ideologically aligned with the Trump administration,

Chris:
But it doesn’t look to me like the agency’s going to go extinct as a result of what’s going on, although there was some indication or threat of that in the early days of the administration change, but even in the litigation, in the preliminary injunction hearing today, the government lawyers came in and said, no, we’re not shutting the agency down. We realize it has to exist. We’re just making it smaller and more efficient, essentially.

Dave:
Okay. Yeah, I was seeing the same things. I think honestly, when we reached out to you to bring you on as a guest, there were a lot of headlines out there that were saying that the CFPB was essentially being dismantled, whether legally or in practice, that a lot of these rules would go away, but it seems like perhaps it’s just being narrowed in scope.

Chris:
I think that’s right. And another thing to keep in mind too is let’s say the agency is reduced in size, that doesn’t necessarily mean the rules go away, particularly the mortgage related rules that your listeners will be most interested in, because keep in mind, those rules weren’t discretionary by the CFPB. They were mandated by Title 14 of Dodd-Frank. The CFPB had to enact those rules, and moreover, the mortgage lending industry needed them because if you just look at the law in Title 14 of Dodd-Frank, it imposes these various requirements, but it doesn’t give the details that are necessary to allow industry to actually comply with it. And so there’ve been a couple of cases where the constitutionality of the CCF PB was challenged in the US Supreme Court, and in those instances, the Mortgage Bankers Association filed a statement with the Supreme Court saying, we can’t afford to have the CFBs mortgage regulations go away. We rely on those to do business. And so not only because they’re mandated by statute, but also because they’re needed by industry regardless of what downsizing or whatever happens to the CFPB with the administration, we shouldn’t anticipate that those mortgage lending rules will vanish as if they were never in existence.

Dave:
That’s when I was reading about this was one of my primary concerns was I will be honest, I think that a lot of the mortgage changes that went into place with Dodd-Frank were necessary. If you just study what happened in 2008 in the housing market, so much of it was due to a lack of rules in the mortgage lending. And you fast forward to today where a lot of people do have fears about a housing market crash, but if you look one level deeper and you look at the quality, the credit and the mortgage delinquency rates, it’s nothing like what it was in 2008. That’s the quality of mortgages and the ability of the average American mortgage holder to pay their mortgage is so much better now than it was 15 years ago.

Chris:
And

Dave:
I’m sure there are trade-offs to that, but I think a wholesale removal of those rules would at least increase the risk of bubbles forming again in the housing market.

Chris:
But that can’t happen because the thing is, even if there was no CFPB title 14 of Dodd-Frank is the law in this country, and it requires that ability to repay analysis. The CFPB just provided the details of how to do it in its regulations, but Congress mandated it and you couldn’t do away with that without amending Dodd-Frank and nobody’s got the votes to do that in the

Dave:
Senate. Okay. So I know this is just trying to read the tea leaves, but has the administration offered any ideas on what parts they would try and scale back? Is it more of that discretionary fairness stuff that is not designated by law or have they not provided that level of detail yet?

Chris:
Not a lot of detail, just sort of broad brushes. So if you were to listen to Mr. Kernans testimony in a Senate hearing last week, he characterized the CFBs behavior over the last four years as being significantly outside its jurisdiction where the agency tried to regulate a lot of stuff and make industry do a lot of things that it really didn’t have jurisdiction to do, and it strayed from the mandate that was given to it in Dodd-Frank and he pledged to sort of bring it back to what it was intended to do. That’s sort of the broad brush of what he said, and to be honest, my perspective is the CCF PB did a lot of stuff that was outside of its jurisdiction over the last four years and was very cavalier about it. But the thing is, again, going back to mortgage, those are within the CF PB statutory mandate. It’s right there in Dodd-Frank. So no, they haven’t been specific about specific things, but the general idea is to bring the CFPB back to the mainstream of what it was intended to do.

Dave:
Are there any ways outside of mortgage regulation that you think our listeners or the average American are touched by the work of the CFPB?

Chris:
Lots of places, actually. So I’ll give you a couple of examples. One thing that you may have seen over the past couple of years is that a lot of large banks have stopped charging overdraft fees for their checking account holders.
And so that was an area of significant pressure by the CFPB on depository banks. They basically took the position that those overdraft fees were unfair and they pressured industry to get rid of them and took a couple of enforcement actions and did a lot in supervision with respect to that and the current state of play with regard to overdraft fees as a result of that pressure that was applied to industry, that’s one of the things that everyday Americans probably experienced because we all have checking accounts. Another area that I think has been significant in terms of the activities of the past four years is there was a huge federal initiative across all the agencies, not just the CFPB, but like the federal banking regulators and the Department of Justice relating to redlining this idea that mortgage lenders might exclude majority minority areas from their mortgage lending.
And the way that the regulators applied this over the past four years was basically to say, for any given mortgage lender, are you making fewer loans in these majority minority areas than your peer lenders are? And if you were, then you were guilty of redlining. What that did was it created a lot of regulatory pressure for mortgage lenders to try to get as many loans as possible in those high minority areas. And so they started introducing a lot of special programs devoted to essentially subsidizing loans in those areas, mainly with down payment or cash to close assistance. And that was a direct result of the redlining pressure that was brought about by the last administration. That’s something that’s probably going to change under the due administration, but that’s something that a number of real estate investors might’ve experienced because it created more affordability for owner occupied single family homes in those high minority areas in cities across the country.

Dave:
What about credit cards? Are those types of things also regulated by the CF PPA

Chris:
Hundred percent, absolutely. Any consumer financial product or service is in the CFBs jurisdiction. So it’s credit cards, auto loans, mortgage loans, student loans, money transmission, like when you send a friend a money through a money payment app or something that’s within their jurisdiction too. Credit reporting is also within their jurisdiction. All of that stuff falls within their jurisdiction. Credit cards was an area that they did a lot of work in. Obviously, they had a rule that they finalized towards the end of this administration to try to limit the late fees on credit cards to I think $8, something like that. Previously the limit had been $35 and the bureau proposed a rule and then finalized it to reduce that to $8. But then that rule was subject to a legal challenge by industry and never went into effect, and now the agency is going to decide whether it wants to continue defending that rule or not.

Dave:
Okay. I do, Chris, want to shift our conversation to help our audience understand what they should keep an eye out for in the coming months as some of this information unfolds. But we do have to take one final break. We’ll be right back. Welcome back to On the Market. We’re here with Chris Willis talking about the CFPB. We’ve gotten a great history lesson and some context from Chris here. Chris, I’m hoping that you can help me and our audience understand what comes next. I know a lot of this is unfolding, so what should we be keeping an eye out for just as ordinary Americans, but also as real estate investors? Because the CFBB does have a big hand in the mortgage industry.

Chris:
I mean, I think in general what I’m watching, and therefore what I think other people would be interested in watching is exactly what changes do take place, especially after a permanent director is confirmed to lead the CFPB. As I said, Jonathan McKernan is the nominee. I’m expecting that he’ll be confirmed by the Senate within the next couple of weeks. He’ll then take office and then we’ll start to see what the CFPB does. My guess is you’ll see them start to roll back some of the more aggressive actions of the last administration of the bureau under Rohit Chopra. And a lot of that is not mortgage related. There was not really a lot of action on mortgage towards the tail end of the administration.
So you could see things like the credit card, late fee rulemaking go away, but all that means is people have the same credit card, late fees that they have today. It never changed actually. But I think to me, the biggest potential impact on real estate investors was what I was mentioning before about this sort of subsidization of owner occupied housing in majority minority census areas in cities across the United States. That was a major product of a big initiative by the last administration that I think is unlikely to be continued. And so there could be a reduction in the affordability of those houses because those cash to close subsidies may go away and they were getting quite large towards the tail end of the administration.

Dave:
And where’d those subsidies come from? Who was paying for those?

Chris:
The banks or mortgage lenders were paying them.

Dave:
Oh, okay. So it was self-selected because as you said, there was fear by the institutions that they wouldn’t be meeting this minimum. Correct. And so they were willing to subsidize buyers in these neighborhoods to make sure they hit that quota.

Chris:
And the thought was, and this I think is correct, they understood the mistake of reducing the underwriting criteria for the loans because then that just gives you a loan that’s likely to default.
So they weren’t really relaxing the income credit, other types of requirements for mortgage loans, but they were subsidizing the cash to close, figuring that if I help somebody with cash to close, but they have the income to make the monthly payment, the loan’s less likely to default. And I think that was a smart way to do those programs, honestly. But I think for people who needed that extra cash to close in those areas, I think that is going to sort of wither away in terms of its availability because the regulatory push that caused it is also likely to go away.

Dave:
I’m curious, are there other areas of consumer finance protection regardless of current policy changes that you think our audience should be paying attention to?

Chris:
Well, another one that people experience all the time themselves is auto finance. People buy cars and most people don’t pay cash for cars. They buy cars on credit.
That was another area that the CFPB was very active, but also state regulators as well. And the Federal Trade Commission had actually just promulgated a rule that required a lot of disclosures associated with the auto purchase and auto finance process. It was a rule directed at auto dealers. That rule was the subject of illegal challenge, again, by industry, by the auto dealer associations. And a court just set the rule aside on procedural grounds. That means the FTC would be free to revisit it if it fixed the procedural problem, but it’s an open question as to whether the FTC is actually going to do that or not. But it had in it, for example, in any advertisement, the dealer was going to have to advertise the full all in price of the car except for taxes. So anything like dealer dock fees or other stuff like that that you’d be required to pay would’ve had to have been included in the price in that regulation. And although I think the FTC is not likely to revisit that, the California assembly just introduced a bill to make those same requirements in the state law in California. So you may see states take some of these things that the CFPB was trying to do and enact them at the state level. Not all states, of course, but states like California or New York or Illinois or Massachusetts may have some of those come into play.

Dave:
Well, Chris, this has been super helpful. I have learned a lot, and honestly, it eased some of my fears a little bit. It sounds like some of the major mortgage regulations that came from Dodd-Frank, it does not sound like really anyone’s talking about rolling those back.

Chris:
No, no, they’re not only because they’re required by law. But again, the industry needs them and the industry has said so publicly on numerous occasions. This is the Mortgage Bankers Association. It’s not just some random person. So I do not think those are at risk. And so I don’t think we’re going to return to the days of teaser rates or interest only mortgages or no dock mortgages. I don’t think that can happen again.

Dave:
Okay. Yeah. And of course, I’m sure audience people fall on different parts of that ideological spectrum, but I think as real estate investors, people generally tend to agree that the strength of the mortgage industry is important for our industry. And so I’m sure people will be glad to hear that. Chris, thank you so much for joining us today. We really appreciate it. It’s my pleasure. Thanks for having me on. And thank you all so much for listening to this episode of On The Market. We’ll see you next time.

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In This Episode We Cover

  • The Consumer Financial Protection Bureau (CFPB) explained, what they do, and how they influence mortgage lending
  • Why the Trump administration is taking aim at this agency and halting work
  • The one piece of legislation protecting strict mortgage laws in America (could it be changed?)
  • The difference between Biden-led and Trump-led CFPB initiatives
  • How the CFPB affects your mortgages, credit cards, and bank accounts
  • And So Much More!

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After President Trump refused to rule out a recession on Sunday, the stock market’s dramatic free fall on Monday showed how unpredictable relying on Wall Street can be when planning your financial future.

Trump said in an interview that aired Sunday on Fox News, “There is a period of transition because what we’re doing is very big. What I have to do is build a strong country. You can’t really watch the stock market.”

The Dow Jones Industrial Average fell 890 points the following day, down 2.1%. The S&P 500 fell 2.7%, while the tech-heavy Nasdaq Composite fell 4%, its largest decline since 2022, and into correction territory. All the major indexes fell below their Election Day levels.

In light of the stock market’s recent roller coaster ride, real estate remains a rock-solid investment if you prefer drama to be on the stage and big screen, not in your asset portfolio. Even Warren Buffett, who has mastered the art of picking the right stocks, admitted after the 2008 financial crash: “If I had a way of buying a couple hundred thousand single-family homes and had a way of managing them … I would load up on them. I would take mortgages out at very, very low rates.”

The Draw of Real Estate

Widening the lens, if the stock market is such an up-and-down investment, why do so many people invest in it?

Real estate is rarely passive, especially when starting out, leveraging, and building a residential property portfolio. Tenants, repairs, and turnover, now against the backdrop of higher interest rates and soaring insurance costs, put it out of the comfort zone for most investors with busy lives. However, not being hands-on—as with stocks—does have a downside.

“When you hit retirement, you do not need a lump sum in an IRA or 401(k),” Grant Cardone told GoBankingRates last year. What you need when you retire at 65 or 68 years old is income to take care of your expenses. I would look for vehicles that, when you retire, are going to pay you money every month.”

Cardone expounded: “When I was 30 years old, I started looking for the asset class where I couldn’t lose money. That means I can’t just save money because money is going down in value. I can’t be in the stock market because I could lose money.”

Given that real estate produces passive income, appreciates over time, and offers tax write-offs, Cardone rightly points out: “There’s only one asset class that does all that. It’s not gold, silver, Bitcoin, or the stock market—it’s real estate.”

The Case for Stocks

There are many recent instances where the case for the stock market has been extremely compelling, outstripping anything real estate has been able to match. Over the past five years, innovative GPU maker Nvidia, responsible for facilitating the artificial intelligence (AI) boom, has seen its share price rocket—with a 2,000+% increase over the last five years!

However, even Nvidia employees likely had no idea their company would become so successful. Being able to predict that kind of explosive growth is rare—otherwise, we would have all invested. 

Even if you didn’t buy Nvidia stocks or those of other tech giants such as Apple, Amazon, or Microsoft and put your money in real estate-related stocks, such as various well-performing REITs, Home Depot, and Bankrate’s picks—Champion Homes and Builders FirstSource—the stock market would have done well for you. Crucially for investors, it would have been without the hassle of dealing with rental properties. 

To Cardone’s point, however, for the average investor without a nuanced understanding of analyzing a company’s performance portfolio as a master investor like Warren Buffett can, the stock market does seem a bit like a fairer casino, but still a casino. You assume you’ll be dealt a decent hand but never truly sure. While real estate certainly has its risks, it’s not as pronounced and grants you more control. Issues can be mitigated, such as removing bad tenants, performing repairs, and investing in the right areas.

When you factor in the benefits of appreciation, leverage, cash flow, and depreciation, real estate becomes appealing for investors who don’t mind a less passive approach than the stock market.

A Tough Spring

Traditionally, one of the key advantages of owning real estate over stocks has been potential cash flow. In a high-interest rate environment like ours, it’s been hard to make a case for this. This means that, in the short term, unless you buy your real estate for all cash or with a large down payment, you won’t be cash flowing. 

Coupled with high home prices, it’s unlikely that this spring will see a thaw; in that respect, you will be buying real estate for the same reason most people buy stocks: for long-term wealth accumulation. Over time, the stock market and real estate have consistently risen. The advantage of real estate is that even in a challenging market, the tax benefits make owning a portfolio that pays for itself worthwhile.

“While our National Index continues to trend above inflation, we are a few years removed from peak home price appreciation of 18.9% observed in 2021 and are seeing below-trend growth over the history of the index,” Brian D. Luke, chartered financial analyst, head of commodities, real and digital assets at S&P Dow Jones Indices, told Forbes.  

Current Real Estate Investors Are in a Good Position

For investors who currently own real estate, the difficult buying conditions will only increase demand for rental properties, meaning you won’t have a problem finding tenants to pay market rents. Also, the general lack of housing inventory means home prices are likely to keep increasing.

“I don’t expect to see a meaningful increase in the supply of existing homes for sale until mortgage rates are back down in the low-5% range,” Rick Sharga, founder and CEO of CJ Patrick Company, a market intelligence and business advisory firm, told Forbes.

“More often, it seems the case that home prices generally keep rising, so the goalposts for amassing a down payment keep moving, and there’s no guarantee that tomorrow’s conditions will be all that much better in the aggregate than today’s,” Keith Gumbinger, vice president at online mortgage company HSH.com, said in the same article.

Meanwhile, the stock market’s volatility this week has sent fearful investors straight towards bonds. The 10-year Treasury yield has fallen to 4.3%, down from 4.5% at the end of February and 4.8% in January. This matters a whole lot to real estate investors, as 30-year mortgage rates are typically tied to the T-bill’s yield. As a result, we’ve already seen some mortgage rate relief—rates fell to 6.8% as of Wednesday, down from 7.1% just a few weeks ago.

Whether the downward pressure on T-bill yields continues is up in the air, as the latest CPI report seemed to calm investors somewhat, ending the stock market’s tailspin.

Final Thoughts

In an ideal portfolio, stocks and real estate work hand-in-hand. I know people who have done phenomenally well by owning tech stocks (Nvidia in particular), then sold some of their stocks and purchased real estate, which they have paid off quickly as share prices continued to rise, creating a stress-free real estate investment scenario. 

But to a tech and Wall Street outsider such as myself, pulling off this remarkable feat seems a bit like threading a needle in a hurricane. Like many real estate investors, I was drawn to the asset class because I understand it, and I know I won’t wake up as many stockholders did on Monday morning to see their wealth had fallen off a cliff thanks to a few inopportune words during a TV interview.

Investing is what you make it, and while I recognize I may not be maximizing my wealth, I sure as heck am protecting it.



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Inflation is a silent thief that erodes your wealth, reducing what your money can buy over time. For high-income earners and small business owners, it’s more than just a rising grocery bill—it’s the risk of watching your hard-earned wealth shrink, even when it’s “safely” invested in traditional vehicles like bonds, money markets, or CDs.

But here’s the good news: Real estate offers a powerful strategy to not only protect your buying power but grow your wealth. Here, we’ll break down why real estate is one of the most effective inflation hedges and how you can leverage it today.

What is Inflation, and Why Does It Matter?

Inflation is the gradual rise in prices over time, meaning your money loses purchasing power. A dollar today doesn’t go as far as it did five years ago, and that trend isn’t slowing. 

Consider these U.S. inflation rates from recent years:

  • 2023: 4.1%
  • 2022: 8% (the highest in over 40 years)
  • 2021: 4.7%
  • 2020: 1.2%

If your portfolio isn’t growing faster than inflation, your wealth is effectively shrinking. While traditional investments like bonds and CDs are designed to be “safe,” their low returns often fail to keep up with inflation—leaving your purchasing power in the dust.

Case Study: Two Investors, Two Very Different Outcomes

So why should you care? 

Let’s take a look at two investors who started with the same amount of capital in 2019 but took very different approaches to managing their wealth. Their results over five years tell a powerful story about the impact of inflation on investment choices.

Investor A: The traditional portfolio approach

Investor A followed the standard playbook: a diversified portfolio of 60% stocks (S&P 500) and 40% bonds. On the surface, this strategy seemed solid—historically, stocks have provided strong returns, while bonds offer stability. But inflation had other plans.

Over five years:

  • The stock portion of the portfolio grew at an average annual return of 11.6%.
  • The bond portion, however, lagged significantly, returning only 0.6% per year as rising interest rates hurt bond prices.

Adjusting for an average inflation rate of 4.5%, the real returns tell a different story:

  • Stocks: 11.6% – 4.5% inflation = 7.1% real return
  • Bonds: 0.6% – 4.5% inflation = -3.9% real return

By 2023, Investor A’s $1 million portfolio had grown nominally to $1,121,000, but inflation had eroded its real value. Adjusted for purchasing power, it was now worth only $912,000—an 8.8% loss in real wealth.

Investor B: The inflation-resistant real estate portfolio

Investor B took a different approach, allocating 50% to equity real estate (multifamily and commercial properties) and 50% to real estate debt (notes and lending opportunities). This strategy leveraged both appreciation and predictable income streams.

Over five years:

  • The equity real estate investments averaged a 12% annual return, benefiting from appreciation and rental income growth.
  • The real estate notes provided stable, fixed returns of 8% annually.

After adjusting for inflation:

  • Equity real estate: 12% – 4.5% inflation = 7.5% real return
  • Real estate notes: 8% – 4.5% inflation = 3.5% real return

By 2023, Investor B’s $1 million portfolio had grown to $1,276,000 nominally, but more importantly, it held $1,038,000 in inflation-adjusted value, preserving purchasing power and generating a real wealth gain of 3.8%.

The bottom line

Investor A followed the conventional wisdom of balancing stocks and bonds—but in an inflationary environment, bonds underperformed, dragging down total returns. Meanwhile, Investor B leveraged real estate to create both appreciation and inflation-adjusted income, ensuring their wealth not only kept up with inflation but continued to grow.

How Real Estate Protects and Grows Wealth During Inflation

So why is real estate such an inflation-resistant investment? There are three main reasons.

1. Real assets appreciate over time

Real estate has a historical track record of appreciating faster than inflation. Whether you’re buying rental properties, managing commercial assets, or investing passively, real estate assets have consistently outpaced inflation over time.

2. Rents rise with inflation

Unlike fixed-income investments like bonds, rental income tends to grow alongside inflation. For example, a $1,500/month rental in 2013 could now rent for ~$2,200/month—an average annual increase of ~4%.

3. Tax advantages amplify returns

Real estate offers unique tax benefits, like depreciation, that shelter income from taxes. This allows investors to reinvest more of their earnings, compounding their wealth faster.

How to Beat Inflation with Real Estate

These four steps will help your real estate investment rise above inflation.

Step 1: Diversify with inflation-resistant assets

Focus on asset classes that perform well in inflationary environments, such as:

  • Multifamily properties: High demand and steady rental income growth make these properties a reliable hedge against inflation.
  • Residential rentals: Single-family homes and small multifamily properties not only appreciate over time but offer increasing rental income potential. 
  • Self-storage facilities: These assets thrive in various economic conditions, with flexible pricing models that adjust quickly to inflation. 
  • Real estate notes: Offering fixed, predictable income, real estate debt investments provide stability even in volatile markets.

Step 2: Prioritize cash flow and equity growth

  • Cash flow: Properties with strong rental income ensure consistent returns that grow with inflation. 
  • Equity growth: Real estate appreciates over time, providing compounding returns that far outpace inflation.

Step 3: Partner with experienced operators or build your own deals

Success in real estate often means working with the right team. Whether you’re an active investor managing your own deals or a passive investor seeking strong operators, look for:

  • A proven track record of navigating economic cycles.
  • Transparency in communication and fee structures.
  • Investments in markets with strong job and population growth.

Step 4: Leverage tax benefits

Accelerated depreciation allows you to offset taxable income, increasing cash flow. For example, a $500,000 syndication investment could generate ~$150,000+ in year-one depreciation, significantly reducing your tax liability.

Take the Next Step Toward Inflation-Resistant Wealth

Inflation isn’t going anywhere—but with the right strategy, you can protect and grow your wealth. Real estate offers a proven solution through consistent cash flow, long-term appreciation, and unique tax benefits.

  • Want to dive deeper into wealth-building strategies? Check out my book, Money For Tomorrow, where I break down exactly how to build and protect generational wealth through smart investing.
  • Follow me here on BiggerPockets and DM me the code INFLATIONPROOF—I’ll send you my free lead magnet to help you take action now.

Protect your wealth legacy with an ironclad generational wealth plan

Taxes, insurance, interest, fees, bills…how can you acquire wealth, let alone pass it down, when there are major pitfalls at every turn? In Money for Tomorrow, Whitney will help you build an ironclad wealth plan so you can safeguard your hard-earned wealth and pass it on for generations to come.  



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