Most rookies think you need a mountain of cash to buy a rental property, but the truth is that the financing strategy you choose matters much more than the size of your bank account.

Today, we’re breaking down five of the best (and sometimes overlooked) ways to get your hands on the money you need to close—from low-money-down bank loans to options that let you bypass the bank altogether!

Welcome back to the Real Estate Rookie podcast! In this episode, Ashley and Tony share some of their favorite ways to fund real estate deals in 2025. Whether you’ve got very little money saved or already have a sizable down payment, we’ve got options for every budget. You’ll learn how to put less money down with FHA and conventional loans, but we’ll also share several strategies that allow you to use other people’s money (OPM)—like real estate partnerships, private money, and seller financing!

Already own your home? We’ll even show you how to tap into your existing home equity so that you always have funds on hand—money you can use to build a real estate portfolio much faster than you thought possible!

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Dave Meyer:
This is how to make the most money from your rental property right now in 2025, because it’s great to scale your portfolio and add more units, but ultimately you’re investing to make more money, not just to have a bigger and bigger door count. The amount of cashflow your portfolio produces is what actually matters, and your current properties might be leaving income on the table. So today we’re sharing some ideas you may not have thought about. This is how you add to your cashflow every month with the properties you already own. Keep listening if you want to learn how to put more money in your pocket without another tenant or another tax bill to worry about. Hey everyone. I’m Dave Meyer. I’m a rental property investor and the head of real estate investing here at Pickpockets. And with me today on the podcast is my friend Henry Washington. Henry, what’s up man?

Henry Washington:
Hey, what’s up Dave? Glad to be here.

Dave Meyer:
Well, I’m excited to have you here today because I think this is a topic near and dear to both of our hearts. Both of us, I think in our careers over the last couple of years have really tried to focus on making the most of the least amount of properties and not trying to just get more and more doors and just trying to reach your financial goals in the most efficient way possible. And for our audience here today, we’re going to share some ideas that Henry and I have some new strategies, amenities to add investments you can make to increase your cashflow without necessarily the big upfront investment of buying entire new properties or the headache of managing more units. So let’s start with the big ones, Henry. What do you think is the biggest opportunity for people to add more income or maybe just even produce income more efficiently on their existing portfolio?

Henry Washington:
There are things that may not necessarily increase the value of your property, but can add value to your bottom line. In other words, there are things that create an emotional response and when people have an emotional response, they can typically want to pay more because they’ve emotionally been tied to your property. And then there are actual things that if you do them can produce more income.

Dave Meyer:
Do you mean pay more like in rent?

Henry Washington:
Yes.

Dave Meyer:
Right, the ways to drive up the rent. Yeah.

Henry Washington:
Right. So when I say that emotional response, what I call it is perceived value. When someone walks into your place, you want them to go, Ooh, that’s cool. And when they have that emotional response, they may be willing to pay more to live in your unit than to live in some of the other units they’re seeing that don’t elicit an emotional response from them. So that’s why we always spend a few hundred extra dollars and we put fancy accent walls into our properties because a lot of rental properties don’t have those kinds of amenities. People typically only get those kinds of things in homes that they own, but landlords aren’t necessarily putting design features into a rental property.
It’s typically just let’s make it livable and clean and throw somebody in there. And so I like to spend money on fancy geometric design, accent walls and backsplashes in kitchens. So you can put some pretty fancy backsplashes in the kitchen and not spend a ton of money. Typically, it’s not a ton of square footage, but people see them and they go, oh wow, I can have these kinds of amenities without having to own a home. And you may be priced 50 bucks a month higher than your competition or than the unit next door. You may be priced a hundred bucks a month higher than the unit next door, and you may get that amount of rent just simply because somebody sees something in your unit that elicits that emotional response from them and makes them want to live there. So

Dave Meyer:
This one makes a lot of sense to me because I do feel like a lot of rental units you go into are just exactly the same, and as a renter I’ve rented for many of the last few years, you want something that makes it feel like your own, something that makes it feel unique. Before we move on, Henry, let me ask you, what’s your surprise and delight when you walk into a house, you’re like, Ooh, I want that. You’re saying a backsplash, is that yours?

Henry Washington:
No, I like cool outdoor spaces even though I don’t spend a ton of time outdoors, but for me, when I see a cool curated outdoor space, it makes me feel like, okay, this home is bigger than just what’s inside the walls. I can actually live in more space. It makes the home feel bigger. I have a patio on my backyard and I went ahead and I screened it in and I spend a lot of time in my air quotes, outdoor living room, which is just a patio with a screened in wall. It just makes me feel like I have a bigger home because I have this outdoor space and then I’m fancy. I like fancy design stuff. It’s cool when I see marble countertops or quartz countertops, that stuff’s kind of cool. If I was looking at a place to rent and I could get those kind of amenities, I would definitely be willing to spend more money to rent that space.

Dave Meyer:
I’m totally with you. I look at the little things. Nothing gets me more hyped about living in a place than the layout of the kitchen If they have the nice inserts

Henry Washington:
In

Dave Meyer:
The drawers and in the cabinet, so I like to cook so I can organize that stuff. I would pay more for that kind of stuff, but you never see

Henry Washington:
That

Dave Meyer:
In a rental property or just little accents in the bathroom. Those are the kinds of things people really appreciate and they’re not big investments. These are things that you can do with just a couple hundred or couple thousand dollars. And that’s the thing I really like about this approach because a lot of times people come to me and they want to scale or they want to figure out how to make more money, but they don’t have money for a down payment on the next property. That’s a very common situation that pretty much everyone runs into, but these are the kind of upgrades that you can make in real time. If you are hopefully earning more than you spend every month in your personal life and you can save two, 300 bucks a month, you can make one of these improvements a month or you could save up for three months and make one of these improvements. It’s just a way that you can continuously improve the performance of your portfolio while you’re figuring out where to buy that next deal.

Henry Washington:
What I would do if I was a listener of this show, what I would do is pull the comps for your rental property in question. In other words, go look at what people who want to rent your unit are also looking at. And I think you’re going to find what Dave said earlier is that they all typically look alike. They all have similar finishes.

Dave Meyer:
They have those gray walls with the white trim and the same carpet.

Henry Washington:
They look lifeless.

Dave Meyer:
Yes,

Henry Washington:
They look like no one cares about you, the tenant. They just want a roof over your head. And so then take that and then take our list of things that we’re talking about and start pricing them out and seeing what you can do. And I bet you, I bet you can command more rent for your market. Maybe it’s 50 bucks a month more, maybe it’s a hundred bucks a month more, but I bet that you could probably spend anywhere between 300 bucks to 5,000 bucks on some of these upgrades and get 50 to a hundred to maybe even $200 more a month rent depending on the market that you’re in. And then if you are commanding that higher rent, your upgrades end up paying for themselves after a few months, and that’s just increased cashflow in your pocket. There’s plenty of little things that you can do to increase the desirability and give people that emotional reaction. People pay for emotional reactions.

Dave Meyer:
Totally. And I think you’re like attracting a more discerning tenant, which I like.

Henry Washington:
Pride of ownership, man.

Dave Meyer:
Yeah, exactly. You want someone who’s going to be excited and proud to live in that unit. And I just think a lot of times for me as a smaller landlord, someone who owns mostly two to four unit properties, I am always thinking about how do I compete against the bigger landlords, the people who are putting out 200 unit properties or Blackstone or whomever, and this is how you compete, right? They’re not going to do this stuff. No one who owns a 200 unit property is going to go in and think about how to add unique characteristics to each of their 200 things. It’s not in their business model. They’re cookie cutter. You as a small landlord, go care about your property and go make these thoughtful upgrades and it’s going to stand out. And honestly, this actually, I think in a lot of circumstances can improve your cashflow more than buying another property. And on an efficiency basis, cash on cash return wise, I think it almost always works better than buying another property.

Henry Washington:
Absolutely. That return on investment is huge. And so when I think about changes you can make that actually do impact the value of the home. So not emotional changes, but actual changes you can make. Some of the things that we’ve done in the past are including laundry in your units. In other words, there’s a lot of units that don’t even have laundry hookups. So you providing laundry hookups is an added amenity, which means you can charge more because somebody doesn’t have to go to the laundromat or you can actually just provide the washers and dryers themselves, which lessens the expense on the tenant, which means they may pay you more to live there. They know they get a washer and dryer. The caveat with adding washers and dryers is they do add maintenance costs to your ownership. And so I would talk to your property manager or a property management company just about the trade-offs because they’re going to have data to be able to tell you if you provide laundry, expect X, Y, Z in maintenance a year, and then you can do the math to figure if I get more rent, but I’m paying more maintenance, is it a wash or do I actually make more money?
And then if adding and providing the laundry doesn’t work for you, you can actually rent washers and dryers to your tenants as well, which can produce income for you because you can say, no, we don’t provide the washers and dryers, but you can rent them from us. And that keeps income coming in. Also, you can charge more rent because you have it, and so it’s kind of getting paid twice on some of those

Dave Meyer:
Things. Have you ever added storage? That’s something I’ve thought about because I’ve bought properties that have garages or a garage that’s honestly just so crappy that you can’t park a car there, but it’s totally fine for storage. But I’ve recently been thinking about you could buy these sheds sometimes you could just buy them secondhand, like tough sheds and kind of stuff and putting ’em on your property and renting ’em out. Have you ever done that?

Henry Washington:
I’ve never bought storage to rent, but we’ve rented space that came with the property. So we had a property that had some garages and no one was parking in them, so we would just rent them to the tenants who wanted them for 25 to 50 bucks a month additional.

Dave Meyer:
Yeah, that’s what I’ve done. But I’ve been just looking at Facebook marketplace and you could buy these things for sometimes 1500 bucks, nice ones, 2000 bucks, you could rent them for a hundred bucks a month. I’m like, I should just do this all day and I don’t want to negatively impact my tenants who lives their experience. So you have to figure out a way to fence it off or just making an okay experience, but I’m like, you could just make more money that way. It’s a good way to add

Henry Washington:
Value. Absolutely, man. Another thing you can do for laundry is, especially if you have a property with four units or more, is if you don’t have laundry hookups and you don’t want to pay to put laundry hookups in your property, you could create a laundry space in a basement or a garage and then you can either offer coin operated or you can partner. There’s companies who will supply the washers and dryers. They will maintenance the washers and dryers. All you have to do is take a split of the profits. So they usually will do like a 60 40 or a 50 50 depending on the company. They’ll provide all the machines, they’ll do all the services. You don’t really have to do anything except get paid every month.

Dave Meyer:
That’s like the two to four unit special man you’ve seen when we were going around the Midwest. A lot of these old buildings, the basements just aren’t livable,

Henry Washington:
But

Dave Meyer:
They’re too short or they smell or whatever, and it’s like it’s a perfect place to do this kind of thing. And it works in a lot of buildings more than you would think. Absolutely, at least in the places I invest that have these older style homes. So I think there’s a great category for just generally finding ways to increase rent through adding unique amenities, but we have more ways that you can upgrade your existing portfolio. We’ll share them with you right after this quick break. Welcome back to the BiggerPockets podcast. I’m here with Henry Washington talking about how to make the most of the units that you already have before the break. We talked about adding unique amenities that will attract great tenants who are willing to pay more for those amenities. Next, I want to go to the one I really love and I’ve been thinking about a lot, which is just adding more capacity. Buying a property that maybe has a basement that’s unfinished or there’s a split level that you can split into two different units, or there’s a single family home that has three bedrooms that you can make into five bedrooms. I think this idea of just taking what you got and making it more efficient for you
Is one of the best ways you can make money in real estate regardless of if you’re buying a new one or doing this to your existing home. Just I love this playbook.

Henry Washington:
This method almost always produces a better cash on cash return than buying a new unit. Now, this method typically is going to cost you some money. So if you’re in a boat where you’re like, Hey, I’ve got 20, $30,000. Do I go put it as a down payment on my next property or do I try to increase my ROI and what I currently have? This method is something I’d encourage you to look at and you don’t even need that much money. My favorite way to do this is on mostly all of my units that have a single car garage. I convert the single car garage into a bedroom, townhome styles that have a single car garage, two bedrooms or three bedrooms upstairs with a bathroom, and then downstairs is just a living room and a kitchen. All of those that I own, I’ve converted the single car garages in the bedrooms, just every time I have a rental property with a single car garage, no one parks a car in it. It’s just always full of stuff, always

Dave Meyer:
Maybe tell us the numbers. What does it cost you to convert one of those?

Henry Washington:
I’ve spent as little as five grand and as much as 12 grand to convert a bedroom.

Dave Meyer:
That’s not bad at all. Nope. And what do you think it adds to your

Henry Washington:
Rent? Where I’ve done it most recently, it adds two to $300 a month in rent

Dave Meyer:
Making. Let’s just call your average price nine grand on something like this. That’s fair. And you’re making three and a half grand. So that’s a three year payoff on that investment. That’s a 30% cash on cash return. That’s incredible. That’s a really good investment for anyone to make.

Henry Washington:
And people always say, especially when I posts about this on Instagram, they’re like, well, I like a garage so I wouldn’t rent there. Perfect, then don’t. But most people don’t use the garage, even though they say they want one, they don’t use it to park a car, and it literally just stores stuff. So for somebody like you, Dave, if you’ve got one, you could convert the single car garage to a bedroom, increase your rent, and then go get that storage, shed put it in the back and then they could put the stuff in the storage stand and pay you extra for the storage

Dave Meyer:
Combo. I think the other thing in addition to doing this is I’ve been looking at this here in Seattle because there’s a lot of split levels where they have a walk off and separate entrances
And just turning it into two units, you could basically have two a thousand to 1400 square foot units instead of 1 2800 square foot unit, which is just kind of the trend in a city like Seattle. I know in some markets people really want the big homes, but in a city, most people are accustomed to living in a thousand, 1200, 1400 square feet and you could just add capacity and there’s already a driveway that fits all of these people. You need to do the hookup, like you said, you need to put some laundry in there, you need to add a kitchen of course, but that can potentially make something in a city like Seattle or expensive market actually cashflow. Whereas if you just bought as a single family, there’s no way.

Henry Washington:
I’ve talked to other investors who do that specifically as a strategy, just converting the basement to a living unit, and now you’re essentially sitting on a duplex. And you can also do strategies where you take that three bed, two bath, single family home, that’s a split where the primary bedroom’s one side of the house and then the two or three other bedrooms in the bathroom or on the other. There are people who have split that into two units because your primary bedroom, essentially, if you put a kitchenette in, it can be like a studio unit. And then the other three bedrooms, the kitchen and the bathroom are its own home. If you’re in a place like Seattle or a more expensive, more metropolitan area, properties where you can do that, make more sense than in a place like where I live. But that’s an option given your demographic.

Dave Meyer:
And just like to put some numbers behind it, these houses are still expensive, but if you bought a house that was, let’s just say 500, $600,000, you’d probably get 3,500 bucks in rent, something like that. But if you’ve spent another 50 grand between the two units, you’re probably getting 5,500 bucks in rent. So if you just think about the efficiency of your capital, it just makes the money go a whole lot further. So I really like that and I am starting to underwrite it. I need to learn more about this, but I’m thinking about doing an A DU development, parceling off an A DU. I’m excited about it because in Seattle and a lot more and more cities around the country are allowing you to do this, not just to build an A DU, but I think the critical difference is parceling it off so you can sell it or you can sell the main house and hold on to the A DU, or you could sell both of them. But dude, in Seattle, there are like 1200 square foot ADUs in the neighborhood I live in. They sell for seven 50.

Henry Washington:
That’s crazy, man.

Dave Meyer:
It’s insane. You can build them for three 50. Obviously there’s holding costs and all sorts of other soft costs, but dude, it’s unbelievable what they’ll sell for. So it’s very attractive. I’m not saying this works everywhere, but more and more cities are allowing this and you have to have the right lot for it. You have to have alley access or you need to have a corner lot to make it a good experience. But if you own a property that has the potential to do this and you have the right kind of property, the return can be insane. It is really worth looking

Henry Washington:
Into. I literally have a spreadsheet that I built several months back when we initially started talking about ADUs on the show of all of my properties that have a DU potential in the size of the lot or the zoning, and then I’m doing my new construction single family homes this year to kind of give me that build experience because I want to eventually put ADUs on these properties. I just want to make sure that I understand more about how to develop something from the ground up before I go do that on my existing properties. But I am ready. I’m locked and loaded.

Dave Meyer:
All right. We’ve talked about how to add value through adding amenities, how to add capacity, whether it’s in adding additional bedrooms or adding entire new units onto a property that you already own, but we have some more management strategies that you can use to increase your cashflow. We’ll share those with you right after this break. Welcome back to the BiggerPockets podcast here with Henry talking about how to add value to your existing portfolio. We’ve gone over adding units, adding capacity, adding amenities. All of those can just be extremely good uses of your money, a lot of times more efficient investments than buying new units. But Henry, I wanted to talk to you about some management strategies to increase your cashflow. To me, these are sort of just different ways that you can operate your property, and I know you’ve looked into some of these. I know you’ve done some of these. So I’m curious, what are your opinions right now in the given market on short-term rentals, on midterm rentals, rent by the room, maybe even assisted living? Do you think these are good ways people can optimize their portfolio?

Henry Washington:
Yeah, absolutely. But they’re all going to be very market specific, and so you really have to understand your market and then what’s the demand for that strategy? It used to be that four or five years ago, you could just be like, you know what? I’ll make more money on Airbnb, throw some IKEA furniture in it, and then yeah, you would make more money.
But it’s not like that anymore with short-term rentals. And it’s not like that even with midterm rentals as much anymore because there is more supply for it. So you really have to understand, does your market have the demand that’s going to allow for that to financially sense for you? And what I mean by that is I think in most markets you could probably convert your single family to a long-term rental to a Airbnb and it may make a little bit more money, but a little bit more money might not make the cash on cash return worth it. So my general rule of thumb, at a minimum, it’s got to make me two and a half times what I would make as a long-term rental for it to make sense. Because when you convert from a long-term rental to a short-term rental, not only do you have the expense of furnishing it, but you take on additional monthly expenses because now you’ve got to buy supplies, you’ve got to pay for internet access, you’ve got to pay for streaming services, you got to pay for lawn care because my long-term rentals, my tenants pay for the lawn care.
And so you have additional expenses and there’s additional work, and you want to be compensated for the additional work. So if it’s not going to make me at a minimum two and a half times per month, then I’m probably not going to do it. And so you
Definitely have to understand do you have the demand? What really works in short-term rentals right now is providing really cool experiences and amenities for the bigger Airbnbs, but there is a market for the smaller just corporate user Airbnb that it doesn’t have to have all kinds of crazy amenities. It doesn’t have to be some million dollar mansion in Scottsdale, Arizona that has a pickleball court. It can be a normal property, but you have to know if your market has the demand for that. So as an example, I have 2, 3, 4 properties that we do Airbnb out of, but we only do it in one particular city within northwest Arkansas because that one particular city has the most demand for those types of units. I could try to do it in some of these other cities in northwest Arkansas, but the demand isn’t as high, and I don’t know that I’ll get the return.
But in this one particular city, I know that they get lots of tourism. I know that there are not enough hotels to support the amount of tourists and corporate people that come into town. And so that helps me have some level of comfortability that there’s not going to be regulation in that city because they need the tourism dollars and don’t have enough places for people to stay. And so because I have that level of understanding of this market, I know I can get the return that makes sense. And so that’s why I only do it in those markets. And then I have a couple of midterm rentals that are in a city just south of that where the research has shown me that the midterm does better there than either the short term or long-term. So it’s very strategic. You can’t just go and say, I’ll make more money as a short-term or midterm, throw furniture in it and hope for the best. You could end up actually getting a negative return on your investment if you’re not doing the proper

Dave Meyer:
Research. And I agree, actually, I’ve never been particularly crazy about these options because I feel like they’re fads. It’s like they get popular as investors, they get popular for demand and then they wax and wane, and that’s just different than the long-term rental markets different than house flipping. Those have just long-term fundamentals that don’t go anywhere, and that doesn’t mean you can’t make more money that way. It just means you have to be willing to adapt and react basically continuously for as long as you have that you actually need to just be willing to change and learn and operate based on what’s going on in the market. And that’s okay. There are a lot of people who crush it at this. It’s just not me personally. It’s not something I’m going to do. And I actually, I was having a conversation with someone the other day.
They were asking, should I be a short-term rental investor? Should I be a midterm rental investor? And I was like, I have never thought of myself as any of those things. I think of myself as a residential rental property investor. I buy houses that are in good locations that are going to have great demand. And if I decide that I’m going to operate it as a short-term rental or a midterm rental for some period of time, that’s okay. That’s a strategy that I’m willing to work on. But I personally am not someone who’s going to go out and buy a property just to make it a short-term rental or just to make it a midterm rental. You say this all the time about having multiple exit strategies. I don’t even think it’s about exit. I think it’s multiple operating strategies. And I think these are ways to manage your property. It’s not a way to define yourself as an investor of all of these things. I actually like rent by the room the most based on the current market conditions. I’m not saying this is good, but rent is super expensive. I think more people are going to be interested in these co-living models. And if you are willing to take on the operational burden and it is an operational burden, sure is, you can definitely make more money. I think that one actually makes sense right now.

Henry Washington:
I like the co-living model. Again, all of these guys, you’ve got to do your research and see if it makes sense before you start taking living rooms and turning them into bedrooms and trying to rent by the room because you need to understand what is the average rent by the room price in your market. Because in some markets, I was doing the math for one of my students the other day, and it was like they would get 150 bucks a room per week, and they had four rooms, and by the time you added that up, it wasn’t much different than what it could get as just a long-term tenant. And I was like, yes, this doesn’t make sense. And so you really have to know, is there a demand for it in your market? This typically works better in larger cities where people need to get to work and there’s great public transportation because typically the people who are doing this probably don’t have a car or have limited access to a vehicle where I live. I couldn’t do this strategy.

Dave Meyer:
No, it wouldn’t work for you, so

Henry Washington:
Please do your research. Is the point that I’m making. You can’t just do some of these things and hope they make money because somebody else in some other city’s doing it and they’re making a killing

Dave Meyer:
Certain markets this could work for. And yeah, like you said, it’s usually dense areas or college university towns like this is a great method there. But again, I wouldn’t buy a house and then cut it up into more bedrooms. See, this is what I sort of mean by I’m just a rental property investor and I’ll change the operating. I’m not going to buy a house and change the layout to have nine bedrooms and three bathrooms. That might work for me for a year or two. And then the market shifts and people don’t want this anymore. And then you’re stuck with the weirdest house on the block and you’re not going to be able to rent it or you’re not going to be able to sell it. If I buy a house that’s a great long-term rental and then it happens to be something that I could rent by the room relatively easily, then I would consider it. But personally, I’m not going to change the layout of the house for something like that.

Henry Washington:
You just have to do your research and going and buying a property that only works as a short-term rental or only works as a midterm rental or only works as a rent by the room model may help you in the short run, but in the long run, you could get hurt tremendously if things

Dave Meyer:
Change. Oh, for sure.

Henry Washington:
A lot of the regulation isn’t in your control, so you could literally go from making money to losing a lot of money overnight because someone behind a desk somewhere decided they didn’t want you to do that

Dave Meyer:
Anymore. I think we should get out of here unless you have any last thoughts on optimizing your portfolio right now.

Henry Washington:
No. The last thing I’d say is if you own that four unit or more, you really want to think outside of just what you can do to your unit. And you want to think about what can I do for the complex as a whole that provides convenience for your tenants that they would be willing to pay a little extra for. So in other words, you might not get more rent per unit because you’ve added the amenity, but that amenity itself could make you money, which increases your net operating income, which increases the value of your property. So think about things like, remember when we were in Chicago and we were meeting with Andre and he created a room where his tenants could go and relax and where they could do workout. He had a couple little workout machines in there, right?

Dave Meyer:
A massage chair.

Henry Washington:
A massage chair, right? So if you charge 25, 10 bucks, 25 bucks a month per tenant for access to that, it’s cheaper than a gym membership. It’s something that they can use, but it increases your net operating income. If you could add a vending machine with things that are convenience. It doesn’t always have to be snacks. It can be laundry detergent and dryer sheets, things that they may not want to go get in their car or lose their parking spot to go to the store to get. And then the money that vending machine makes, increases your net operating income, which increases the value. So think about what amenities can I add where people would pay for those amenities for the convenience of them that wouldn’t cost me a ton of money, and then that increases the value of your property as a whole.

Dave Meyer:
Well, that’s what we got for you all today. Remember, optimizing your portfolio can be as good or better than acquiring new properties, and it’s really just all about how you can pursue your financial goals as efficiently as possible. Thank you all so much for listening to this episode of the BiggerPockets Podcast. I’m Dave Meyer, he’s Henry Washington. We’ll see you next time.

Dave:
October 1st was a very interesting and somewhat pivotal day for the housing market. We had all sorts of policies and news converging on that day. Everything from a government shutdown to changes in FTI and Franny loans, changes to the student loan repayments, how FEMA is dealing with flood insurance. We have new tariffs that are going to be impacting the housing market. So a lot happened last Wednesday and this is important stuff that everyone needs to know. So today we’re breaking it down. Hey everyone, welcome to On the Market. I’m here, just me and Henry Washington today. What’s up bud?

Henry:
What’s up buddy? Glad to be here.

Dave:
I’m also glad to be here. It’s very unfortunate that Kathy and James just completely abandoned us.

Henry:
They just left us high and dry, but we’re going to pull it together. We’re going to pull it together.

Dave:
It’s pretty rude because the reason that they’re not here is because Henry and I are playing golf tomorrow during our normally scheduled time to record this and we’re like, yeah, if you guys can’t adapt to our schedule, we’re definitely still playing golf. So Henry and I will just do the podcast ourselves and that’s the real story of what’s going on. Henry and I are on a vision quest in Las Vegas right now for eight days before BP Con just having a lot of fun. So hopefully we’re going to see a lot of you there. This airs, I think, while BP Con will be going on. So hopefully we’ll be seeing you today Among the many thousands of people who will be here in Vegas talking about real estate,

Henry:
Come say hello and ask us who won our golf head-to-head tournament.

Dave:
What are the rules? Are we just playing straight up? You against me?

Henry:
I think we’re playing. I don’t know if you want to play match play or if you want to play just straight score, but we definitely need to implement our give me putt rule.

Dave:
Okay, so yeah, I saw this game I was proposing to Henry where if you know anything about golf, you get the distance of your putter. If your ball’s that close to the hole, it just counts. You don’t actually have to go make it. But in this game, for every alcoholic beverage you drink, you add the size of that can to the end of your putter. So if you drink four beers, you go from a three foot, give me to a five foot, give me, and that actually kind of matters and we might be playing this way.

Henry:
Yeah, absolutely. Absolutely. So stay tuned. We may capture some content.

Dave:
Alright, let’s get into our topic for today, which is all these things that are going on on October 1st. It’s basically just for whatever reason, I don’t think there’s any particular reason, just coincidence. There are all these things converging on the housing market and the economy as of October 1st. We of course now know that we are in a federal government shutdown and this could change by the time this airs. Just so you guys know, we are recording this on October 2nd and this comes out a few days later, so that may have changed, but the way it’s looking will probably still be in a federal government shutdown a week from now. We also saw that flood insurance program. There’s basically the national program that funds FEMA for flood insurance actually expired. And so any homeowners who had that will face some challenges. We saw new tariffs start on October 1st, and these seem really aimed at real estate, which I want to talk about 50% tariffs on kitchen cabinets and vanities, 30% on upholstered furniture and the sneaky one that’s probably going to impact housing a lot, 25% on construction trucks. Then we have all sorts of changing to FHA and HUD laws and more. We even have some other stuff not about October 1st to talk about today. So let’s just jump right into this. Henry, how are you feeling about this government shutdown? You got deja vu.

Henry:
Yeah, it feels like we did this not that long ago. I know it wasn’t super recent, but this has happened before and so we’ve kind of seen how it can or cannot impact the housing market.

Dave:
I had to Google it because it feels like we’ve had 30 government

Henry:
Shut. I think we’ve had two.

Dave:
Yeah, but there has been, I think it was 14 between 1980 and now, but it does feel like we’ve been talking about it way more. I think the last one was in 2018, 2019, something like that. But they’ve been threatening this every single year. So before we get into the details of what this actually means, big picture, high level, does this impact you specifically in your real estate investing

Henry:
Business? No, mostly because I’m not doing section eight housing, so I don’t depend on government funds to pay my rent. So the only real way that I see an impact on this is tenants who have government jobs who may not be getting paid for this time. So if they’re essential and they’re working, they’re working and not getting paid and if they aren’t essential and they’re not working, they’re not getting paid. So it could impact rent collection for the few tenants I have that are employed by the government. We’re always willing to work with people in situations like this. So I don’t see that it’s going to make a massive impact on me and my portfolio personally could also impact my flipping business if I had any buyers that were government employed who now can’t qualify for a loan or won’t be able to buy the house until there’s some resolution here. But other than that, no major impacts to my business.

Dave:
Yeah, that’s generally how I feel about it. I think the biggest thing across the whole housing market is really going to be sentiment is just do people pull back on spending or moving or just making big life decisions because this is just one more uncertainty in the economy and we’re already in a period where there’s a lot of uncertainty. So is this, just to add to that situation, but I do think that the section eight thing is real. Just so you know, the way this works is that Section eight payments should continue to go out at least for a period, but if there is an extended shutdown, there could be impacts to section eight funding. That is something that anyone who has section eight tenants or is thinking about getting into Section eight should be aware of. I was actually looking into this a little bit decimate is that as long as the shutdown is less than two months, then HUD and section eight shouldn’t be impacted, but we’re in this very unusual economic and political time.
So normally I’d say, oh, it’s going to get sorted for sure within two months, but I honestly have no idea. I have no idea if this is going to last two more days, two more months or what’s going to happen. Of course, the thing that really matters is of course the people who are directly impacted by this, if government workers are getting furloughed and although they will presumably get paid once this is over, people are going without paychecks and that could impact the economy. I’ve also seen some reports that travel and tourism could slow down. There’s always these negative impacts to the national parks to TSA and air traffic control because sometimes people if they’re not getting paid, they just don’t show up for work because suggesting you do that, but not saying I don’t understand that concept. So I think those things could impact just the general economy as well, but I think it’s right, if it’s short, it’s really going to be probably a blip in the grand scheme of things. If it’s long, it’s probably going to really impact the economy just by lower spending and lower total transactions in the housing market and in the broader

Henry:
Economy. And I think you’re onto something because if sentiment gets worse then people stop doing things like spending money, which is what our economy is based on. And so I think we’ll start to see an impact just in the fact that people are spending less money doing less things and that’ll create, everybody will feel that.

Dave:
Yeah, I’m not going to say it’s like the nail in the coffin, but it’s just one more thing in a world right now where there’s just so much confusion that’s just going to add a little bit more confusion. So that always has the potential for impact on the economy. I won’t get into this because it’s less about the housing market, but I do think this is just one more thing that is decreasing investor confidence. In the United States, we’re already seeing the dollar get a little bit weaker over the last couple of days. We’re seeing the stock market down a little bit, not a ton, but just a little bit. And if those things do continue, that could negatively impact mortgage rates as well. If those two things happen again, that could impact mortgage rates honestly in either direction depending on how long this goes. So it’s something we’ll keep an eye on and keep you posted on in the future.
Wait, before we move on, I have one more thing to say about government shutdowns. Why does Congress get paid during a government shutdown? That pisses me off. This is not a political thing. I just think both parties have shut down the government before and it’s their job to make sure it’s not shut down. Meanwhile, we’re not paying TSA agents or air traffic controllers or all these other parts of the government while we’re paying Congress. The people responsible for the shutdown get to keep paying. I want them to get their pay also suspended until the government reopens. How about that?

Henry:
I am wholeheartedly with you on that my friend.

Dave:
It’s basically going on vacation. You’re like, yeah, we vote to not work, but we also vote to keep getting paid. Super cool for us. Everyone else figure it out. It sucks. Alright, so that’s obviously the big news, but it might be one of the things that happened on the first that actually is the least impact on the housing market. So we’re going to take a quick break, but we’ll come back with some of the other things that will be impacting the market more directly. Stick with us. Welcome back to On the Market. I’m here with Henry Washington talking about what a big day. We had on October 1st just for the housing market. We just talked about the government shutdown. There are a few things that happened that I think more directly will impact the housing market. The one that’s really got me thinking is these new tariffs. If you haven’t heard, we were seeing tariffs implemented as of yesterday, 50% on kitchen cabinets, 30% on upholstered furniture and 25% on construction trucks. And this to me, these are just a package aimed at real estate investors. I know it’s not probably intended that way, but when I read these I was like, man, these are all going to hit real estate pretty hard. What was your reaction?

Henry:
Yeah, my reaction was, of course this happens the year I decide to build my first new construction homes that these tariffs come in and luckily I haven’t gotten my loans from the bank yet so I can adjust my budget to absorb a little more construction cost. But for a lot of new builders who have already gotten their funding for their projects and they based it on three tariff numbers like this could start eating into people’s profits. And my biggest concern or point of confusion is it seems that the government or mainly the president has been very focused on housing and affordability and wanting to get interest rates down and trying to make housing more affordable for people, which is good for the country as a whole. But these new tariffs would essentially do the opposite of that because it would make housing more expensive because the builders and the flippers and everybody else building and adding supply to the housing market is going to try to compensate for the profit they’re going to lose by increasing the prices and that does the opposite of affordability. So it was just a confusing thing to see.

Dave:
It’s sort of contradictory policies a little bit. I’ve had a lot of questions about this and the reasonable questions. People say, oh, just buy American made cabinets or furniture or trucks. That is true, you could do that, but we are already seeing this in the data, but the prices for even American made goods in this new tariff situation we’re in are going up and it’s because the input costs for American manufacturers are also going up when people say they’re unquote made in America. And this is not a dig. I think this is just the reality of the economy. People say it basically means assembled in America because no, really in this globalized world we live in, if you’re building Ford a massive construction truck, you’re getting parts from all over the world. So all of those input costs are already starting to go up. That’s everything from aluminum to steel components that are coming in from China or a lot of these other places.
Those are going up and so their costs are going up and ideally these companies want to pass those expenses on to the consumer whether they can do that or not. It depends in a free market country on competition. So if there’s a lot of competition for market trucks, Ford is less able to pass those costs on to the consumer. But now any competition that’s coming in from outside of the country is going to be more expensive, so it’s probably going to be 25% more expensive. So that gives for room to raise prices to compensate for their higher input costs and pass that on to the consumer. Now we don’t know how much that will happen. What we’ve seen so far is that most companies are not passing a hundred percent of their increased costs onto consumer. That’s good for consumers right now, but most of the data shows that they’re just kind of doing that gradually rather than being like they don’t want to shock their customers, so they’re not going to be like, oh, we’re going to just jack up the price of trucks by 25%.
That would be very jarring and bad for the economy. So they’re probably doing it a little bit every month or every year. They’re going to just trickle that in. And so there’s very good reason to believe that on cabinets, I’m just using trucks as an example, but cabinets are going to be the same thing. The wood that we use for cabinets, a lot of that is imported from Canada that has a 10 or 15% tariff. So all these things are going to contribute to higher costs during a time where development, you do this Henry, but development’s pretty to make a pencil in the first place. It’s not this lucrative, super lucrative thing as it was in the past. Construction costs are already very high. And so I just worry about how this is going to impact the pace of not just new construction which we need in this country, but also renovations, like renovations and flipping is going to become harder with this stuff too.

Henry:
Yeah, absolutely. I mean even your typical mom and pop flipper who, so if you think about the big time flippers, they’re flipping hundreds of homes, right? They’re typically sourcing materials in bulk and get some sort of a discount for doing that in bulk. But a small percentage increase in materials equates to big dollars for the big flippers. And so the tariffs on these things are going to have a pretty massive impact on their bottom line. And then if you think about the mom and pop flippers, we’re the ones that just get our supplies from Lowe’s and Home Depot and those kinds of places. But the tariffs, again, I think we’ll start to see as new product hits the shelves in these stores that the prices are going to be going up because they’re going to have to pay more to get these products, which means that gets passed onto the consumer.
And so it just means for you mom and pop flavors are for everyone really. You have to pay attention to when these things are starting to hit so that you can account for them in your underwriting and you not pay as much for a property so that you have more margin to, you have more margin for your construction budget. And the problem that that creates is more margin means you need to pay less. Paying less means you need a seller to say yes to a lower price. And sellers aren’t often going to do that, which means less houses get flipped, which means less inventory on the market, which has a negative impact on the housing market. So that’s the kind of trickle down effect of these tariffs or this situation. And I don’t know that we’ll see an impact for several months when we start to look at the numbers on the inventory numbers and what’s happening from that perspective. And it’s just tough. Like I said, it was a confusing, it’s a confusing message, but it’s the reality that we live in. And so you just need to be aware of it so that you’re not bleeding money on your flips and if you are a builder or someone who’s already budgeted for these things, you need to start figuring out where you can cut in order to make your margins so you’re not losing money in this fast paced changing economic environment.

Dave:
For sure. As someone who’s learning to flip, I’m in the middle of two right now.
Cabinets are the worst. They’re so expensive. It’s insane. So that’s what I am sure the president is not thinking about it this way, but I was like, man, you had to pick the most expensive thing and can it be like toilets? If toilets went up 20%, I’d be fine with it, but cabinets, it’s already so expensive it’s going to get even more expensive. And I agree with you. The president has been talking about declaring a national housing emergency because housing is super unaffordable and I’m on board. How do we get housing more affordable? That is a main question and to me, we talk about all the time on the show short term, there’s probably stuff that you could do long term, it’s supply and the reason there’s not enough supply is construction costs. If you really want to drill down to the thing that we could do to make the housing situation better five years from now, 10 years from now, I think the number one thing is reducing construction costs, like figuring out a way to make it more profitable for people to build. Sure, big multinational public companies can figure out a way to do it at scale, but the average person can’t build homes right now,
And that is a big problem and our housing supply. And so I hope that something happens where the construction costs come down,

Henry:
The two areas for margin and margin equals profit when you’re a builder are construction costs. So what’s it cost you to build the property? The cheaper you can build it, the more money you can make and land costs. The cheaper you can get the land, the more money you can make. And so if the government can help or local government can help with builders getting land or tax breaks or some incentives for buying certain land, that helps build affordable housing because you’ve got the land cheap so you can make more margin as well as getting construction costs down. Those are the things that are going to impact whether or not people are able to build more housing.

Dave:
We got to shut down. We’ve got new tariffs, but there’s more that happened. Just those two things alone would be huge.

Henry:
But wait, there’s

Dave:
More. There is more that happened on October 1st that we need to go over, but we’re going to take one more quick break. We’ll be right back. Welcome back to On the Market. I’m here with my friend Henry Washington after Kathy and James completely abandoned us because Henry and I want to play golf. And we’re here just discussing everything that went on October 1st. We’ve talked about the shutdown. We have talked about the new tariffs, but I wanted to talk about something that worries me a little bit, which is that funding for FEMA’s flood insurance program has now lapsed. And so that means that they’re not going to be issuing new policies. I’m not sure. I think people who already have policies will be covered, but this worries me a lot because we’re already seeing in Florida for example, the biggest correction in the country is really going on in Florida. And a lot of it from the data I’ve seen, the experts we’ve talked to is because insurance costs in Florida, for example, are just going up like crazy. And if the government is not going to be providing flood insurance and the state that needs flood insurance and it’s not just Florida, this is Texas too, Louisiana, Alabama, Gulf Coast, what happens there? Does that mean we’re going to see less transaction volume in those states? Kind of where I think this is going as long as this stays lapsed.

Henry:
Yeah, I mean I think you’re going to see obviously less transaction volume because people A aren’t going to be able to afford homes in those areas because investors won’t be able to afford homes because you can’t make money if all of these costs are so high and they’re not going to want to take the risk of buying a house in an area that’s impacted by floods frequently when there’s no insurance to cover it. Because I don’t think people sometimes think about the cost of repairing a property when it gets flooded.

Dave:
You can have a total loss so easily

Henry:
Just a small flood. You can have a total loss. As an example, we had heavy rain, so not even a massive weather event. We had heavy rain in one of my properties, and this property has a kind of rainwater runoff in front of it, so it’s not in a flood zone, so we don’t have flood insurance. The rainwater runoff just got so high because of the flash rain, heavy rain, and the water ran back into my duplex. We’re talking a couple inches of water into my duplex on both sides and just the remediation, just the remediation of that, not even rebuilding the duplex, just getting the water out, cutting out all the wet drywall. I got a bill for $50,000 for just getting the water out, getting the drywall out.

Dave:
Insurance doesn’t cover any, and

Henry:
Insurance won’t cover any of that. Now we’re disputing that bill because that seemed a bit excessive. But think about this, if companies know bad companies know that there’s not insurance, do you think they’re just going to be like, oh, we will do it for less? No, no, they’re going to try. Absolutely not. They’re going to try to jab at people and get more money for the work because a lot of these companies depend on insurance money to fund a lot of this work. They want insurance jobs.

Dave:
Most people don’t have 50 grand to pay it.

Henry:
They want,

Dave:
Yes. Most people, if they don’t have insurance, they’re not going to have 50 grand in their bank account to just pay for remediation.

Henry:
So this problem doesn’t just impact homeowners. It impacts people in the business of flood remediation. And because if you’re dependent on insurance dollars and now you’re not going to get that, you’ve got to make up that money somewhere. And when these things happen, it’s going to get passed on to the consumer. So I think the cost for mediation’s going to go up. It’s just going to make it extremely difficult to have an own property in those areas, both for the typical homeowner and for investors. I don’t see how it’s possible.

Dave:
I agree. I think this is going to really impact the housing market more than people realize. This sounds like a little thing, but I wouldn’t buy a home if I was in Florida. I wouldn’t do

Henry:
It. I’m renting.

Dave:
Yeah, exactly. I think this is going to happen a lot in the Gulf Coast, which are the markets that need stabilization right now, I’m not as familiar where else in the country there are flood zones, but there’s flood zones everywhere. There are flood zones pretty much anywhere you live near a river or lake. So I mean, I just wouldn’t do it. It’s too big of a risk right now when private insurance is already so expensive. Private flood insurance is super expensive.

Henry:
It’s so expensive.

Dave:
Yeah, it’s insane. So I think this is going to be a big problem. I did look it up while we were talking. The way it’s working is there are no new policies and no renewals. So if you have a policy in place, it will be okay, but only until the renewal date then you’re not going to be able to renew. Could that bring more supply on the market? Probably, dude, maybe I’m overreacting, but if I lived on the coast of Florida and I couldn’t renew my flood insurance, I’d be like, I’m out of here. But there’s not a lot of buyers there. Could that make the correction in coastal Florida worse in my mind?

Henry:
Yeah. I mean, I think what you’re going to see is foreclosures, right? If you own properties that you can’t monetize, you can’t pay for. I think people are going to start walking away from properties, and that might allow for somebody to come in and get a property super cheap, but can you get it cheap enough to cover all of these additional expenses and be willing to take the risk of having to pay for a flood event out of your pocket because you can’t get insurance? Man, I still wouldn’t do it. I still wouldn’t do it if the property was that cheap.

Dave:
The other thing about this is why government, why would you make this lapse in the middle of hurricane season? This is just such a bad idea. We’re in the beginning of October. There is still hurricane season, knock on wood. We haven’t had a bad one so far this year, but that could still go on for the next couple of weeks, and that makes people really vulnerable. I wish they would pass some sort of temporary thing because people could be really negatively impacted by this, but let’s hope that doesn’t happen. Dude, these are three really big things going on in the economy right now, all in one day. We don’t have much time to get into the last one, but I will just read this off quickly that there were also just pretty big changes to servicing rules and loss mitigation rules with FHA loans that also happened on October 1st.
I’ll read off some of them. Basically the COVID era tools and safeguards. Some things like forbearances and modifications for your loans are going to be sunset. They’re going to be phased out already. These are things like now we’re going to have a waiting period for 24 months. So if you are a borrower, you got a loan modification or partial claim. If you get up to speed and then you need to make a new modification, you’re not going to be able to do that for 24 months. So previously you could have it modified every six months or 12 months or whatever. Now it’s going to be a minimum of 24 months, for example, that there are some I things that I think are pretty interesting that we’ll have to keep an eye on. But basically now if you can secure a permanent modification if you’re late, they can actually extend your term up to 40 years to reduce monthly payments, which could be helpful for some people.

Henry:
That’s cool.

Dave:
And then servicer evaluation waterfall. So basically servicers need to really do a little bit more due diligence about the ways that they can offer loss mitigation before they foreclose. So I think there’s ups and downs here. So we’re ending some things that were there specifically for COVID, but it does seem like there are some modifications that could be good for any borrowers who are getting in trouble. We’ll probably just need to do a whole show on this at some point because it’s really important, but we are running out of time in our episode here today.

Henry:
We expected the COVID rules to go away at some point, and it just sucks at the timing right now with everything else happening all at the same time that it seems to have an impact. But I think there are some positive things in those modifications that can help. And all these things we discussed seem to have a negative impact on the housing market, and we know that this administration has been trying to get the housing market more affordable. So I would just say to everybody listening, it’s just so important that we all stay on top of what’s going on in the economy and read beyond the headlines and think about how these things may impact our bottom line before we continue to implement our strategies in the way we’ve implemented them in the past. Because the margins are already thin and mistakes can cost you lots of money right now. So if you’re not staying tuned into what’s going on, then you could make a mistake that you don’t even know that you’re making. So that’s why I think shows on the market is vitally important now more than ever as news and the economy is changing so frequently. So just please be careful, everybody.

Dave:
Yeah, I agree with you. I think it’s not, no. One thing here is like, oh, this is going to tank the housing market, but we’re just in this fragile time. I think things can go either way, and a couple of these things point to more challenges for the housing market, in my opinion. I think here is super direct. But these things do add up. So these are topics that we will be continuing to monitor here on the market, and we’ll bring you more as we learn about more things that are going to impact your portfolios and your decision-making. By the way, if you have ideas or there are things that are going on in the economy or the news that you have questions about or want us to discuss, let me know. You can always hit me up on BiggerPockets or on Instagram where I’m at the data de, we love doing this research. We’ll look into these things and talk about them if it is a big enough issue that applies not just to you and applies to our own whole audience who will be listening to a lot of those episodes. So thank you all so much for listening to this episode. Henry, thanks for being here.

Henry:
Thank you, sir.

Dave:
I appreciate you making time around your golf game to be here.

Henry:
No, no. It’s totally fine. I will take the rest of the day and go find a place to practice.

Dave:
Well, that’s not fair. I don’t have time to do that. And now

Henry:
You have to give me three

Dave:
Strokes tomorrow when we actually play because you get to practice.

Henry:
Yeah, not going to happen.

Dave:
All right, well thanks everyone. We’ll see you next time for another episode of On The Market.

I talk to short-term rental hosts all the time who are struggling to figure out why their place is not booking. They have followed the design tips, adjusted their pricing, responded to messages quickly, and done everything they were instructed to do. 

The truth is, the problem often started before they ever welcomed a guest. It began when they bought.

Buying in an unfriendly short-term rental market can be the last nail in the coffin. You can find a property just outside the city limits, or try your luck and hope you don’t get shut down, but that’s not a long-term strategy. To build something sustainable, you need to know which markets are true vacation destinations, or pivot your model toward business and mid-term travelers.

Some of these places do have zones that can work for short-term rentals, so it is not always a matter of never investing there. But these are markets where you should proceed with caution.

What Makes a Good Short-Term Rental Market?

A good short-term rental market has several key elements in place from the outset. Established regulations are actually a positive sign. They provide clear guidelines and demonstrate that the city has already considered how to handle STRs. What makes me nervous are places with no rules at all, because that usually means officials have not yet decided, and one vote could shut everything down. 

I also stay away from HOAs. They wield too much power and can change their stance at a moment’s notice. The only exception I would ever make is in a community with no restrictions and plenty of STRs already operating, where strength in numbers offers some protection.

Beyond the legal side, it is essential to know your vision and your guest avatar. You might think a bachelorette-themed house in Los Angeles is a sure hit, until you realize that it is not the type of traveler visiting LA. 

I prefer markets that have always relied on tourism and STR demand. Urban markets can still hold significant value, but if you want the confidence that your investment will stand the test of time, look for destinations where the local economy heavily relies on tourism. If short-term rentals disappeared, those towns would crumble, and that kind of reliance works in your favor as an investor.

A Tale of Two Investors

Imagine two friends, Maya and Alex, both excited about making their first Airbnb investment. Maya goes for the glitz: She buys a sleek condo in San Jose, California. Alex chooses a rustic cottage outside Flagstaff, Arizona. 

Initially, both share the same dream: Airbnb revenues pouring in to fund their adventures. It doesn’t work out equally. 

Maya’s San Jose property costs more than four times the price of a typical U.S. home. Listings suitable for short-term rentals account for a mere 0.41% of the market. Demand is weak, regulations are strict, and local ordinances limit guests. Within a year, she’s losing money.

Meanwhile, Alex’s Arizona cottage draws hikers year-round. His costs are lower. His market’s occupancy rate stays healthy. While his revenue isn’t dizzying, he isn’t contending with crippling overhead or impenetrable red tape. 

Alex is living the dream Maya thought she’d have.

Data Behind the Warning Signs

A report released last year prompted me to consider what exactly constitutes a “bad” short-term rental market. I don’t necessarily agree with every city on the list, and there are several data points that suggest these rankings are incorrect. 

Clever Real Estate’s 2024 ranking of short-term rental markets paints a clear picture of what they consider to be underperformers. San Jose sits at the bottom, accompanied by:

• Birmingham, AL
• San Antonio, TX
• Houston, TX
• Sacramento, CA
• Raleigh, NC
• Riverside, CA
• San Francisco, CA
• Oklahoma City, OK
• Pittsburgh, PA

In many of these markets, oversupply and tepid tourism keep revenues down.

I’ve found that some of the biggest cities are actually the worst places to invest in short-term rentals. Indeed, the counterpoint is valid: These markets often have stronger appreciation and a more straightforward transition to long-term or mid-term rentals if regulations tighten. 

But personally, I wouldn’t risk it. These major cities usually combine weak returns with strict regulations, making them challenging to justify as STR investments. 

For example:

• New York City limits rentals under 30 days to instances when the host is present and ensures that hosts reside in the property for at least 183 days per year. That’s a nonstarter for most investors.
• Los Angeles only allows short-term rentals in a host’s primary residence, caps them at 120 nights per year, and requires hosts to register with the city and display their registration number. To exceed 120 nights, owners must apply for an Extended Home-Sharing permit, which involves extra fees, neighbor notification, and stricter oversight.
• San Diego imposes multitier licensing and caps whole-home rental licenses at 1% of the housing stock.
• Denver requires STRs to be primary residences; hosts must pay a Lodger’s Tax of 10.75%.

Even if you dodge the worst financial metrics, you may be tripped up by the rules.

Places Where the Law Says “Just Don’t”

Some cities go beyond simply regulating; they nearly ban investor-owned short-term rentals:

• New Orleans, LA bans whole-home rentals outside a few commercial zones. The city allows only one short-term rental permit per block; corporate operators are forbidden.
• Santa Monica, CA allows home-sharing only if the host lives there; unhosted stays are illegal.
• Honolulu (Oahu), HI attempted to require stays of at least 90 days outside resort zones. Though a court injunction currently holds the minimum stay at 30 days, unhosted vacation rentals remain confined mainly to resort areas.
• Nashville, TN separates permits for owner-occupied and non?owner?occupied STRs. New non?owner?occupied permits are only allowed in non-residentially zoned areas.
• Brookhaven, GA (a suburb of Atlanta) restricts STRs to owner-occupied homes; hosts must show proof of a homestead exemption and pay local taxes.
• Atlanta, GA allows a short-term rental license only for your primary residence and one additional unit.

Lessons for Aspiring Hosts

By now, Maya has put her San Jose condo up for sale and is searching for markets that won’t strangle her with high costs and restrictive laws. Alex, on the other hand, continues to host hikers and hikers’ dogs, albeit constantly checking for evolving rules.

Here’s what investors and aspiring hosts can learn from their contrasting experiences.

Do your homework on regulations

Some markets require registration, tax collection, and adherence to strict rules; others limit whole-home rentals altogether. Always consult official sources before purchasing.

Consider overall demand and supply

High-cost cities like San Jose, San Francisco, and Sacramento have fewer suitable STR properties and high purchase prices.

Watch for hidden fees and taxes

Occupancy taxes, business fees, and license costs quickly reduce net income.

Think about your travel goals

If you want to operate in vibrant markets, pick those with a strong tourism draw, moderate housing costs, and balanced regulations. Avoid purely speculative buys where numbers don’t add up.

Final Thoughts

Real estate investing is more than crunching numbers; it’s about understanding the rules of the game. Do your homework, dig into the data, and take lessons from Maya’s and Alex’s experience, so your story becomes a success, not a warning.

As of 2025, the Social Security Administration revised its insolvency forecast to 2032. 

It won’t actually go bust, of course. But it also can’t continue on its current course of benefits and revenue. Something will have to give, and politicians from both parties have proposed solutions—none of them good news. 

So what are these proposed Social Security reforms, and how am I preparing for them personally?

Proposed Fixes for Social Security

Like all government overspending problems, the solutions come in two flavors: spend less, or tax more. In reality, the government will probably combine both. 

Here are the proposals most likely to actually happen.

Cut benefits

The simplest option on the table is just to pay out less in benefits. That’s not exactly a popular move for the millions of us who have paid far more into the system than we’ll ever get back. Although that will likely prove true no matter what, it’s just a matter of extent.

Slower COLA increases

Surprise! The SSA has already been doing this for years. By raising the cost-of-living adjustment (COLA) more slowly than real inflation (purchasing power), they’ve managed to delay Social Security’s insolvency. The next COLA announcement for 2026 will come out Oct. 15, based on third-quarter inflation numbers, and is widely expected to be under 3%.

Raise the full retirement age to 69

In 1983, Congress put in place changes that raised the full retirement age from 65 to 67 over the course of decades. We don’t have decades this time around, but Congress has proposed raising it once again from 67 to 69. 

Honestly, this one makes sense. When Social Security was first created in the 1930s, the average life expectancy was just 58 for men and 62 for women. In other words, we weren’t planning on paying for many seniors to live very long. Today, life expectancy is around 76 for men and 81 for women, and the ratio of seniors to workers has plummeted. 

Means-test recipients

The government could cut or deny Social Security benefits for higher-income seniors, despite the fact that they paid the most into the system throughout their careers.

Raise FICA taxes

Workers and employers pay a combined 15.3% toward Social Security and Medicare taxes. Uncle Sam could, of course, take more of your paycheck and make it even more expensive for companies to hire and keep workers.

Remove the cap on FICA taxes

The SSA caps how much retirees can receive in benefits, and the government also caps how much they tax workers for FICA taxes. That cap could disappear for higher earners, so they pay an unlimited amount into the system, despite being capped on what they could ever receive. 

How I’m Preparing

Now that you’ve gazed into the future and wrapped your head around lower benefits and higher taxes than what your parents enjoyed, how should you prepare?

Don’t count on Social Security

You’ll likely get some Social Security benefits. They just won’t be as juicy as they have been for the last 90 years. And even with full benefits, Social Security is only designed to replace 40% of your preretirement income. 

Still, today’s workers under 50 probably shouldn’t budget for Social Security benefits at all, given all the uncertainty around their future. I’m not counting on them. 

Higher earners might find themselves as convenient political targets, and could conceivably receive no benefits at all due to means testing. 

Plan to work longer

With lower benefits in store, you may need to keep earning money later in life. Which, let’s get real, is a reasonable price for living longer. If someone gave you the choice between a life expectancy of 58 versus 76, with the caveat that you’d have to keep working and paying your own bills up to age 70, which would you choose? 

A more aggressive investing portfolio

I was appalled to learn that my sister had 40% of her portfolio in bonds, at the ripe old age of 35. 

You’ll need more money in retirement, and that retirement might be further away than you’d planned. To me, the calculus looks pretty simple: Invest more aggressively.

I personally have around half of my portfolio in stocks and half in passive real estate investments. I hope to earn a long-term average of 8% to 10% on my stock investments and 12% to 18% on my real estate investments. 

For example, in the co-investing club of peers that I help organize, we invested last month in a property currently paying 9.3% in distributions, projected for a 22.4% annualized return. This month, we’re reinvesting in a land fund that has paid out 16% in distributions like clockwork.

These types of investments help me grow my own portfolio much faster than the average person who’s bogged down prematurely in bonds. In fact, I actually invest in real estate as an alternative to bonds in my own portfolio, although in the three to five years before I retire, I’ll probably move some money into bonds. 

Diversifying to mitigate risk

“Brian, your portfolio sounds high risk.”

As a working-age adult, I can handle some risk. When the stock market crashes, that’s basically a Black Friday sale for me to buy stocks at a discount. I don’t need to sell stocks anytime soon. 

Even so, one way I mitigate risk is through diversification. In my stock portfolio, that means buying both international and domestic stocks, large-cap and small, in every sector. You don’t need to become a stock wizard to do that. Just use a roboadvisor or buy shares in the Vanguard Total Stock Market Index Fund (VTI) and the Vanguard FTSE All World Excluding US Fund (VEU). 

On the real estate side, I invest just $5,000 at a time, every month, as a form of dollar-cost averaging. Our co-investing club meets every month to vet a new passive investment, whether that’s a private partnership, syndication, private fund, or secured private note. We all analyze the risk together, and each person can invest small amounts. That lets us diversify across states, operators, asset classes, and payback timelines. 

I even added a little precious metal to my portfolio recently. While you won’t get rich investing in gold, it helps protect your portfolio from inflation, geopolitical risk, and stock market crashes. 

“Precious metals provide retirees with a tangible hedge against market volatility,” notes Jesse Atkins, director of market research for SEMAFO Gold, in a conversation with BiggerPockets. Investing in gold also protects against the U.S. government inflating away its debts, which keep ballooning. 

Plan for higher tax rates

The current debt-to-GDP ratio in the U.S. is a worrying 119%. 

Ultimately, the government can’t keep overspending forever. Sooner or later, it will have to get serious about either cutting spending or raising taxes, and probably both. “Tax rates will almost certainly rise again in the future,” explains tax attorney and CPA Chad Cummings of Cummings & Cummings Law in a conversation with BiggerPockets. “That could happen as soon as post-2026 midterm elections.”

It’s a double whammy that could hit us in our golden years: higher taxes and lower Social Security benefits. 

Take advantage of relatively low tax rates now by taking the hit on capital gains tax for assets you want to sell or making Roth conversions. 

Max out Roth accounts

If you agree that tax rates will rise in the future, then it makes sense to knock out taxes now and let your investments compound tax-free. 

Consider maxing out your Roth IRA and opting for a Roth 401(k) if you have access to a workplace account. As touched upon, you can also convert your traditional IRA or 401(k) funds to Roth accounts. That triggers a one-time tax payment now, but you’ll never pay taxes on the money again, no matter how much it grows. 

Many of my fellow members of the co-investing club invest in Roth self-directed IRAs. Their balances keep exploding in value, and they’ll never pay another cent in taxes on it to the IRS. 

The less you lose to taxes in retirement, the better you can withstand lower Social Security benefits. 

As a final thought, Cummings adds that if the government starts means-testing recipients and restricting Social Security benefits to higher earners, Roth accounts can help protect them. “Future income-based benefit cuts may use modified adjusted gross income as a threshold. Roth withdrawals do not count toward MAGI,” he adds.

Explore cost-of-living contingency plans

My family and I lived abroad for 10 years, and I can tell you firsthand that the quality of life is just as high, but the cost of living is far lower. 

Just four months ago, I was living in a three-bedroom apartment with a 180-degree view of the Pacific Ocean in Lima—a city with 11 million residents—and paying $1,300/month in rent. And yes, it was a great neighborhood, with trendy cafés on every corner. The cost of living in Lima is 65% lower than in Los Angeles, for example. 

If the U.S. becomes too expensive or politically fractious, we can always move back to Peru, Brazil, the UAE, Italy, Romania, or any number of other countries we love, where our dollars stretch farther than they do in the U.S. In fact, my family and I have long-term residency in Brazil through 2030, although it’s easy to get a digital nomad visa in many countries nowadays. 

Nor do you have to move overseas to enjoy a lower cost of living. Ditch the average $1,240,382 San Francisco home to enjoy a $247,197 average home in Kansas City. You’ll still enjoy all the amenities of a major city while paying a fifth of the cost to live there. 

Today’s Workers Will Foot the Bill

For 90 years, retirees have enjoyed generous Social Security benefits. But with fewer babies being born and workers paying into the system, Social Security can’t continue on the same trajectory. You won’t get out anywhere near what you paid into the pyramid. 

Plan to cover your own living expenses in retirement, with returns from your own investments. Plan on higher taxes, too, while you’re at it, in case the future feels too cozy. 

Up your game as an investor, because you’re going to need more than you think.

Sue McCormick is five years into a plan she long postponed while raising two kids as a single mom. “We are working on our 20th project as we speak,” she said. “We’ll finish our 20th project in a couple of weeks, and then we have two more in the pipeline.” 

The Dayton native invests where she grew up for affordability, and because rebuilding old blocks brings her much joy.

How She Got Started, and Why Dayton

McCormick had always wanted to invest, but waited until life allowed it. Podcasts were the on-ramp that built confidence and a roadmap. She targeted Dayton once she realized that homes in her hometown were more affordable. The community mission matters, too: She loves going into those communities and rehabbing properties to enhance those areas.

Strategy and a Live Example

McCormick’s strategy is simple: fix and sell. 

“Our investment strategy right now is still rehabbing homes to sell,” she said. “We get homes primarily from auctions, sites like yours [Auction.com] especially.” 

Eight of the 20 properties McCormick has purchased in the last five years have been through Auction.com, the most recent one in June 2025. She targets about six to eight weeks for a rehab. 

A current project was purchased at a tax auction for $80,000, with about $70,000 into rehab so far. She plans to list it for about $269,000.

Why Auctions Beat the MLS (for Her)

McCormick said she sees better pricing at auction than on the MLS, and she’s upfront about the trade-off: Interior conditions are often unknown. 

“I’m not necessarily afraid of going into a house that I haven’t seen pictures of,” she said. That risk tolerance is offset by potential discounts.

Managing From 500 Miles Away

Ohio’s online foreclosure auctions make a long-distance strategy workable. As a long-distance investor, McCormick can get in the game without having to physically fly to Ohio for every auction. She has even bid on her cell phone while traveling or on vacation. 

Division of labor helps. She primarily sources the deals while her daughter goes to Dayton to check on the progress, with FaceTime check-ins with the contractor in between.

The Contractor Who Stayed—and Stayed

McCormick’s Dayton network spans friends who tackle small errands to a contractor who became family. Early on, a subcontractor lingered after hours while she toured a stranger through a house, staying mainly to ensure she was safe. 

“From that moment on, I had a connection with this contractor,” she said. “He has been with us for five years.” And the lesson stuck with her: “Contractors can make or break you… So having a contractor that I can trust is a major win.”

Due Diligence, Costs, and Early Lessons

McCormick urges newcomers to study the process, observe in person, and build a conservative budget. 

Research is very important, she said, while also running comps, trying to see inside if the property is vacant, and talking to neighbors as top things to achieve. When estimating costs on auction buys, she plans for worst-case scenarios, such as new plumbing, updating the electrical system, and replacing the roof. 

One caution McCormick pointed out was that underestimating can really kill a deal. Her first auction win had undiscovered kitchen-fire damage. They didn’t make a lot of money, but it delivered the confidence to keep going.

Title vigilance is another takeaway. After experiencing deed fraud on a property, she now recommends enrolling in a county alert that flags deed changes.

Neighborhood Ripple Effects

Rehabs have turned out to be a motivator for neighbors, not just a balance sheet win. “The neighbors are affected. They feel better,” McCormick said. 

As projects progress, she’s watched more homeowners come outside to work on their own places, or even ask her crew for help. 

“A rehab project can not only enhance the community, but motivate the community in some ways,” McCormick added.

Advice to Start Today

Education first. McCormick suggests listening to podcasts and reading books. She also said that she found Auction.com through the BiggerPockets podcast, and at one time was listening to two to three BiggerPockets episodes a day. 

If auctions are your path, she also said to attend some, even if you have to do it for a year before you’re comfortable. Then build your local network the way she did—by showing up at auctions, hardware stores, and online community groups—so you’re not alone when issues arise.

McCormick’s story fits a busy investor’s reality: Pick a market you understand, buy with a margin of safety, and rely on people you trust.

Dave:
This investor bought his first property for only 25 grand right in his hometown. Now, his cashflow from real estate averages $5,000 every single month. He was able to accumulate 20 units in seven years, all while working a day job by maximizing his own strengths, understanding his local area, and adapting as the real estate market has changed. If you want to repeat his journey, keep watching to find out how. Hey everyone. I’m Dave Meyer, head of Real Estate investing in BiggerPockets, and on this show we teach you how to achieve financial freedom through real estate. Our guest on the show today is Investor Dustin Cardenas from Western Illinois. Dustin didn’t start in real estate with any sort of built-in advantages. He calls himself an everyman and has worked a series of very regular jobs including bug exterminator and car salesman. But Dustin also saw an opportunity right in his backyard, low priced homes that could be worth much more if someone just took the time to fix them up and maximize their value. So he thought, why not me? And bought his first property for only 25 grand. That was seven years ago, and today Dustin has a cash flowing portfolio that’s allowed him to cut back his hours at work and dream of a retirement that otherwise might not be possible. Let’s bring on Dustin and hear about this amazing investor journey. Dustin, welcome to the BiggerPockets podcast. Thanks for being here.

Dustin:
Thanks for having me. Huge fan of the show.

Dave:
Oh, it’s great to hear. We love to hear that. What was your background? How long ago did you get into real estate and what had you been doing prior to that?

Dustin:
It’s funny you asked that. I just had to think about the age that I started investing in real estate and I actually wrote it down, so I was actually 35 years old when I started investing in real estate and I’m currently 42 before real estate. I had my W2, which I still have at this point. I’m a car salesman here at the local dealership in town, and I’ve been here for nine years. Previously to that, I was a pest control manager for about four years, and previous to that I was a juvenile detention officer for almost six years, and my wife is currently a nurse practitioner here at a hospital in town.

Dave:
Nice. Wow. You’ve done a little bit of everything. It sounds

Dustin:
Like a little bit of everything. Yes.

Dave:
Just a very varied career. Yeah. So why did you decide to get into real estate at 35?

Dustin:
There was a handful of investors around here in town and one guy I went to school with and he was kind of born into it, and I was at a local establishment one night and he told me, he said, you could do this. There’s room for everybody in this field. And he said, Hey, I know you got a good job. I know your wife has a great job. You guys have good credit. He said, there’s more than enough to get around, and what he said to me stuck with me and lit the fire right there, and I still, I never forgot it. What he said was, you know what I want to do with my life? I want to do whatever I want to do whenever I want to do it, and I want to get paid for it, and real estate does that for me. So right then at that moment, I just started reading every sort of book material I could get my hands on and it was on and going from there.

Dave:
Oh, that’s super cool. I love that story and I love the mentality of this guy. You met your friend or mentor, if you will. What was your instinct at that point? Where did you want to go with your investing career and how did you start thinking about doing your first deal?

Dustin:
But the first deal I hunted down, it was a great deal with my realtor and she’s still my realtor to this day. I was selling a vehicle and I had to take the vehicle back to the real estate office. So I went in and had a conversation with her and she was probably eight years younger than me, but she actually broke everything down to me and said, you can do this. So just to piggyback on the helping each other.

Dave:
So

Dustin:
She said, you can do this. And so we instantly started looking at houses then, and I had a lot of different realtors kind of shy away from me because I was looking for the smaller deals. I wasn’t looking for a hundred thousand, $200,000 houses, anything like that. I was in the range of 20 to $40,000 houses. So the first deal that we found it was they had a list of $41,000 and it was a move-in ready house in this area, right place, right time. The people had moved to California and the house had already been redone, move in ready. I ended up low balling them and I got the house for $25,000.

Dave:
Oh my God.

Dustin:
Wow. And I still own that house to this day, and that house right now with equity is probably worth 70,000 because I bought it in 2018, but that first deal was the one that sparked it, that I said, okay, I can do this, and after that deal, then the snowball happens and you just start going from there.

Dave:
Wow. I mean, hearing those numbers about the price of houses is crazy to just imagine that you could buy a house for 25 grand where most people would be probably pretty happy to find a house for 10 times that amount if you could find something for two 50, but what is your market like? Is it rural?

Dustin:
Our town is currently about 35,000 people, so we’re in a perfect area. We’re right in the middle of two higher volume areas. 45 minutes north of us is, it’s called the Quad Cities, and it is probably about a hundred, 120,045 minutes east to us is called Peoria, Illinois, which is also about a hundred, 1500 20,000 people. So we’re right in the middle, which is a great area. I love listening to the podcast all the time too. You guys talk about the Midwest and it’s by far, I don’t want to give all our secrets away, but it’s by far the top spot to invest in the whole country.

Dave:
That’s what I’m saying, man. I agree,

Dustin:
And that’s true, and I have the numbers to prove it.

Dave:
Yeah, it sounds really cool. When you buy a house for $25,000, you said it was move and ready, what can you rent that for

Dustin:
Originally? I rent that house now for $700 a month, and that is a two bedroom house. It’s two and a half bedroom, maybe a little small office. There’s no closet. It also has two bathrooms in it, so I rent that house for 700. Currently I was renting it for six 50, but with time it just goes up and I have long-term renters there that they take care of the home.

Dave:
That’s

Dustin:
Great. They love the home, and not only that, the lot is huge, so it’s a great house.

Dave:
That’s unreal.

Dustin:
It is completely unreal. I figured you guys would be somewhat shocked with these numbers that I tell you here

Dave:
I am. I mean, people are saying you can’t get the 1% rule. You have nearly 3% rule right now

Dustin:
On multiple properties, Dave.

Dave:
Wow, that’s awesome. Well, just for everyone who knows, there’s this thing called the 1% rule that got really popular maybe like 10 years ago, and basically the idea is that if you can find a property where your monthly rent is 1% of the purchase price, you’re probably going to have pretty strong cash cashflow. And in the last couple of years it’s been harder and harder to find that, especially outside of the Midwest, but you find deals that are 0.7 0.8, which you could still cashflow, but a 1% is like a solid deal, but people rightfully are saying it’s hard to find those, but apparently Dustin’s finding two and 3% real deals, which is pretty incredible. I could see why this has snowballed for you because that’s an incredible first deal. Congratulations on figuring that out. Once you did that, were you just ready to go for the next one immediately?

Dustin:
So 2018, that was August of 2018 is when I bought the first one, so I let that roll for a couple months. Then November came back around and I found another home, which I still own to this day, two bedroom, two bath. Once again, the same scenario, people were moving out of it. I ended up getting that house for $30,000 and is moving ready. The same tenant still lives there to this day. Going onto the third one, I bought a third one, three houses in 2018. The third one was in November, same exact scenario. I ended up buying that house for $18,000 and that was also semi moving ready, but I had to do very few cosmetic stuff to it and I added Central Air to the home. But the scenario behind that one and elderly gentleman had moved to a nursing home. I was driving by one day and his brother was mowing the yard and I just stopped and talked to him.
He showed me the house immediately and he said, Hey, we’re getting ready to list it for 28,000. And I said, okay. And I said, well, would you guys take 18,000? He took my information and within one week I had it rolling to purchase that home. Oh my gosh. On the third deal, just to kind of back up on that, on the third deal, the financer, the bank was said, Hey, we usually like to wait about a year or so before we give you any more money. We want to see how it works. And I kind of just was direct and forward. I said, Hey, I have this business plan and it’s going to work. I said, me and my wife both have the finances to back this up, but I’m going to start this business and put it in an LLC, and either you guys are going to give me the money or I’m going to go down the street to another bank and they’re going to finance this immediately. Once I put the business plan out there, they accepted it. They knew that it was going to work because I had everything in play and from then on out, now I have a business line of credit through them. I don’t even have to go through there. I don’t have to run credit.

Dave:
Do you think this is a strategy or approach that is repeatable by the average investor? If you live in a small town, do you think this is just something that anyone can do? I

Dustin:
Really do, and I definitely think a hundred percent of it is a demographic. I really do believe that anybody can do this, but I think there’s just a fear around investing in real estate. A lot of people are pessimistic about it instead of being optimistic about it. Me personally, I think that you’re doing yourself a disfavor if you’re not investing in real estate. That’s just my opinion, because the bank needs people like us. They need us to pay our interest rate, they want to give us money so they can loan our money out to different people for different houses, cars, whatever it may be. But I definitely believe that it is easily possible, especially in the Midwest.

Dave:
Yeah, for sure. Yeah, I mean I think in the Midwest it’s definitely something that is more achievable, especially from the affordability standpoint. But we talk a lot about markets on this show and in BiggerPockets in general, and there are some great markets across the US all sorts. But I think your story is just reinforcing the idea that you really can make almost any kind of market work if you have the right approach and the right strategy. And it sounds like what you’re doing, Dustin is just working with what you know this market really well, who wants to live there, who’s selling properties, you know what the tenant base is going to be like, and you’re using that very effectively to your advantage. That’s awesome. I love that. Well, this is a very cool story and I want to hear more about how your investing career has progressed, but we do have to take a quick break. We’ll be right back. Welcome back to the BiggerPockets podcast. I’m here with investor Dustin Cardenas talking about how he has scaled his portfolio very effectively with very affordable properties. Tell me, Dustin, what happened during COVID in your market? Most places in the country started going crazy price wise. You were starting at a pretty low entry point. What has changed and what happened in COVID?

Dustin:
I’m very glad that you asked that question because COVID, for me, 2020 was kind of a breakout year. So even in my W2, the car industry was great. We sold a lot of cars
And I bought a lot of houses. I actually bought five units, one duplex, and the rest were single family homes in 2020. One of them was a duplex in a less desirable neighborhood, but it’s all about finding those deals too. I listen to Henry Washington a lot. It’s all about finding those deals. So I ended up finding a duplex on the less than stellar side of town behind a liquor store. I know it sounds cliche, but it’s actually true, and it actually was just placed on Facebook marketplace, and my sister messaged me and well, she tagged me in the post, and so my wife actually went and looked at it first and I got off of work, and I remember to this day, I walk upstairs and she’s sitting on the couch just glaring at me and she says, I want it. And it was a very nice house. It might’ve looked kind of like, it still looks like crap on the outside with old shingles, but it was actually owned by a maintenance man upstairs and downstairs, do blacks separate utilities,

Dave:
Love that

Dustin:
Furnace, separate furnace, separate water heaters, locked down like a fortress. And I bought that house for $24,000. Unreal. And I still own that house to this day, and I have long-term tenants there as well. So that was a beautiful home. So I had absolutely no problem in COVID.

Dave:
What are the conditions of these properties? I’m trying to just wrap my head around what a $7,500 or $10,000 property looks like. I mean, I paid more to resurface my driveway than that property.

Dustin:
The $10,000 house I have, it was pretty nice. It wasn’t bad. I rented it for approximately two or three years, a couple different tenants, and then the floor started sagging. So I ended up going in there just to make a quick repair. But of course when we got into it, I ended up rehabbing the whole house. So I rehabbed that whole house for about 11 grand. I wanted to spend 5,000, but it’s such a small square footage,

Dave:
I just don’t even understand how does that happen? How do you do a new kitchen?

Dustin:
I did everything in that house. It was such a,

Dave:
How do you do a kitchen for 11 grand?

Dustin:
The bedrooms were fine. It was two bedrooms on one side of the house and a bathroom in the middle. On the other side of the house is an open living room that goes into your kitchen that is separated by an island. So I tore it down to the rafters, completed all brand new wood rafters, all the wood, everything. And then I bought stainless steel appliances, but I buy a lot of stuff secondhand. And then I have a plumbing and heating company that went in there and they redid the whole house for about $700 for plumbing. But you got to think about the square footage is so minimal, there’s not a huge area that they’re going

Dave:
That’s fair.

Dustin:
But it was very cost efficient.

Dave:
And if you were to go and sell that property today, how much do you think you could get for it?

Dustin:
My realtors already offered me about 30 for it. I think if I put that house on the market, I could probably sell it. 35,000, 40,000 I think I could get out of it.

Dave:
Okay. So you put 15 grand into this thing and you could probably double that. And what would it rent for?

Dustin:
I rent that house for $500 a month.

Dave:
All right. Still a good deal. I want to hear how your portfolio looks today, what you’re buying, what your goals are, but we do have to take one more quick break. We’ll be right back. Welcome back to the BiggerPockets podcast. Me and Dustin are going over his incredible portfolio that he’s building. Honestly, I didn’t even know that how this price point even exists anymore, but it seems like Dustin, you are making a career out of this. So let’s fast forward to now where we sit in 2025. What does your portfolio look like today?

Dustin:
Currently in 2025, I own 20 units, five duplexes and the rest are single family homes and one of my favorite homes that I bought too. And I ventured out into a different field in real estate. I bought a house in Peoria, Illinois, once again, a private deal through a friend who was a realtor. The same family owned this house since the seventies, and their daughter lived there. They lived there, a central part of town. I ended up buying a house for $30,000. They wanted 45,000 for it. I ended up getting it for 30, and they left everything in there, move in ready house. So I sold all of the possessions in there, and then I just basically gave the house a facelift. All new paint, of course, all cosmetic, nothing. I put a new water heater in it. But that current house, I tried Airbnb for a while and Airbnb was not for me.
It was not for me just because I was 45 minutes away, the high turnover rate, the cleaning. So I switched from that to Furnish Finder, which has been absolutely phenomenal there. I get long-term tenants and there’s two hospitals located there. So that home I currently can rent for almost $2,000 a month, and that’s absolutely everything included, of course. But my power, water insurance, everything like that is very minuscule compared to the profit margin that I make off of that home. And I’ll tell you, traveling furnish finder is an amazing thing because all nurses really care about is cleanliness, a place to sleep, wifi and air conditioning, and a nice comfortable bed. And we provide all of that and I’m more than happy to do it.

Dave:
Awesome. So right now you own 20 units. Are you still self-managing them all?

Dustin:
One guy, me. So I self-manage every single one. I listen to you guys every single week when I mow yards. So I mow about 10 to 15 yards, and I’ll add that into the rent too, which I listened to your podcast for about listen to your podcast for about five years. And I know what role I fall into. I’m definitely an active landlord, so I like to keep my eyes on the property. I have no problem mowing the yards. I actually educate myself while I’m mowing these yards. And I hear your podcast every single week, which is definitely interesting. I’ve learned so much off of it. But I completely manage every single thing, all Google Sheets, and that all came with time because when I first started, I’m writing stuff down on a piece of paper, I’m doing this, I’m doing that. Before, I was actually paying a lot of money into taxes before I learned about tax write off and tax code and everything like that. So I have everything on Google Sheets, everything backed up, and I absolutely love it at this point, think I want to continue to self-manage. But then I also hear you guys, as I told my buddy today, I said, man, now I know what they mean by you get a lot of units and you’re self managing it, and it does wear on you. It really does.

Dave:
Yeah, it takes time and you’re still working.

Dustin:
I work. So I was going to leave the auto industry altogether after I bought my maybe 18th house. I just said, Hey, thanks for the opportunity. I worked for a phenomenal place. I’ve only worked at one dealership my whole entire career. And I said, I really appreciate the opportunity, but it’s time for me to move on. I just can’t be here 50, 60 hours a week. And they gave me a great opportunity. They said, Hey, will you stay on part-time and we’d like to keep you here and you can travel. Do as you please, go as you please and work your customer base. And even when I started investing, they were nothing but supportive. They said, oh, hey, he’s going to start buying houses. You should do that. I, so I couldn’t ask for a better place to work, and I honestly don’t plan on going anywhere unless they fire me.

Dave:
That’s awesome. I mean, it sounds like the best of both worlds.

Dustin:
It really is.

Dave:
I think so many people focus on retiring, but mean if you have a little bit of each, have some income coming in from the car dealership, more money for you to invest, more things that you can use to pay your lifestyle and hopefully scale your portfolio,

Dustin:
You are absolutely correct. You hit it right on the button.

Dave:
Your portfolio level today, how much cashflow, if you don’t mind me asking, is it thrown?

Dustin:
Sure. I’ll break the numbers down to you. Exactly.

Dave:
Yeah, let’s do it.

Dustin:
Well, first of all, do not live beyond my means. So

Dave:
Good for you.

Dustin:
I’m very frugal, if that makes sense. But every single month I bring in $13,700 in rent.

Dave:
Is that rent? Okay,

Dustin:
That is what I bring in rent. So the yearly gross is $164,000, $164,400. Now, the monthly mortgage I pay is $3,600. That’s what I pay for 20 units total. Total $3,600, 3000, kidding. 605 to be exact,

Dave:
Yes. Well, I have some payments less than that, but man, that is wild for your entire portfolio.

Dustin:
Now, of course, that does not include, as we both know, it does not include my property taxes, and it does not include my insurance. So with my insurance and taxes, I pay $41,340 a year just for insurance and taxes.

Dave:
Okay, so you’re still at what, 1 23 before repairs and maintenance and vacancy and all

Dustin:
That? So total yearly, net 1 21, 1 40, take home every month. Everything broken down, everything paid for, excluding maintenance, of course not if it’s when it’s going to happen, is $6,650 take home. After all the bills are paid every single month.

Dave:
Wow, that’s awesome. And do you have an average of repair? That kind of expense

Dustin:
This year has been the hardest so far. And I was speaking with my buddy though, and I’m like, man, this has been my most expensive year. And he said, well, this is also the year that you have the most properties.

Dave:
Well, that’s true too. Yeah.

Dustin:
As of this year, I’m currently about 25,000 to $27,000 with maintenance fees this year alone.

Dave:
So you’re still making, I mean, net net, you’re still making four or five grand a month

Dustin:
Easily.

Dave:
That’s awesome. That’s incredible. And is that enough to support your lifestyle?

Dustin:
Oh, 100%. As mentioned, I don’t live beyond my means. So the average door broken down from Google Sheets, of course and everything, and the average door, I make $332 and 50 cents is the average price on if I was to break them down by 20. But as far as living my lifestyle, I’m also a big credit guy, so I do all the, I travel for free. I don’t spend money on hotels. I don’t spend money on traveling. Airplanes are free, rental cars are free, and I do all of that by playing the credit card game.

Dave:
Oh, I play the credit card game so hard, man. I love it. It’s the best. I’m so addicted.

Dustin:
I don’t remember the last time I paid for a hotel or flight or anything like that.

Dave:
Honestly, if you buy rental properties, it’s such a good game to get into. If you can pay off your, I’m not saying put things on your credit card that you can’t pay off, but if you’re going to buy stuff, buy it on a credit card, especially if you have an LLC for every one of your properties, which is something that I personally do. You open a new business card in every single name, and they’re always giving you these a hundred thousand point bonuses or whatever. If you spend three grand in the first six months and it’s a rental property investor, usually you spend three grand in the first six months, and so you’re just, it’s like a thousand, 1500 bucks worth of travel credit if you’re just going to buy it anyway. It’s the best game.

Dustin:
Yeah, so why would you not? Yeah,

Dave:
Exactly. I love

Dustin:
It. I was listening to your podcast the other day, and I was actually in the middle of doing what exactly what you and Henry said. I was like, well, okay, I’m going to rehab this house, so I’m going to use this Amex card that’s going to give me $20,000 interest free for a year, so I’m going to go ahead and I just gave it to my contractor. I said, here, just take this card. Buy what you got to buy. You know what I like? I’m always on a budget. I’m cheap. I know that you find great bargains. Here’s this credit card. Let me know when you’re done.

Dave:
If you could do that, if you trust your contractor, I love that. But just so everyone knows that if you didn’t listen to that episode, Henry and I were saying that you can do this if you have the money to pay off the credit card immediately. If you’re going to buy it, you might as well put it on the credit card because that’s an interest free loan. If you do it on a new credit card that has an interest free period. Or you could just do it to get the credit card points, which can offer you anywhere between one to 3% discount or cash back. Essentially on these things. You got to use credit cards responsibly. You can’t let your credit card debt rack up. Having that interest sit, there can be a huge financial trap. Do not do that. What we were just saying is if you had 20 grand in your bank account and you needed to go spend 20 grand on a property, you might as well put it on the credit card, get the point, get some interest free period, and then just use the 20 grand to pay it off later.
I know it might not sound like a lot, but if you do this over a long enough period of time, it really does add up to a lot of credit card points and money saved over a long period of time.

Dustin:
How else I use utilize credit cards too is I’ll pay the utilities for my houses, so I’ll include it with the rent or they’ll pay me back. But nonetheless, I’ll pay $3,000 in utilities every month on a credit card and then immediately pay it off after collecting rent.

Dave:
Yep, exactly. That makes a lot of sense. Well, Dustin, this is super exciting. Congratulations on your success. It’s incredible. Very cool. Unique portfolio. You’re building there. What’s next for you? Do you have any goals that you’re pursuing right now?

Dustin:
Currently in the middle of a flip right now. I’m almost done with it, and I’m hoping to make a substantial amount of money with this home just to put it and reinvest into another home. As far as the rental properties, I’m not actively looking, but if something comes along that I can’t pass up, then I’ll buy it. But 20 units right now, I’m doing okay. It’s rolling. Great tenants. I’m just going to stick with that. But the next step I want to go into flipping, but also as we mentioned earlier, I’m not opposed to finding another furnish finder house because I think you get the most bang for your buck off of the short-term rentals. You really do. It really pays off if you can do it right.

Dave:
Well, Dustin, thank you so much for joining us. Congratulations to you and your wife and working really hard to be able to achieve such an impressive portfolio in just about seven years. It’s really cool story that you got there. We really appreciate you being here.

Dustin:
I appreciate being here and anyone out there listening. It’s possible, especially listening to podcasts like this. You got to start somewhere. I started with one single family home, and I remember people doubted me, but when they doubt you, you’re the one that’s out there doing the work. It’s not them. It is possible, and especially with a good group of support, it’s possible to get in the door of real estate.

Dave:
Awesome. Well, I love that message and couldn’t agree more. That is absolutely possible. Just work on getting your foot in the door and you can find success just like Dustin has. So thank you all so much for listening to this episode of the BiggerPockets podcast. We appreciate you being here, and we’ll see you next time.

Ashley:
Everyone’s heard of rentals, house hacking and even fix and flips. But what if I told you there are four niche strategies outperforming in 2025 that most rookies don’t even know exist?

Tony:
And look, these aren’t just buzzwords. We’re talking about real deals where rookies can create values in ways the average investors simply overlooking. So if you are rookie and you want strategies that are working right now in 2025, not the same old stuff we talked about before, this episode is free.

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

Tony:
And I’m Tony j Robinson. And with that, let’s jump into our first niche strategy.

Ashley:
So this first one is a section eight overhang and this brings into accounts low income housing and specifically the low income housing tax credit. So a lot of people have heard of section eight, and if you haven’t, it is when a person qualifies for financial assistance to pay for their rent from an organization such as your local housing authority. So here in Buffalo it is Belmont Housing and a Section eight voucher is somebody applies and most often the rule is that their income has to be less than the medium income for that county. Things like that. There’s different rules. You can Google your local housing authority to see actually what the amount is that qualifies for somebody for low income. But usually your tenant will go ahead and do that themselves. You really don’t have to be involved until they want to move into your property.
And that’s where section eight will come in and do an inspection of your property and make sure it is rent ready and then you’ll actually sign a lease agreement with them to actually pay you part of their rent income. So it could be a portion of it and it’ll be different based on what the person can qualify for. And then your tenant pays the additional portion so you can do a lease agreement with your tenant. Some of the housing authorities do it different ways depending on what organization you go through to do this. But if you just search Section eight vouchers in Buffalo, New York or whatever your city is, you’ll be able to find the housing authority that actually handles them. And they usually have a landlord tab and will tell you everything you need to know about to becoming a landlord that accepts Section eight tenants.
And they even have their own listings there where you can list your property for rent. So all of the counselors there that help people get placements, they can look at your listing and maybe they’ll already have somebody that can, it’s waiting for an apartment to move into there. Okay, so that’s section eight one Pro of section eight is that people can consider it guaranteed income because it’s the government paying the income and not necessarily relying on the tenant if they lose their job or different things come up. So during COVID, people really liked section eight because you still got paid that portion of it. Another thing that I’ve seen from the section eight tenants I have is that they are more likely to pay also because if they stop paying, they lose that section eight voucher and now they get no funding at all. So those are some of the benefits.
I’ve actually never had a bad experience with Section eight resident, but there are people that have and people that stay away from it. But one advantage that isn’t often talked about is the low income housing tax credit. So this is actually where you can get the tax credit and you have to comply of course with rules and regulations and your property has to fit the bill, but this is an additional benefit that can put more money back into your pocket. And Tony and I recently did an episode on what we’re doing for tax planning and tax advantages and this is another way to save money from these tax advantages that are available out there for real estate investors. So Tony, when you had your properties in Louisiana, did you have any Section eight tenants?

Tony:
No, no Section eight experience on my side. That’s why this strategy I think is even more interesting to me because it’s all new and foreign. But I guess help me understand, so section eight is obviously subsidized rent, rent being subsidized by the government, but the low income housing tax credit, just walk me through how does that work? So basically if I’m a landlord and I buy a property that satisfies the conditions for this low income housing tax credit, am I getting some kind of tax benefit that offsets the income of that property? How does it actually work? The credit?

Ashley:
So when you would file your tax return, you would get the tax credit savings on your tax return, you would report your income and expenses for it. And I honestly dunno exactly how it’s calculated for the tax return when you’re reporting the rental income. But I do know there are some restrictions as to even how much you can charge and it has to be under that certain amount in order to fit the low income housing tax credit cap that they have. So some of the reasons I think this is actually worth looking into for rookie investors is because affordable housing and demand is actually exploding and with higher interest rates and rental rates increasing, it’s getting harder and harder for people to find affordable housing. And if we do start to shift into a recession, this actually can be a recession proof income for you because section eight will still pay most of the bill for these renters that you have in place.
Or if somebody’s living in a luxury unit and all of a sudden they’ve lost their job, affordable housing may be what they need. So one thing that I did want to share is how to actually find out if a property is actually eligible for this. And this is one of the nice things about this strategy is looking for properties is that you can most of the time find out if it qualifies before you even purchase the property. So hud, they actually maintain a property database. So this is the L-I-H-T-C database and this is where you can search by city, county or even zip code and it will tell you if the property is already part of the program. The next thing you could do is also contact your local state housing finance agency commonly referred to as HFA and you can tell them the property address and they will actually just tell you if it’s already approved.
And also when the compliance period ends, some of these tax credits, these programs, there’s also one for timber that I’ve learned about too. They have an end period where you can get these tax credits but they end after so many years. So you have to commit and this one is usually 15 years. You commit to being the low income housing 15 years. And then after that you can decide if you want to re-enroll or if you’d like to do something else with the property, which I think gives it flexibility that it’s not something you have to do forever with the property. You can also go ahead and get your property approved. If you already own a property too and you maybe already have a Section eight person in place there and you’re not enrolled into this program but you want your property approved, you can go ahead and actually go through the process to get it approved to get that tax credit to.

Tony:
So Ash, if I’m tracking correctly, really what we’re talking about here is just stacking two strategies together because not every section eight property also qualifies for this low income housing tax credit. And not every property that qualifies for low income housing tax credit is also being filled with Section eight tenants. But you’re saying if you combine both of those, you get the certainty of the section eight voucher and the government backing up their rent payment, but then you also get the tax benefit that comes along with this credit. So we’re really putting two strategies together focused on affordable housing.

Ashley:
And I think this is also another way to stabilize a property you already have. So if you already have a property, you could go ahead and do these two different things, these two different strategies and implement it into that property to be able to get these benefits and maybe make it a better performing property. So I actually went and looked up what Section eight actually pays in my area. And so I looked at one of the, it breaks it down very, very specific by zip code. And so I looked at one of the properties that I have and I’ll tell you the market rent first. So the market rent, and this is based off of my properties I have there and my friend manages two 40 unit apartment complexes there and I know some other units and what they’re going for or whatever. So the market rent for a two bedroom is around nine 50 for just middle of the road, no luxuries, nothing, just your regular standard apartment, nine 50 for a two bedroom for a section eight in that area, they would pay up to $1,300 for a two bedroom apartment.
So in some cases you may be able to raise your rent even if the market rent isn’t there, you still can list it for that with section eight and they will pay up to that amount as long as the tenant they have is qualified for their portion. We’ve had circumstances where section eight would pay it, but then the person was only approved for a thousand dollars that they would get and they couldn’t afford the extra 300 or whatever it would be. But yeah, so that’s just something to look into if you are not looking for a new property is just seeing what you can do to maximize your rent Now with a property you already have too.

Tony:
Alright, but what if you don’t want to deal with tenants like at all? That’s the beauty of land flipping. No late night maintenance calls, no lease agreements, just dirt that you can actually buy. So we’ll cover what this is right after. Quick word from today’s show sponsors. Alright, so we’re back and our next strategy is what we call mid-range land flipping. So we all know home flipping, you buy an undervalued home and disrepair, you fix it up and you sell it for more than what you bought it for. You get to keep the difference, but there’s also this concept of land flipping where you can pretty much do the same thing. But with land, what mid-range land flipping is, it’s I guess most land flippers focus on super cheap pieces of land, like 1000 to $5,000 or on huge development lots where there’s going to be a subdivision of a bunch of homes and that’s in the millions of dollars.
But there’s this mid-range land flip that’s, I dunno, call it like 50 to maybe $250,000. That’s turned into a bit of a sweet spot for folks who are looking to do this. And you can buy a parcel with kind of good underlying fundamentals and that’s is there access, can you actually get to the property, not landlocked, are utilities nearby? Zoning? Is placement good? If you need to put a well or septic or any of those things you hold it for, call it six months, maybe a year and a half and then you resell this after making some small improvements and you get to keep the difference. I’ve never personally land flipped. Have you ever flipped land ash?

Ashley:
No, I don’t think that I have. I mean I guess I would know if I did, but yeah, if I did it was accidentally with another property or something. But I do have 10 acres under contract that I did nothing with and I’m selling it for, let’s see, $5,000 more than I bought it for definitely not covering my holding cost, but I really like this strategy because in my market I am seeing every single week on Facebook and the local group says to looking for two acres to build a home, does anyone have anything available? And all across the US right now are builder incentives, like crazy incentives to purchase a house. But a lot of times builders already have their own lots that you can pick and choose from and most of the time they’re in developments, they’re in a cul-de-sac right next to each other. So for the people that don’t want to be right next to each other, you can go and buy 10 acres and parcel it off into five, two acre lots.
There’s lots of things you have to check on this as to make sure there’s enough frontage so that everybody can have a driveway to their house, make sure that the town will let you parcel it off, speak with the code enforcement there that it won’t be an issue to parcel. And then you could even go as far as putting utilities there or maybe there’s already utilities at the road where it’s not a big deal to actually bring them to the house. So if you’re getting pretty rural, you could put in a septic or a well have electric run under there, but that also can change how when someone’s building their house wherever you put the, well maybe that’s where they wanted the bedroom, it has a view of this tree or something like that and now they’re not going to buy it. So that’s just taking it an extra further step is having the actual infrastructure in.
But just this morning I drove by a property that I remembered being for Sally, I had to take my car to the dealership. So I took a different route on the way back from school and I remember this property being for sale and it was a single family ranch home and there was about, I don’t remember how much land, but a lot of land with it and the house was very dilapidated and just old and it was just like a crazy amount of money. I don’t know what it ended up selling for, but the person that bought it when I drove by, I saw that the single family home had been fixed up, but they also had subdivided the land on the other side of the street and they had driveways put in. Some of them already had contractor sign out front that people were coming in to do the foundation, put in the wells, things like that.
So they had actually gone and subdivided this land. What ended up with the single family house? I don’t know, maybe they moved into that or maybe they rented out, but selling the lots paid for the whole thing. So that’s what I like about the opportunity of land and this subdividing is like you can go ahead and buy it and then parcel it off and then maybe you keep a parcel for yourself to build, put a rental on, do whatever for the future for you to build a house or something like that. But I think that mid range is really key because you’re going to get the developers, the house builders that are going to buy up those bigger lots where they can put a whole paved road through, create the cul-de-sac and have 20 to 30 lots right on there. Then smaller lots you’re just, you can only fit one house and sell it to one person and not be able to subdivide there.

Tony:
And I think that’s why this one’s kind of like that sweet spot, right? Because you think about the cheap land, those homeowners are getting bombarded with people trying to solicit to buy their lots of land and the big parcels, that’s where all the big institutional builders are going, but it’s like that mid-range, maybe a little less crowded, you got less folks going after that. And then from an affordability perspective, I think you brought up a good point ash of if I want to build my own home sometimes, well first sometimes it’s cheaper to build right now it is to even buy a resale home in certain markets we know that that’s definitely a shift that’s happening. But what about the financing portion? I think all of us understand that’s gotten by a traditional single family home. We go to a bank, we get a loan 10, 20, 30% down. What’s this process like if someone wants to do this mid-range land flipping

Ashley:
And that is the difficult piece because it is harder to get a loan on raw land that doesn’t have a property on it. The first thing to do is check with the small local banks to look at getting a loan on the land through them. And some banks will do it if you put 30% down or a larger amount down the way that most people when they build house, their contractor or their builder, if they’re not buying a lot directly from their builder, some people will have their builder buy the lot and then wrap it into their home loan. So then they’re not even owning the lot yet the builder is building their house and when they close on their house, they’re buying it all in one from the builder. Okay, so you don’t have that luxury if you’re going to go and do land flipping on this property of doing that.
So talk to the small local banks, see if they would land it on, but still that’s a lot of cash to have upfront to put 30% down on one of those lots and you most likely have to have some credibility or some kind of experience that they’re just going to lend to you on this raw land that the best way is to get seller financing. Find somebody who will seller finance a property for you for a year or give yourself a cushion of how long you think you need to actually parcel it off and sell each of those lots. The next thing is partnerships. Bring somebody in that has the capital. You have the lot, you have the land, there’s not a lot of things that you need to do to get to this ready besides doing a survey to do the parcels and maybe putting in driveways to the lots and sometimes you don’t even need to go that far.
But yeah, you could bring a partner in and then I think the last thing that you could do is what that house I drove by today did. They bought the land with a single family home on it so they could have gotten financing on that property because there was the single family home. So now the difficult piece of that is though, once you purchase it, you can’t go and just sell and parcel off pieces of land because that land is part of the collateral of all the loan. So when I worked with this other investor, something he would do is go to the bank and ask the bank, can I parcel off this five acre lott? And the bank would basically evaluate what the value of the land was. Some may do an appraisal, some may just do book value, whatever, and they would say yes, that’s okay, there’s still enough collateral in this property, it will work.
So you can go to the bank and do that, especially if you are adding value and you’re rehabbing the property, then you’ll be able to show, I put this property, the house is worth a lot more, can I go ahead and section off this land? Or you could work it out that those five lots you’re selling is actually going to pay off the whole loan. You would just have to time it so that those lots are all pretty much at the same closing time to be able to pay off the loan that you have it. But also if you find buyers for each of those lots, I think that would be a pretty easy way to find a private money lender to pay off your bank financing and they hold the note for three months or whatever it takes to actually close, make some interest off of you or maybe get a cut of the deal during that time until you actually close on the other lots.

Tony:
I think one other concept too, ash, is that the cost of this land in a lot of cases might be what you already have saved up for your down payment of what you were thinking to buy as a down payment. So you might be able to just go out here and buy some of this land and cash and then either partner with someone to do the improvements or whatever the cost may be there. But I think because the price point is so much lower, maybe it does open you up just for using the cash you have sitting around to go out there and take these down. But I guess the last thing that comes to mind for me on this ash, is actually choosing the right markets to do this in because I think that maybe this works better in some markets than others, right? I’m in California, one of the most expensive places to buy land to buy dirt. What do you think are maybe some of the things folks should look for as they think about markets to identify?

Ashley:
Yeah, I think looking on the outskirts of the town, so looking where is their growth that’s coming out of the town? So I think of Denver for example, when you’re driving to the airport just, I mean I’ve probably started going to Denver four years ago, maybe five and just since then, how much is slowly coming out towards the airport to the new development? There is nothing there, nothing. And now there’s things popping up. So I think going and looking at different cities or towns where there’s a lot of growth and looking where are they expanding to where are the pockets where people who can’t get houses in that area, they’re moving out a little bit. So look in those areas. And then I think another thing is to look at where there’s rising building permits. So you can look online in most cities, how many building permits were filed, what they were filed for, and the more building permits means there’s more demand for land already there.
And you can look, are these for residential homes? Do a lot of people want to build residential homes in this market? Then that’s probably a good area for you to look for land for. And some really good tools you can use is just like the county GIS mapping system. My dad actually showed this to me. He would use it when he would go hunting to look up who owned land if the deer he was tracking went on someone else’s land or whatever. But this was like, I used this religiously for years and it’s free to, there’s more advanced options that you can pay for like stream things like that recently. But the county GIS mapping is free and it will show you who owns a parcel, the mailing address sometimes what the taxes are. But it will also tell you is it what it’s zoned as. It will also tell you is there frontage? So is there road access, is it vacant, is there any property on it? So that’s a really useful tool. Then there’s also just looking for properties. You can go to LandWatch land.com, Zillow has a lots in land filter. And then also just even on BiggerPockets, they have the market finder to help you analyze a market too.

Tony:
So obviously the mid range land flipping I think is a concept that more folks should be exploring, especially if it’s something that makes sense in your market. But the third strategy that we want to talk about is bedroom count conversions. So exactly what this sounds like. The idea is taking a property and simply adding more bedrooms to it. It could be taking a two bedroom home and converting it into a three bedroom, or we’re taking a three bedroom and converting it to a five bedroom. And we’ve actually had several investors on the podcast who have done this in various strategies. We had the nasims who were leveraging the rent by the room strategy and they would buy a three bedroom house and convert it into an eight bedroom property. So we’re talking a massive conversion. Then we also had Ariel Herrera who a big part of her strategy was looking for properties that had oversized square footage for the bedroom count so she could go back and add bedrooms.
So I think the idea of finding a property that has the footprint, the existing footprint, and this is obviously you could do this by doing an addition, but I think we’re more so focused on here is within the current footprint, can you add additional bedrooms? And the reason why this is so valuable is because when you think about both appraised value and rental income, both of those things increase somewhat substantially when you add additional bedrooms. So the income from a three bed is substantially higher than the income from a two bedroom. Most situations, the appraised value on a three bed is significantly higher than the appraised value on a two bed again in most situations. So finding these properties that give you that opportunity, I think the strategy outperforms because it’s a relatively small change, reconfiguring some walls, adding some closets, and closing maybe a space that’s already open to get a pretty fast and high ROI as opposed to doing a full gut renovation on something else.

Ashley:
So one of the things that I really like about this strategy is that I’ve love hidden MLS deals. Things that you go to a showing and look at a property and you get excited that you found something that not everyone would see you when they’re on the MLS and Tony’s talking about using data screen, looking at all these things to figure out if there is that key point there. But also just visiting the property and seeing it. And yes, you don’t want to waste a lot of time going to showings, different things like that, but when you find an opportunity, and we’re specifically talking about bedroom conversions, but maybe there’s something else in your market that will really add value to a property that maybe somebody could leave out of a listing, and I can’t think of a single example off the top of my head, but maybe there’s a pond on the property or something like that in my area, people love to have a pond on their property.
So different things like that. And with the bedroom conversion, one thing I will say because I have made this mistake before is if you are on a septic is make sure that your septic is approved for how many bedrooms you want to have in the property or even if you are adding another bathroom to add value that it is approved for that number. So I purchased a property that was a three bedroom, I put in a four fourth bedroom. The septic that is in and past inspection is only for a three bedroom and not approved for up to four bedrooms. So when I go to resell that property, at some point I will not be able to market it as a four bedroom because when they get the septic tested, they’re going to fill out that sheet and say we’re buying a four bedroom house, that septic is going to fail inspection because it’s only meant for three bedrooms.
And then I will have to pay out of escrow for a new septic to be put in at that property, which I do not want to happen. So at the time of selling that property, it will be listed as a three bedroom with an office, with a playroom, with a bonus room, whatever we have to say to not make it a bedroom, which really, really stinks because that would make it an extra bedroom. But also as a buyer, here’s exactly what we’re talking about. Here’s an opportunity where there’s actually more value in the property. So maybe somebody’s going to come and look at this to rent this property out and they’re going to say, oh, I could actually use that other one as a bedroom and I can get a lot of money for a four bedroom property and not even care about the septic.
So I think there’s different looking at the code and area, what actually means turning something into a bedroom, what that actually is around here, almost every house has a basement. So if you’re putting a bedroom in a basement, you have to make sure there’s some kind of access outside. So on this property I was talking about, it had a walkout basement. So the bedroom we put was in the basement, but there was actually a window, but where the window was placed, this bedroom had to be a massive bedroom because there was no other way to configure it because we had to have that window. And when we had code enforcement come to the property just to check everything, things like that, he had said this window is literally the bare minimum of what code is for somebody to be able to escape out of if there was a fire. So window size, making sure that you have the correct window size to make it count as a bedroom. So there’s a lot of little details like that you don’t want to miss out on.

Tony:
I know it can sound like Ash is talking about a lot, but honestly I think this strategy in my mind is actually simpler than doing a full house flip because if the property is in good condition and we’re literally just moving a couple of walls, I think that’s easier than having to do a full gut rehab where you’re tearing down all of the walls and you’re redoing plumbing and electrical and all these other things come along with a full rehab. So in a lot of ways it actually I think might be a lower risk way for a rookie to get into the game while still doing almost a burr type deal, but with way less work and way less overhead.

Ashley:
When I was in college, the guy that I dated, he was in a frat and all the fraternity guys and sororities, they lived off campus in these houses. And I remember him and his friends were getting a house and we went house hunting and I could not believe what was considered bedrooms for these college kids. So you’re in college towns, you probably have way more flex as to what can be considered a bedroom. Every single dining room was turned into a bedroom. The house they ended up settling on the dining room was the biggest bedroom. And then behind it was two more bedrooms. Then off of the kitchen was a pantry and the pantry had a window and the pantry was considered the fourth bedroom. And so they rented this house and it was like someone is actually going to stay in there. And it was a gross, disgusting room and it was like, I mean obviously it was a big pantry, but it was still the smallest room and just the creepiest room.
And what they did to decide as to who would get what room is they each picked one competition. So one picked basketball, one picked a video game, one picked, I don’t know, whatever. And so they had this whole tournament and every place that you got in each of the competitions, you got points and based on your points, you got pick of your room or whatever. So you got to pick, which I actually thought that was pretty creative, but it was just so shocking as to like, wow, college students don’t care. You can live Even the house was disgusting, disgusting. Me and him ended up living in there over the summer to do a summer program or whatever before anybody else even moved in. And so we did the initial walkthrough with the landlords, people that worked for them. I don’t even know, literally the bottom of my shoes were disgusting. And I was like, I don’t think I could live here. I don’t think we had to go to the store and buy all these cleaning supplies and I to scrub it, but it still was just like, it’s just dirt and grime that never ever comes up.

Tony:
But you guys still moved in? Yeah. Oh yeah, there you go.

Ashley:
Yeah. So I had to live there for six weeks out of the summer, and then I was back to my very nice luxury on campus apartment with four of my friends and we had our nice kitchen, everything. We had two bathrooms in our thing.

Tony:
So the moral of the story is go graft after attendance with low expectations like a bunch of boys in college.

Ashley:
So we’re going to take our last ad break. So what if instead of moving walls, you place an entire home on a piece of land? Prefabs are giving investors a way to create affordable housing at half the local median price and they’re selling fast. It’s like flipping, but you’re starting with dirt and ending up with a brand new house. Let’s break down how that works for rookies after a quick word from our sponsors. Okay, so welcome back. We’re going to be talking about prefab homes. So this is prefabricated homes where the home is a modular home or even a manufactured home. But I specifically like modular homes better than manufactured homes because they first of all look and feel more like a stick built home, I guess. So these prefabricated homes are built most of the times in pieces and then trucked to your land and put together in pieces. So I’ve actually never done this, Tony, any of your Airbnbs or any tiny homes or anything set up as prefab homes?

Tony:
No, but a friend of ours, Brody Faucet, I know he’s working on a development, it might be close to Dun now actually. And it was a short-term rental development and he got his homes from zip kit I think it was, but they offer modular homes as well. And he’s building out a little tiny home community built of nothing but these modular homes.

Ashley:
Yeah, so one of the benefits of this is you have it built a lot faster than if you were starting from the ground up because you could ideally order one of these before you even close on your land where if you haven’t closed on your lot, you can’t start building from the ground up yet until you’ve actually closed on the property. And plus, since a lot of these are, they’re kind of the same built out, like you’re probably picking a floor plan and picking a property. Some of the lead time is even less because they’re already just manufacturing making these. I did know a guy once who was building one on some land and he talked about the finishes you can pick out, his wife was deciding on what light fixtures and things like that, but was they would bring the thing and the pieces and put it together and then there was a period of time where it had to sit before they could actually move into the property too and do a bunch of the little finishes and things like that to actually make it to move in ready. But the thing I like about this is because usually it is cheaper than building a stick home from the ground up.
And I say stick home because that’s pretty much what’s built around here is your framing out a property in wood and then building out from there. It’s not concrete homes or anything like that, but that this is more affordable. This actually might be a great option for a rental. I don’t know the pros and cons of it. I think it would be really interesting to look at the lifespan of a modular home. How is the quality of the build compared to actually building one from the ground up? My guess would be it’s not as good, but that’s only just because nobody I know does it. And if it was better quality, why wouldn’t you do it? I guess

Tony:
I think the other piece too for me is just the appraisal of those homes as well. Typically, if you go traditional sick built versus a manufactured home, the manufactured home just simply won’t appraise for as much as a comparable stick-built home. And I wonder if the modular homes maybe have more upside when it comes to their long-term value. Because if someone wants to buy not just for cashflow today, but for long-term wealth, are they potentially setting themselves up for less wealth building because they went with the modular homes? I don’t know. But some of these modular homes that I’ve seen, you could look at them and not even almost know that they weren’t stick-built. So hope is that as this technology gets better, that maybe it is an option for more folks to get in quicker, more affordably than going the traditional sick bill route.

Ashley:
I guess a couple of the other advantages to this is also the speed to market that you’re going to be able to get a property up faster than anyone else to be able to sell it. There is a little recession resistance, so the demand for starter homes rarely disappears. And that’s what I’m seeing in my market is the houses that are still flying off the MLS are this perfect starter homes for people. And then I guess the last thing would potentially be the equity upside. You are essentially creating a house out of just land by placing a prefab onto it. You are multiplying basically the value of your investment by adding value to that land. So instead of doing a burr or rehabbing a property, you are adding value by putting a property on that land. So I think some of the things to look at as far as finding the right market are where our high housing costs, where is it really expensive to actually build or to buy a property and you can put in these cheaper prefabs and be more affordable to hopefully attract more buyers to your property.
Look for counties with flexible zoning and also builder friendly areas too. Well, those are our four niche strategies that we wanted to touch on today. If there are other strategies that you think are really the go-to strategies for 2025, if you’re listening to this on YouTube, please put them into the comments. We’d love to do another episode like this and share with you guys strategies, tips, tricks and advice that we have as investors and what we’ve been able to research and find out for you guys. I’m Ashley, he’s Tony. Thank you guys so much for joining us and we’ll see you on the next episode of Real Estate Ricky.