How to Buy Cash-Flowing Rentals in 2026 (Despite High Rates) (Rookie Reply)

Ashley:
What if rising rates made every deal feel impossible? Your cashflow no longer works and you’re starting to wonder if real estate investing is even worth it anymore. Or maybe you’re brand new in asking, how do I even break into this industry when I have zero experience?

Tony:
And when tax season rolls around, what should you actually ask your CPA to make sure you’re not leaving money on the table? Today we’re breaking down all three of these listener questions that get to the heart of what Ricky’s are struggling with right now, financing, experience, and taxes.

Ashley:
This is The Real Estate Rookie Podcast. I’m Ashley Kehr.

Tony:
And I’m Tony J. Robinson. And with that, let’s get into today’s first question. So today’s first question comes from Ray in the BiggerPockets Forums. And Ray says, “I’m a newbie looking to purchase my first rental property and I am in need of some advice. My main goal going into real estate investing is to gain some cashflow so I can scale down, not necessarily quit my day job, which seemed fairly attainable based on the deal analysis on the site and discussions on the BP podcast, but recently I’ve seen several forum posts saying it’s no longer possible to have cashflow and that you’ll be lucky to even break even. Is this true or does it just take more careful planning and knowledge in today’s world? I’ve heard high interest rates are one thing that are hampering cashflow, but my plan was to tap into the equity from our home to cover the first rental, understanding that we could get a better interest rate on a HELOC than with a traditional loan and therefore create more cash flow.
Is that correct? Or does it all depend on the LTV ratio on the HELOC as to how low the interest rate will be? The other option is to withdraw money from our Roth IRAs to pay in cash, which would give us decent cash flow on the first property, but we would still need to finance the second, third, fourth, et cetera, through a HELOC or traditional loan and would then face the same question of whether we can find a deal that gives us some as in two to $300 per month in cashflow. So I’d like to figure out, is cash flow still an option? And if so, what is the best strategy if that’s my goal? Great question. And I feel like there are probably a lot of people listening right now who are thinking about investing in real estate, but are hesitant for a lot of the same reasons that Ray just said.
They’re just hearing a lot of chatter about what real estate investing looks like today. I think first is maybe just have like a quick history lesson and then Ash, we can both give our take. Interest rates are high right now, right? A lot higher than what they’ve been in my adult life. And I think a lot of folks, even when BP got started, like BP got started right around the Great Depression. And there were a lot of folks who were investing when it was probably one of the best times in the history of mankind to invest in real estate. But even as the market stabilized and before COVID, it was still a good time. There are unique challenges today. Inventory is constrained in a lot of places that’s pushing prices higher in a lot of places and interest rates are making it more difficult. That said, I think anytime that we make blanket statements about real estate investing everywhere across every strategy, it becomes a lot harder to say things that are actually true.
And while some markets and some strategies, maybe it is difficult or maybe impossible to cash flow, there are definitely markets and opportunities and strategies that still work. And I’ll give a quick example. I was just talking to a real estate investor last week and she’s based on the East Coast and Jersey, but she buys duplexes in Philadelphia and her strategy is burring duplexes in Philadelphia and then putting in Section eight tenants. And she said her average cashflow across those deals, even for deals she’s buying today, is about a thousand bucks per month. A thousand bucks per month on a duplex in a C class neighborhood in Philadelphia. So the question isn’t, does it work or can I get cashflow? The question is, what market should I be focused on? What strategy should I be focused on? What niche should I be in? And it’s the combination of those things that I think will help you find the cashflow.
So that’s my initial take. Ash, what are your thoughts?

Ashley:
Yeah, I think the combination is key as far as not only your market, things like that and the property type, but also what other benefits you can get with real estate. Because I think a big comparison right now is, should I invest in real estate? Should I invest in the stock market? And you’re not going to get the same benefits like tax benefits, tax advantages, appreciation, things like that that you would with the stock market. You’re just going to get the value of the stock price going up, or maybe you’ll get dividends, things like that. But real estate has its own specific benefits. So first, outweigh what other things are important to you. So if you want to reduce your taxable income, real estate may be a better option for you than the stock market, even if you could get the same return on either one.
So I think those are two major investments that you could be looking at to choose between. And I think you have to look at not only the performance in the long run, but also look at the other benefits that you can get from either one. And I like real estate because I believe it has more benefits that benefit me right now in my journey. I want to hold properties for a long time and then sell them way down the road. I want to get the tax benefits right now to decrease my income and keep more money in my pocket now. So I think looking at that is really important too, is what other benefits do you have? Your tenants paying down your mortgage, you’re not even paying for the property, appreciation, building that equity in the property, and then just the tax benefits that rental income is tax different than W2 income and being able to use things like the short-term rental loophole or doing cost segregation studies on a long-term rental or short-term rental.
And also being able to get that real estate professional status for you or maybe your spouse to really be able to decrease your taxable income. So that’s something I think you also need to consider when looking at real estate as to like, oh, this is only going to cashflow $300 a month, but what if that same exact property could actually decrease you not having to pay $20,000 in taxes that year? That’s almost a little over $1,000 a month that you’re keeping back into your pocket that you’re not paying into taxes. And that’s the one thing that took me a long time to realize is this benefit besides just cash flow. So I think take that into consideration too as to how much money overall can you keep in your pocket.

Tony:
Ash, how have your maybe expectations around cashflow shifted from when you first started investing to today? Because I think that’s a big part of it too. It’s just like having realistic expectations around what’s here. So yeah, how has that shifted for you?

Ashley:
Yeah, cashflow is everything. Cashflow is king. Cashflow is how I was going to quit my job. Cashflow is how I was paying off my student loans. And for a while it worked. It was great. But I realized some of the really great cashflowing properties were headache properties. They were like in class C areas and they needed a ton of just attention. There were headaches, a lot of turnover, things like that. And I realized over time that yes, cashflow is really good and you should not ignore it and you should not buy a cashflow negative property, but there are so many other benefits. I feel like one day where I just looked at this property I bought in 2017 for $143,000 and looked at what the rents were when I bought it compared to how much I had been able to increase the rents over the years and then what the value of that property was now.
I could probably sell that property for 250 to $300,000. The tenants have paid the mortgage down to like 95,000. I had put, I think like a 25,000 down payment maybe on it, maybe 30,000. And just looking at if I sold that property now, how much money I would get, how much I’m cash flowing on that property. So really, I was in shock when I had that realization one day, like the aha moment of like, wow, those 10 years, eight years went really, really fast. And now it’s like, okay, if I keep doing that, there’s so much more value than just the cash flow. So again, the cashflow built my strong, steady foundation, and now I can focus more on that appreciation and long-term gain too for the properties. What about you,

Tony:
Tony? Yeah, I think for me, just my expectations around the type of cash flow that we can get today has definitely shifted. If you go back to like on my wife and I, we have a YouTube channel of Real Estate Robinsons, and if you go back and you watch some of those earlier videos and we talk about the types of deals we were looking at buying, we typically, there’s a 1% rule, the 2% rule in the long-term rental space. And I had like a 30% rule where it’s like, man, if I can get my annual revenue to be at least 30% of the purchase price and it’s a really good deal. So if I bought a house for round numbers sake, let’s say I buy a house for $100,000, if I can do $30,000 in an annual revenue, then it’s a good deal or a million dollar property does 300K, it’s a good deal.
Today, that number’s probably closer to like 15 to 20%, and it’s because rates have effectively doubled since I bought my first short-term rental, right? So that means that we’ve got to see the returns probably go down a little bit as well. So I think the question isn’t, should I be investing in real estate or should I not be? The question is, what is the best way for me to do it today? And we interviewed That Win and James Daynard as two investors who have been doing this for decades and they both echo the same exact thought. The people who say now is not a good time to buy are people who are probably never going to get started because there’s always a reason or some data point that you can point to to say, now it’s not the right time to buy. But it’s the people who understand that every time it’s the right time to buy, it’s just adjusting your strategy and adjusting your expectations is how you continue to get ahead.
So I get the fear guys and I get the hesitation, but you’ve got to be able to separate who you’re taking advice from. And if the folks who are telling you don’t buy real estate are people who’ve never bought real estate or maybe people who have done it without the proper guidance and education and they’re not really part of the BiggerPockets ecosystem and they’re not actively doing this, you got to kind of filter that advice out. So yes, now is still a good time to do it. You just got to figure out the right way to do it.

Ashley:
So if you can’t make the math work yet, what if your day job was your turning ground? After the break, we’ll talk about which jobs actually teach you to invest smarter. We’ll be right back. Okay. Welcome back. Our next question is from Taylor and the BP Forums. I’m a brand new investor with little to no real estate experience. My wife and I are moving back to Birmingham this summer and I am planning to invest in real estate when we do. In your opinion, what is the best job that will teach me the skills necessary to be a real estate investor? Little background, my wife is a high income professional in the medical field and I am an educator. Our plan is for me to leave the teaching field and invest in real estate full-time when we return to Birmingham this summer. I don’t have any work experience in real estate, but I started reading and trying to learn what I could back in 2020.
I’ve read a few of Brandon Turner’s books and a few others about five or six in total. So I would like to obtain a job in real estate where I could work full-time while we begin buying rentals. Our initial strategy is to buy single family homes who are buying hold long-term rentals in or around Birmingham. We are looking at buying at least one home per year for the next 10 to 15 years. I assume our plan can and will evolve over time as we are interested in small multifamily as well. So back to my question, what would be the best job for me to gain valuable experience? After a little online research, it seems something in acquisition so that I can learn to analyze deals or property management so that I can learn the day-to-day operations. What would be the best position thoughts? I actually have a hot take on this, I

Tony:
Think. Yeah. Ooh, Ashley’s got a hot take. We need like a hot take sound effect or something. What’s the hot take?

Ashley:
I don’t think that’s what you should be concerned about. I don’t think that you should worry about that. I think you should take the highest paying job to increase your income, to increase the amount of money you have to invest in real estate, and also that gives you the time to invest in real estate. So I would say being a teacher, okay, if you were to keep a teaching job, teachers can be well paid. I will say it’s not the highest paying job for the amount of work that they have to do, but you’re working school hours, you’re getting vacation days off, you’re over holidays, you’re off during the summers. So if that is like a better paying job than working at a property management company where you’re working 40 hours a week for the whole time throughout the year, maybe keeping a teaching job is actually the better solution for you.
So I think the reason I think that is because you don’t need to learn a skillset to actually invest. I do think it is very valuable to get paid to learn. That is how I started. I worked as a property manager, foreign investor, and I learned everything and definitely gave me the confidence, but I don’t think that you need to do that or that it’s going to set you apart than someone who isn’t doing that. I think you are still as capable of learning everything online at your home without actually physically working that job. If you are set on getting a job that’s in real estate, I would say not a real estate agent. It’s not consistent enough. You’re going to most likely be 1099. It’s not going to help you get loans for investment properties. Property management, unless you’re in a lot of states, if you’re not a licensed real estate agent, you can’t actually be like a property manager, but working in the office, you’ll have access to the lease documents, things like that.
What I would suggest instead, instead of getting like a full-time job, I met someone who went and worked as one of the, I can’t think of what it’s called, but they would like be the person that answered the phone for work orders and assign the work orders to people. And so they’d moved to their full-time job to doing that. What I think what you could do instead is keep your consistent job as a teacher, maybe pick up a shipped a night or on weekends leasing an apartment or doing maintenance on a property. I had met a sheriff before who he, as a part-time job, would do maintenance on properties. The investor that owned the properties would text him, this was before there was great property management software. Text him, here’s the work orders that needs to be done. And then he would schedule them and set up times that worked for him to go and meet the tenants and complete the work orders.
So I would say like if you can get paid more money to switch careers into something that’s like in the property management field, even project management, but usually you need to have some sort of like experience or a project management degree to get into a field like that can be super beneficial, especially if you’re going to be doing rehabs, maybe even in construction, working for a builder or something like that where you’re learning more about the rehab process. But I would say my recommendation would be to keep whatever job is going to be consistent income for you and that you enjoy too. Property management, you just hear complaining all the time is not enjoyable and then try and pick up something on the side or just your part-time job is going to be just shadowing an investor or something, not even get paid to do it.
So I think there’s many other options rather than just like completely switching careers.

Tony:
Asha, I’ll agree with you, but I’ll also disagree with you. And I think the advice you gave, I would agree with for most people, but there’s a caveat to what he said that I think is important. He said, “My wife is a high income professional in the medical field.” So it kind of sounds like his wife is able to hold it all down for like what they need for their life and everything. So I actually do think that in that unique situation, him going and taking a very kind of riskier job in the real estate space might actually be a really good idea. And for me, I feel like most investors, like if I was in his position, I would try and go find the biggest wholesaler in my market and go work for them so I can understand how to build deal pipeline, like how to build my pipeline of deals because whatever strategy you end up wanting to go into, the ability to find a good deal is foundational to being able to execute.
It doesn’t matter if you’re flipping, long term buy and hold, short term, midterm, whatever, name it, you still need a good deal in order for these deals to work. So I think only because he’s got this spouse who’s a high income earner that can, it seems like take care of everything, I would invest all of my extra time, effort, energy into getting really, really good at finding the best deals and then scaling up from there.

Ashley:
If you guys are watching this on YouTube, let us know in the comments which way you would take if you were this person or if you totally disagree with both of us and have your own solution, let us know in the comments.

Tony:
Right. So from your perspective, if you think about all the different pieces that go into like making a real estate transaction happen from acquisition through management and everything in between, for a rookie, which one do you think they should focus on most or first maybe?

Ashley:
That’s a good question. I do think that acquisition piece is important, but I do think like there’s so many investors that are successful that don’t have to acquire property from scratch that you can use a real estate agent to walk you through that process, to find a deal for you, to help you with all that, or you can buy from a wholesaler. So I think it really depends on the person and what their goal is in real estate and what they want to actually get into. I have no interest in going and soliciting off market deals by cold calling or texting or door knocking. So I mean, I wouldn’t take the time to learn how to do that. I’ve sent mailers before. I do a lot of off market deals just from referrals, things like that, but I am not physically out there soliciting deals.
So I think that that makes a big difference, that it’s not useful for me to learn too much into how to spot a motivated seller, things like that. I definitely do think it’s a big thing and probably can propel you and 10X you and get you better deals, but I don’t want to put the time into that. So I don’t know what I … For me, property management definitely was really useful. I think it gave me the confidence of like not being scared of actually managing the tenant and knowing what to do and things like that. But I actually know what … I’m changing my mind. I know it would be the best thing, handyman skillset. That I think would be one of the greatest things if I was getting started, because I think that’s like one of the biggest not feeling confident about doing the rehab on the property, not feeling confident and about getting maintenance things.
So that’s what I would do.

Tony:
I like the handyman idea, but I think your initial point, Ash, is maybe even more important because what you’re basically saying is you’ve got to understand who you are as an individual, where your natural kind of skills and abilities lay, and what do you really want to focus on as you become a real estate investor? Because you’re right, there are successful real estate investors who do just use networking with agents and wholesalers to go out there and find all their deals so they can focus on the other elements. So I guess you’ve got to ask yourself what part of that cycle of a deal do you really want to be focused on and build your expertise in and then probably go do that. So yeah, it’s a great point, Ash. I guess the answer does kind of vary depending on the unique individual.

Ashley:
And for me, it was property management, but also it’s so easy to hire a property management company. So if you already know you’re going to do that, it’s not worth your time. So maybe asset management is the best answer, knowing how to manage your assets.

Tony:
For me, I’m good at property management, but I don’t like it. I do not like being a property manager. That’s why my wife handles most of the day-to-day in our real estate business, but I do like underwriting deals and kind of building that pipeline and doing that piece first. So yeah, I guess it does kind of depend on where your skillsets lie.

Ashley:
I have to say for short-term rentals, I do not like it either until I finally grew up and got good property management software. And now that I use hospitable, I love it because it does everything for me. So I feel like I’m so accomplished as a host of my rentals now, but literally just because it’s doing everything for me.

Tony:
Shout out to the right tools. So guys, DM me and Ashley on Instagram if you want all the tools that we use, because it makes a big difference in being able to run both of your long-term and your short-term rentals the right way. So there’s plenty of them out

Ashley:
There. And again, if you’re watching on YouTube, tell us your favorite tool for investing because I am obsessed with software, apps, anything that will help me run my business. So I’d love to see what are some of your guys’ favorites. All

Tony:
Right guys, so we talked about where to get started, but what happens when you actually find the deal? At some point you got to pay taxes. So how do you navigate the world of taxes and real estate investor? We’ll cover that right after we’re from today’s show sponsors. All right guys, we are back with our final question of the day. And this one comes from Daniel in the BiggerPockets Forum. And Daniel says, “I’m looking to hire a professional to help me with my taxes this year. I’ve always done them myself, but I fear I’m leaving money on the table. I have W2 income and I own three properties, all long-term rentals that I’ve had for a few years.” Are there any questions that I should be sure to ask or anything that maybe you wish you had asked sooner? Looking forward to hearing from you guys.
All right, this is a great question and we are recording this right at the end of the year, but this will release the beginning of the year. This is actually a great time to talk about taxes because I think a lot of people wait until that spring deadline to start thinking about taxes, but really you should be thinking about taxes on January one for that entire year, not the following year when you’re going to file.
We got our first CPA, not at our first deal, but it was within like the first, I don’t know, 12 months or so because by the time I filed my first tax return as someone who had several properties, I did have a good CPA that I was working with. I think the first thing, and Ashley, let me know if you disagree with this. I think the first thing that you should ask whatever CPA you go work with is what percentage of your clients own real estate? And you don’t want to get into a position where you’re educating your CPA on things like bonus depreciation or cost segregation studies or different deductions you can take as a real estate investor. So for me, I think that would be my first question when I’m going to vet someone as my potential CPA is not do you work with real estate investors, but what percent of your client base right now are in real estate?

Ashley:
I think that’s a great question for any vendor. If you’re looking for an insurance agent, if you’re a real estate agent, how many investors do you work with? I think that’s a great thing. Even contractors, like a contractor that I’ve used a lot, he really only does stuff for investors or he has his own investment properties. So he’s very like conscious that like this is a rental. This isn’t like my dream home and we don’t need to go over the top with finishes and things like that. So really can make a big difference. With using a CPA, I think there is some level of knowledge that you need to have. Of course, you want to hire the right people so you don’t have to learn all of these things, but BiggerPockets does have a couple books on tax strategies for real estate investors by Amanda Hahn and Matt McFarland, which I think are a great read just to like give yourself the basic knowledge.
So that way when you are going to your CPA, you have some knowledge about what they can offer you and also to be able to ask these right questions. So for example, I worked with the CPA for a long time that never ever told me about a cost segregation. Now I know to ask how many cost segregation studies have your clients done in the past year or have you done on their tax return or whatever. I think that just having that basic knowledge of what opportunities, tax loopholes, deductions are out there can really, really help you have that conversation with the CPA to see if they are a right fit because if they don’t know what some of these things are, that’s probably a red flag.

Tony:
I think another one for me to call out is like your entity structure, and it’s good to give advice both from a CPA and an attorney on this one because they’re both trying to optimize for different things, but I’ll give you guys like an example. The first CPA that I hired, we were flipping homes and we were holding real estate and we were doing it all together. And she’s like, “No, no, no, no. You do not want to do that because … ” I can’t even remember the reason, like something about employment taxes or something that’s like you’re getting double tax if you’re running active income through a passive income entity like it doesn’t work. So she encouraged us to split it out. So now, even to this day, we have one entity that we hold all of our real estate in, right? So all of our buy and hold rentals are in one.
Anything that we flip or any of our other active income is in a separate entity and there was a tax advantage to doing that and she was able to share that with me. So I think just sharing with your CPA, what are your current … You’ve got three rentals right now, but are you doing anything active? Do you flip as well? Do you wholesale? Do you have any other active income that you’re doing to make sure that they can give you some insight there? I think another one that’s important too is just like exit strategies, because sometimes maybe you’re thinking about selling a property and just having that conversation with your CPA beforehand so they can give you advice on, “Okay, you bought it for this much, you actually depreciated this much already. If you sell this, here’s what you’re kind of looking at from a tax perspective, but if you 1031 it, then here’s the benefit of doing that.
” So I think just keeping them in the loop about not only where you are today, but what your plans are for the future so they can give you advice on how to make the right moves.

Ashley:
And you can also have two people help you with this, but I know you mentioned the attorney, but also like you don’t have to have one CPA that does everything. You can have a CPA that files your tax return and you could have a different CPA that does your tax planning that helps you with this going forward. So they’re the ones that are really focused on like what moves you need to be making, knowing what you’re going to have happen so they can have you do the right things before the end of the year so that when you do go to file your tax return, you have all of the information that you need for the other CPA to put onto the tax return. And I’ve actually found this to be like cheaper kind of is to like not have the really skilled person do all of it where they’re doing the fine tuning, they’re putting it into a package for me of how this is going to be the best tax strategy.
And then basically I’m giving the other CPA the fill in the blank information on my tax return because that’s what a tax return is. It’s fill in the blank and then each year the tax planner actually reviews, make sure it’s correct, things like that. So that’s another thing too, is you don’t have to rely on just one person. And it really helps having two people because if there is something that one person brings up, you can talk to the other person about and see what actually is the best benefit to you.

Tony:
Yeah, that’s true. That’s actually how we started as well. We had someone for tax strategy and someone else who’s doing the actual preparation for us. And on that note that I think the other question you should ask the CPA as well is like, how often are we meeting throughout the year? Am I just meeting you like the first week of April when I sit down with you to do everything or are we meeting multiple times throughout the year? And ideally, probably like a quarterly cadence I think is good for you and your CPA to meet to make sure that they can stay up to speed on what you’re doing throughout the year and help you plan to make sure that by year end, you’ve done everything within that calendar year to optimize that year’s tax returns. Because if it’s 20 27 and you’re now filing your 2026 taxes, well, if you’re sitting down in April of 27, it’s too late to really change much about 2026.
So the goal is that throughout 2026, throughout that year, you can make those changes, make those decisions that’ll make that tax prep in the next year a lot easier. So I think that’s an important one as well. How often are you guys going to actually meet?

Ashley:
Well, thank you guys so much for joining us today on Ricky Reply. I’m Ashley. He’s Tony, and we’ll see you guys on the next episode.