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.

Detroit Rock City? More like Detroit “Rental City.” The Motor City’s emergence as a rental haven for investors after the dark days of the 1980s, ‘90s, and early 2000s is well known. Now the city is attempting to give its residents a better chance of homeownership. However, its new homebuying assistance program could also help new investors get on the property ladder.

An exhaustive 2022 report by think tank Detroit Future City noted that there were over 42,000 landlords in Detroit. Landlords with five or more properties owned a third of the city’s rental housing. The attraction was clear: Low purchase prices, increasing rents, and urban renewal made Detroit a strong long-term bet for cash flow and appreciation. 

However, for any city to thrive, it needs a healthy mix of owner-occupants, as well as renters. So recently, Detroit has introduced a grant of up to $25,000 in down payment assistance to help tenants become homeowners and curb the rising tide of investor-owned properties.

Detroit’s Play: Backing Buyers

To qualify for Detroit’s $25,000 homebuying grant, potential homeowners must prove that they have lived in the city for at least 12 months or lost a home in the city to foreclosure between 2010 and 2016.

“It’s definitely changing people’s lives,” Shane Ouimet, a Detroit-based mortgage broker who works with buyers looking to qualify for the program, told Realtor.com. “There are a lot of people who just don’t have 5, 6, or 10 grand, whatever it might cost them to get into a house, but they come up with $1,000.”

The additional $25,000 can be used for a down payment, closing costs, interest-rate buydowns, and even certain repairs when paired with a renovation mortgage, such as a 203(k) loan. 

Additionally, the Michigan State Housing Development Authority (MSHDA) is partnering with the Tobias Harris Homeownership Initiative to pilot a shared-appreciation program, offering potential buyers as much as 40% of a home’s purchase price that can be used toward a down payment. 

Homeowners do not make monthly payments. Instead, they repay the assistance to the lender when they sell or refinance, plus a share of market appreciation.

“This new partnership will help make the dream of homeownership a reality for more Detroiters, offering the kind of affordable support that leads to long-term housing stability,” Amy Hovey, CEO and executive director of MSHDA, said in the organization’s press release. “We’re moving quickly to identify new partners and programs that can help lower costs and unlock opportunities for Michigan families.” 

“Homeownership is one of the most powerful ways to build stability and generational wealth,” said Tobias Harris of the Detroit Pistons, who is championing the project, in the press release. “With this initiative, I’m focused on expanding access to homeownership so Detroiters can plant roots and build equity in the city they call home.”

From Tenants to Homeowners to Investors

Almost 60% of Detroit tenants are cost-burdened, spending over 30% of their monthly income on rent. However, in the same way that the new housing initiatives help tenants become homeowners, it can also help new owners become investors by enabling them to save money for a down payment on another home, or renting rooms in their primary residence, (no minimum time period of primary home residency is stipulated to qualify for the grant), and moving into a rental and benefitting from the cash flow—a process known as “Rentvesting,” which has proved popular in the city.

“Detroit has become a prime city for rentvesters—people who rent where they live, but own investment properties here,” Erica Collica, a Detroit-based real estate agent, told Realtor.com.

Out-of-towners looking to take advantage of Detroit’s housing initiative to kick-start their investing career would need to rent in the city for a year before applying for a grant.

Other Midwestern Cities Favorable to Investors

Other Midwestern cities offer an attractive mix of affordability and decent rents, according to Zillow and the U.S. Census, making them viable alternatives for investors considering Detroit. 

St. Louis, Missouri

Affordability and economic diversification across healthcare and logistics have helped St. Louis tick all the investment boxes for prospective landlords.

• Average single-family home value: $180,070
• Average rent (all home types): $1,263
• Percentage of renters vs. owners: Owner-occupied 45.4%; renter-occupied 54.6%

Cleveland, Ohio

The world-famous Cleveland Clinic has made the city a healthcare hot spot, while its low entry point has made it ripe for appreciation. 

• Average single-family home value: $113,340
• Average rent (all home types): $1,213
• Percentage of renters vs. owners: Owner-occupied 46.7%; renter-occupied 53.3%

Indianapolis, Indiana

According to U-Haul data, Indianapolis has experienced a quiet net migration recently, with new residents—many from fellow Midwest cities—drawn to its affordability and amenities. 

• Average single-family home value: $229,845
• Average rent (all home types): $1,500
• Percentage of renters vs. owners: Owner-occupied 64.9%; renter-occupied: 26.9%

Chicago, Illinois

Chicago has received a bad rap in recent years, but its surrounding suburban area can offer affordability and competitive rents, along with diversification and economic resilience, making it a reliable investment, as long as you know where to look.

Currently, the Chicago market is more balanced than it was in previous years, with home prices stabilizing and inventory levels increasing. Affordable suburban markets such as Bronzeville, Avondale, and Jefferson Park are in high demand.

• Average single-family home value: $311,033
• Average rent (all home types): $1,995
• Percentage of renters vs. owners: Owner-occupied 56.6%; renter-occupied 31.8%

According to Benzinga, the Midwest dominates the 25 best cities to buy a rental property based on ROI, which are:

1. Detroit, Michigan
2. Houma, Louisiana
3. Birmingham, Alabama
4. Cleveland, Ohio
5. Toledo, Ohio
6. Rochester, New York
7. Memphis, Tennessee
8. Youngstown, Ohio
9. Columbus, Ohio
10. Milwaukee, Wisconsin
11. Indianapolis, Indiana
12. Huntsville, Alabama
13. Dayton, Ohio
14. Kansas City, Missouri
15. Little Rock, Arkansas
16. Tampa, Florida
17. Tulsa, Oklahoma
18. Charlotte, North Carolina
19. Nashville, Tennessee
20. Buffalo, New York
21. Fort Wayne, Indiana
22. Springfield, Missouri
23. Omaha, Nebraska
24. Dallas-Fort Worth, Texas
25. Fresno, California

Final Thoughts

The Midwest is currently one of the nation’s hottest housing markets. Its apartment shortage has made it ripe for investment, as evidenced by Morgan Properties’ $501 million purchase of 3,000 units across the area earlier this year.  Developers’ focus on the Sunbelt has made the Midwest a great place to buy single-family homes. In contrast, large-scale developers are focused on building new apartment buildings, which can take years to come to fruition.

Although Detroit has made headlines in recent years due to its remarkable economic turnaround and high rental yields, it is certainly not the only worthwhile market worth investigating in the Midwest. Highlighting its credentials is the fact that the Midwest also generates more yield for investors than other regions. Housing has yet to keep pace with the area’s economic growth, making it an ideal opportunity for smaller investors to buy.

Ashley Kehr:
Have you ever heard of the Burr strategy? It’s the real estate investing method that actually scales your portfolio and fast. But what if you don’t have the cash to complete it? There’s a more beginner friendly Brr R method for those without six figures, and we’re about to share it with you.

Tony Robinson:
But after you burr for the first time, chances are you’ll be paying today’s sky high home insurance costs. But don’t worry, we’ve got some solutions to lower your insurance premium so your bill stays reasonable.

Ashley Kehr:
Finally, we’re going to share the lazy method experts use to increase rents. It’s so genius that your tenants may even ask you to raise rents on their behalf. Once you hear about it, you’ll use it on every rental. This is the Real Estate Rookie podcast. I’m Ashley Care.

Tony Robinson:
And I’m Tony j Robinson. And if this video gets 100 comments, I’ll finally share my nighttime skincare routine. With all of you who’ve been asking,

Ashley Kehr:
Does it involve cucumbers?

Tony Robinson:
It absolutely does not. So with that, let’s go to today’s first question. Alright, so our first question today comes from Reese. And Reese says, I’ve heard that the Burr strategy is dead. And just really quickly, for those that don’t know, Burr stands for buy, rehab, rent, refinance, repeat. But Reese says, I’ve heard that the Burr strategy is dead unless you have huge capital, like a minimum of 50 to 80 K to start. So if a new investor has 25 to $30,000, is there a way to pool this with a small group of other investors to do a bird deal together? Almost like a small syndication. For example, if there was a property that was $100,000 and it needed $60,000 in rehab, the amount needed would be 160 K. In total. If there were five investors each putting in $32,000, that would give us a 160 K.
Then after repairs, we sell that property for two 40, each investor would get a return of $48,000. Then after repairs, we sell the property for 240 K. That would be a $48,000 profit giving each investor $16,000 in profit. And then we just repeat that process. Is this the strategy that some investors use? If so, where would I find them? Once I built up capital and learned the process, I could then do it by myself. But I think working with a small group of people might be the less risky way of doing my first few deals. Alright, so there’s a couple of questions in here and I think something that I want to clarify. The initial question talks about the burr strategy, but then you talk about going on to sell this property for a profit, which would be flipping. So in a traditional burr, you are keeping that property as a long-term buy and hold asset, right? So you’re going to buy it, renovate it, refinance, get all your capital back, rent the property out, and then take the money that you got from the refinance and recycle that into your next deal. But it sounds like what you’re saying here is just buying a property in all cash, renovating in all cash and selling that property as a flip, which is also fine, but it’s just not the burr strategy. We’re going to talk about Burr. It’s about holding that property as a long-term asset.

Ashley Kehr:
Yeah, so instead of selling the property, you would refinance the property and the goal would be to refinance it however high you could. So most banks will lend on 80% or 75% of the value, the appraised value of the home. So you would need it to appraise for more than what you actually put into it to get all of your money back. So that’s one difference with the burr is you’re actually refinancing too because you have rented out the property and in this, if you’re going to sell the property, you probably don’t want to rent it out before you actually sell it, unless this is specifically maybe a duplex or something like that where it is a rental property and not a single family because you’re really going to limit your buyer pool if you have somebody in there that’s on a one year lease and they can’t move into it as their primary residence upon purchasing it.
So the first thing I thought of it in here is, first of all, if you’re going to, there’s laws and rules and regulations against investing and pooling your money together, and if you were to get five investors, each investor would need to be active in the deal where they would need to have some kind of job, some kind of role to actually be part of the deal. It couldn’t just be four of these are just passive investors, they’re giving you your money and then your investing, they need to be active in the deal. So maybe one’s doing the bookkeeping, maybe one’s managing the contract or whatever that may be. I see this as a headache as to now you have five people, five opinions all saying how this deal should be done. So if you were going to do this, have this many partners, I would make sure it is very, very clear as to whose each person’s roles and responsibilities are and who has say and how decisions will be determined. Is it upon a vote because you have an odd number? How would that work? And just be very clear with having five different people making these decisions with this, I think you have many different options to actually do this deal instead of taking on five partners or four partners if you’re the fifth and just giving equity to them and they’re putting their cash in, there’s different ways to partner without actually having to put equity in the deal.

Tony Robinson:
Yeah, the lending I think would be a great option. But just really quickly, going back to your point Ash, about the different roles and responsibilities that folks could have to play one way I agree, the idea of five people all being equally invested from a time perspective into a deal sounds terrible to me, too many cooks in the kitchen, but I think one way to navigate that is in your operating agreement for your LLC, you can just designate that there are certain major decisions that you guys have to vote on as a group. So maybe it’s the listing price, maybe it’s the selection of a general contractor. Maybe it’s the selecting of a listing agent. If there are any seller credits, if you guys were to go and sell this property, those are the things you guys would’ve to discuss. Any material changes to the scope of work above a certain dollar amount would require a group vote.
But anything outside of those maybe you can delegate to one person and say, Hey, Tony’s going to be the point person on everything else except for these core decisions that we all need to focus on or to agree on together. And for our hotel, that’s how we did it where we have partners who brought the majority of the capital. They’re not interviewing cleaners. We’ve gone through six onsite managers. Our partners haven’t talked to any of those onsite managers, but if we were to sell, refinance or other major decisions, that’s where they’re able to come into play. So obviously Ash and I are not attorneys, so go talk to an attorney, talk to a syndication attorney specifically. I think they might have the most insight into what works and what doesn’t. But going back to your other point Ash about it doesn’t have to be an equity partnership.
Maybe you don’t even need to partner at all. In your example, you mentioned $32,000 from each investor, could you maybe save a little bit more and do this deal by yourself? If we use those same numbers on 160 K in total cost for your renovation and your rehab, call it 20% down, what is 20% of 160,000? 32,000 bucks maybe tack on another five ish percent just for capital, working capital, you’re at 40 grand give or take. So if you’ve already got 32,000, could you get another eight to $10,000 and then you can go out and maybe get a hard money loan where they’re going to cover the other 80% of what you need to do this deal. So I don’t necessarily think that maybe it’s even necessary because you’re pretty close at the numbers you’re talking about with just being able to go out and get some hard money.

Ashley Kehr:
Yeah, one thing he says in here too is that Burr is pretty much debt unless you have huge capital. And the only way that really makes sense is if you are leaving money into the deal. So if you are putting a lot of money down, then you are doing the bird deal When you go and refinance and you don’t need to pull all your money back out, then yeah, the deal is more likely to work. Anytime you put more cash into the deal, you’re more likely to get better cashflow on the deal, but it doesn’t mean your cash on cash return is actually going to be better on the deal too. So I think there’s a little confusion here as to Burr is dead unless you have huge capital because even if you are putting in the numbers are the same on the deal. So even if you infuse more cash into it, it’s just going to change what your cash on cash return is on the deal.
It’s not going to change the other numbers on the deal such as the purchase price such as what you can rent it out for, what the appraised value is. Those are all factors that don’t come into play. If you are just changing how much cash you’re putting into the deal you’re looking, you want to look at the overall numbers because Tony and I could purchase the same property and say it’s a hundred thousand dollars and I put in $20,000, and he says, well, I want the deal to work, so I’m going to put in $50,000. So he’s saying this deal, it’s not going to be dead, this spur isn’t dead because I’m putting more capital into it. And yes, okay, his cashflow is going to be more because he has a lower mortgage payment because he only has debt of 50,000. For me, I have debt of 80,000 and I have a higher mortgage payment, so my cashflow will be less. But there are other metrics who actually analyze what’s a good deal and one of those is the cash on cash return. What else could Tony be doing with that $50,000 that’s actually generating more income from him than that cashflow from that one property? So I just want to make sure that you guys know that infusing cash into your deal doesn’t always make it a better deal. There’s more metrics to look at than just cashflow on a property.

Tony Robinson:
Yeah, I think the last thing to ask that Ash is just circling back to what you said earlier about private money lending versus equity partnerships. And if you’ve got four other people who are interested in investing in real estate but don’t want to do it themselves, don’t have the cash, could you pull from some combination of those folks, all of those resources, those capital resources, and they’re just now private money lenders for you to be able to go out and do flips or burrs yourself and now you’ve got a hundred K that you can go out and redeploy over and over and over again to help you build your own portfolio and then they’re happy because they’re getting a nice fixed return on the capital that they’re lending out to you. So I don’t think that a partnership with five people is the only possible route. It is a route, but I don’t think it’s the only route that you should consider

Ashley Kehr:
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Okay, welcome back. Our next question comes from Sam in the BP forums. It’s 2024 and I received a renewal notice on two single family home properties with a 33% and 28% increase respectively without any claims over the life of the policy period. This is after a double digit percentage increase last year. The only two options if I want to hang on to these properties are increase the deductible change carriers to a lesser reputable carrier. Is there anything I am missing and how are you coping? Okay. I actually have an insurance thing come up recently to is just comparing policies and trying to figure out what do I actually need? Do I need some of this stuff? And then if I cut it out, am I going to regret that? And then actually this random thing that could happen actually happen because I just got one of the short-term rental policies quoted and it was double what my current insurance policy is and just comparing. And they both have completely different things that they’re each covering and it’s not even like, oh, this one has it all, this one is missing. Some of it, they’re like two completely different things. So I am also in the midst of trying to figure out what insurance I actually need and if it’s even worth increasing my deductible at this point.

Tony Robinson:
Shopping for insurance is not easy, like you said, there’s a lot of language and caveats and carve outs unless you spend a lot of time talking to your insurance agent or broker, I think it is sometimes hard to understand what you need and what you don’t need. But I think in general we’re seeing rising insurance costs as a more common reason that deals aren’t penciling out, especially in certain parts of the country. If you guys have been around the podcast for a longer period of time, you’ll remember my property back in Shreveport. The reason that we ended up needing to sell that property was because the insurance premiums like four XD from one year to the next and we shopped it around and every insurance provider that we went to gave us roughly the same quote and nothing had happened. It was our flood insurance, there was no flood, nothing had happened, the property didn’t flood, there was no flooding in and around that area, but for whatever reason the premiums went up and we made the decision to sell the property. But I think between the floods, the hurricanes, the wildfires in California insurance, it’s just more risky for the providers. And I think as we talk about scaling our portfolio or understanding where to start investing insurance just simply has to be part of that conversation in a way that maybe it wasn’t five or six or seven years ago because it is rising and there’s just not a lot of options. Unfortunately,

Ashley Kehr:
I bought this property, I ended up buying it, but I had talked to the seller before I purchased it and I asked how much he paid in insurance every year and he said he was self-insured. He said that he owned the property free and clear. I was literally buying it for like $37,000 and he’s like, I self-insure if something happens to the property, I’m going to come out of pocket and pay for it or I’ll left of the property. If it burns down then you know what, I’ll just pay to have the lot demoed and I’ll sell the lot because the lot is worth probably as much as the house was, which was pretty much true at that point. And so I think about that as to is there going to be a point in time where people do just decide to self-insure and banks and lenders aren’t going to allow you to do that.
They’re going to want you to have a policy in place and to be listed on the policy. But if you own a property free and clear, I wonder if there is going to be a transition of people who are just going to say, Hey, instead of sending my premiums in every year to this insurance company, I’m just going to keep funneling this high yield interest savings account and that is going to be my insurance policy. And then just getting maybe liability coverage on the property and not actual property coverage for that. So I dunno, it would be interesting to see the data on that as to how many people are actually self-insuring the physical property.

Tony Robinson:
I think Ash, maybe if we hit on just what can this person actually do in their situation because it is a tough spot to be in and they brought up two options. It’s increasing the deductible, which is an option. And just for folks who maybe aren’t super familiar, your deductible is what you would pay in case there were a claim and you can increase or decrease your deductible and that’ll have an impact on what your actual insurance costs are. Typically a higher deductible would lead to a lower payment in the inverse would be true where a lower deductible would lead to a higher payment. So this person is saying if they increase their deductible, the actual monthly costs or the annual premium would go down, which is an option or change in carriers, which yeah, different carriers offer different options at different costs. But I think maybe just taking a step back, one of the things that I would do is just shop around and not necessarily looking for a budget or lesser reputable insurance carrier, but if you go talk to an insurance broker and give them your profile, your property’s profile, and let them go shop around to a bunch of different carriers, I think that in and of itself would give you a better idea of, hey, lemme get some apples, apples quotes on the coverage amounts, the deductibles, what’s included, what’s not.
And maybe it is a case where every person that we go talk to, they’re within five or 10% of each other. That’s what it was for us and that was a sign that like, hey, there’s no way around these new costs, so our best option here is to sell. And maybe that’s the same conclusion you come to or maybe you go to a different carrier and you find that, hey, for pretty much the same coverage, we can cut our premium costs by 25 or 30% and undo this increase that we’re seeing. But I don’t think you’ll really know until you shop it around to quite a few different options.

Ashley Kehr:
Tony, I just pulled up an example of a quote I just got that shows the deductible options and then what the premium would change to. So for a thousand dollars deductible, the total cost would be 3,300 for a $5,000 deductible would be 2,800, but it also, it goes up then all the way up to $50,000 deductible and a cost of 2,136. I bought this property for 50,000. I’ve never taken, but I’ve renovated stuff, but still I think it’s put total 130,000 into it with the purchase and the rehab into the property. But yeah, so that just shows you, it’s almost like I think of buying points for your mortgage rate. They’ll show you like, okay, you pay two points, this is what your interest rate is. Now you pay two and a half points, this is what your interest rate is now, and you got to try to find that happy medium.

Tony Robinson:
$50,000 deductible is crazy. And that was only to save how much annually? 800 bucks. It’s like, is

Ashley Kehr:
That Yeah, yeah. Not even a

Tony Robinson:
Thousand. Yeah. Is that even worth it? But yeah, I think it’s math that they’ll have to go through. I think something else too, and I’ve never done this, but I wonder a lot of times when you shop around for your insurance, they’ll ask you questions like, Hey, what’s the age of the roof? When’s the last time that you replaced this thing? Do you have a pool? Do you have this? Do you have that? Maybe just making sure that your insurance provider has the most UpToDate information because if you bought these properties and like Ash you said you bought it for 50, you invested another 70, $80,000 into the rehab, you probably improved a lot of the things that insurance companies might lose sleepover. And if you say like, Hey, did you actually know we’ve replaced a roof last year? Did you know that we added this thing or that thing?
Or did you know that we filled in that pool That was you guys were worried about just making sure they’ve got an accurate picture of the current property and any improvements you’ve made. Sometimes that can reduce the cost as well. Or maybe sometimes it’s the simple fact of removing something that could reduce your insurance premium. And I’ll give you guys an example when we, two different examples actually one time where we did do what they want us to do in the other time where they didn’t, but when we launched our hotel, the previous owners used to let guests rent bicycles for free. It was just like a perk of staying at that hotel is that you got bikes you could ride around and every insurance carrier that we got said, that’s a huge liability for us. So you guys can keep the bikes if you want, but your premium is going to go up by X percentage.
And we said, Hey, it’s fine. Let’s just get rid of the bikes. It’s not that big of a deal. At one of our single family Airbnbs, we have a slide that goes into the pool and the initial carrier that we were going with, they were like, Hey, we like everything about this property. Here’s the quote, but we actually won’t underwrite you if you keep the pool in place. And we’re like, well, or if you keep the slide in place and we’re not getting rid of the slide. So we went to a different carrier who charged us more to account for the fact that there was a slide going into the pool. So sometimes you can ask the carrier like, Hey, is there anything that I can remove from this property that would allow me to bring my premium costs down as well?

Ashley Kehr:
Yeah, that’s one thing I’ve learned is what do carriers like and don’t like in your area? And you can talk to your insurance broker about this as to what are red flags, like wood burning stoves, row houses, trampolines. These have all been things that have been red flags on my insurance or will increase the premium. So things they won’t land on and things that will increase the premium I think is also great starting point and not only for your current property, but when you’re looking to buy properties in the future of knowing what an insurance carrier would like and what they don’t like too, I think can go a long way with helping you keep that insurance cost down.

Tony Robinson:
Ash, just really quick because you said the word trampoline and I just found this out yesterday. If I say Q-tip, Q-Tip is a brand name, but it’s actually called a cotton swab. If I say, I don’t know, jacuzzi. Jacuzzi is a brand name, but it’s actually called a hot tub, right? Trampoline, do you think? Is that the generic name or the brand name?

Ashley Kehr:
Well now I don’t think that I thought it was the generic name, but now I’m not. And also Jacuzzi. I did not know that was a brand name because my kids literally asked me the other day and I was like, I think it’s something with the Jets or something like they’re two different ones. Ja

Tony Robinson:
Jacuzzi is a brand name, but trampoline is also the brand name. I want you to try and guess what the generic name is for trampoline. Those are all great guesses, but not correct. It’s a rebound Tumblr, never in my life anyway. Trampoline’s a brand name. So maybe just you were today years old when you found that out for all our Ricky said, you’re listening.

Ashley Kehr:
People study brands of Apple and different things. People need to be studying jacuzzi and trampoline as to how to become a household name.

Tony Robinson:
Alright, so we’re going to take a quick break before our last question, but while we’re gone, be sure to subscribe to the real estate rookie YouTube channel. You can find us at realestate Rookie and we’ll be back with more right after this. Alright guys, let’s jump into our last question. This one comes from Jimmy and Jimmy says, I have a three bed, one bath family house, which is rented at $1,400 per month. The current comps in the area are around 2000 to $2,500 per month and I should be able to easily get that amount. My current tenants have been there for almost 10 years now and they always pay on time. In fact, they’re usually several days or even one week early paying the rent. They are great tenants and rarely ever have a maintenance call and small stuff they just take care of on their own.
And don’t even charge me or let me know. I’ve already went a couple of years without even talking to them. I’ve been slowly raising the rent like 50 bucks a month every year, but it’s still way under market value by at least 500 to a thousand dollars a month. It’s an old house and does have its flaws, which is expected on a 100 plus year old home. But what would you do or how much should I raise rent at renewal? It’s a yearly auto renewal lease. Alright, so we’re talking about raising rents and what’s the best way to do this, Ash, I’ll defer to you here. Obviously you’ve got a lot more experience than I do when it comes to raising rents on folks. I think that just from there’s some level of value that we should give to peace of mind as a real estate investor, and you said you’ve gone a couple of years without even talking to them.
How much is that silence worth to you? And maybe it’s not a thousand dollars, but maybe it’s 500. So maybe instead of raising the rent by a thousand bucks, you raise it by 500 or maybe you raise it by two 50 on their next renewal. But I think there’s something to be said about the peace of mind that comes along with having great tenants who don’t say anything, don’t make a fuss, and they just pay their rent on time and leave you alone. And maybe you can go out there and get that a thousand dollars premium that you’re looking for, but if it now requires you talking to that tenant every month and they’re always complaining about something, you’ve got the vacancy you have to worry about of like, okay, they’ve been in it for 10 years now you’ve got to go and maybe renovate this place to get it up to standards to be able to run out at the amount you’re asking. Is it worth all of that? And is there a better way to maybe meet in the middle with these tenants where you both kind of give what you want, they get to stay at this place, they’ve been out for a decade, maybe slightly under market rents. You get to keep these amazing tenants, but you get a little bit closer to what it would demand on the open market. So just my initial 2 cents, but I’m curious what your thoughts are, Ash.

Ashley Kehr:
Yeah, I always like to include the market rent in the area and show them here are comparable markets in this same area and this is what they’re going for. So example, if their rent is $800 per month, everybody else is paying nine 50. So not only are you having $150 per month increase, but you’re having to pay moving costs, you’re having to switch all utilities, you’re having to forward your mail. There’s a lot that actually goes into moving besides just paying new rent. So just the convenience of being able to stay where the person is. I really try to capitalize that and to show them that I’m still very competitive. I’m not trying to overcharge them. And if there is a drastic difference in the rent, sometimes I’ll do the step up method where it’s like, okay, let’s start with a $50 increase for three months and then we’ll go to a hundred dollars increase and keep doing it that way.
So it’s over time. I do that mostly for inherited tenants where I’m taking over the property and their rent is below market value already instead of just this big shock of here comes a mean old landlord raising our rents right away. I try to do it a little bit over time because there always is that fear factor. Your property that you’re living in as a rental, it’s selling and you have no idea. Sometimes when I’ve gone and looked at properties, you can see the terror in these tenants face not knowing are they going to be asked to leave? Is their rent going to increase? Who is going to buy it and what’s going to happen? It has to be a really, really scary and uncomfortable feeling. So I try to not be first impressions I think are always a very, very big thing. So I try and just do the step up thing instead of just slapping ’em like $500 right now.
So you could always do that over time. And with putting the market rents, they’re going to see that even if they move somewhere else, they’re going to be paying the same amount unless they find a great deal somewhere. So that’s kind of how I handle it. But I 100% agree about the points of if they are great tenants, take care of the property, you don’t really hear from them, they don’t have issues, they don’t put in a ton of maintenance requests because they’re actually taking care of the property if someone’s putting maintenance requests in and it’s actually legitimate things and not just them trying to nitpick at things that have literally been there the whole time they’ve lived there and all of a sudden one day when they get a rent increase, they’re deciding to bring it up to your attention. But I think that’s a good starting point.
And also think about it too, you can give them options. So you could do, here’s a one year lease with $800, here’s a two year lease at seven 50. So you could even lock them in longer showing them like, okay, you can actually, I’ll increase it by just a little bit if you are going to actually stay in the property for another two years. But I’ve had a tenant that has lived in a property for, let’s see, it’ll be nine years, I think right now, nine years. And I’ve never raised their rent once because they have always paid on time. It’s like a different unique property to me that I want to keep forever. I never want to sell it. And they take great care of it, and they have paid the same amount of rent every time, and they’ve stayed there for the whole nine years. And there’s never ever, ever been an issue.

Tony Robinson:
We’ve interviewed Dion McNeely a couple of times in the podcast, and I really like his approach where he puts the onus on the tenant to say like, Hey, what do you feel is a fair amount? You’re currently at $1,400 a month in rent. Here’s five properties that are within walking distance of your unit that are renting at $2,500 a month. This is a big gap. What do you feel is the best way for us to address this? And he said, a lot of times they’ll end up saying a number that’s higher than what he even thought. So I think just showing them the facts and letting them kind of lead that conversation is always a good way to go. But yeah, for me, peace of mind, I think there’s a lot of peace of mind that comes along with great tenants. So I would try and hold onto ’em as long as you can.

Ashley Kehr:
Thank you guys so much for joining us. Make you’re subscribed to our YouTube at realestate Rookie and you’re following us on Instagram at a BiggerPockets rookie. We’ll see you guys on the next episode of Rookie Reply. I’m Ashley Hughes. Tony, thanks so much for joining us.

This article is presented by Coastal Equity Group.

If it feels like everyone you know is packing up the U-Haul and heading south, you’re not imagining it. Neighbors are trading in snow boots for flip-flops, colleagues are escaping sky-high rents for bigger backyards, and retirees are leaving the cold behind for warmer winters. The Southeast has officially become America’s migration magnet. 

And this isn’t just a cultural trend. It’s backed by some of the strongest demographic and economic data available. 

For real estate investors, the Southeast is not just “hot.” It’s on fire.

The Numbers Don’t Lie

Let’s start with the receipts.

• According to the U.S. Census Bureau, the South added nearly 1.8 million people in 2024 alone. That’s more than the entire population of Phoenix picking up and heading below the Mason-Dixon line in one year.
• Texas and Florida led the charge, with Texas gaining about 563,000 residents and Florida adding 467,000 between July 1, 2023, and July 1, 2024.
• The Carolinas are the new rock stars. North Carolina brought in more than 82,000 people through net migration, while South Carolina added over 68,000.
• Meanwhile, the states people are leaving tell their own story. California, New York, and Illinois continue to see massive population declines.

Zoom out a bit further: From 2020 to 2024, the South gained 2.685 million net new residents through domestic migration, while every other region of the country lost people. 

That’s not a shift. It’s a tidal wave.

Why the Southeast?

Sure, the weather is nice, but this isn’t just about sunshine.

Job growth and corporate relocations

Major corporations are flocking to the Southeast, bringing high-paying jobs with them. Dallas-Fort Worth, Austin, Nashville, and Charlotte consistently rank at the top of the charts for corporate headquarters relocations. 

And tech jobs? Fourteen of the top 15 fastest-growing tech hubs in the past five years are in the Sunbelt. More jobs mean more people, which in turn leads to increased demand for housing.

Pro-growth housing policies

While coastal metros like New York, LA, and San Francisco are bogged down by red tape, Southern metros are moving forward. Raleigh, Orlando, Charlotte, and Austin are permitting homes at rates five to six times higher per capita than the nation’s largest coastal metros. That means a steady housing supply to meet demand and a more balanced, affordable market.

Affordability and lifestyle

Who wouldn’t trade a cramped condo for a four-bedroom property with a yard and lower taxes? Families moving south aren’t just chasing sunshine; they want a higher quality of life at a lower cost. And when families put down roots, they rent or buy homes, fueling demand for single-family rentals and multifamily alike.

What This Means for Investors

Here’s the magic formula for a great market:

• Strong population growth
• Expanding job markets
• Affordable, scalable housing
• Business-friendly policies

Combine them, and you get the recipe for sustained rental demand and long-term appreciation. Vacancy risk goes down. Cash flow goes up. And because new residents aren’t slowing down anytime soon, these tailwinds will last for years to come.

But here’s the catch: Not all properties are created equal. Buying the wrong house in the wrong neighborhood can turn a golden opportunity into a financial headache. 

That’s where Coastal Equity Group comes in.

How Coastal Equity Group Helps You Win in the Southeast

When you hear “Southeast real estate boom,” you’ll see a lot of talk, but few lenders actually lean into it the way Coastal Equity does. We believe it’s one of the rare firms fully built around helping investors in the markets that are actually growing.

Here’s what sets it apart (and why I’m backing them):

Lending in the right places

Coastal Equity Group doesn’t spread itself thin. Its lending footprint covers Florida, Georgia, Tennessee, Kentucky, South Carolina, and North Carolina. By focusing solely on those states, it’s developed deep local knowledge, strong relationships, and the ability to move quickly.

Data-driven market selection

Coastal Equity Group examines migration trends, job growth, rental yields, and housing policy to identify markets with sustained upside potential. It’s particularly focused on areas where affordability, infrastructure, and population growth intersect.

Speed and flexibility you won’t get from big banks

Because it’s boutique and private, Coastal Equity Group can structure loans creatively and close faster than many traditional lenders. This agility enables investors to pounce on opportunities as they arise.

Turnkey, end-to-end support

Coastal Equity Group offers a proper turnkey solution, including:

• Acquisition guidance
• Financing strategies
• Property management oversight
• Exit strategies for when you’re ready to cash in

In short, you can invest in booming Southeast markets without becoming a hands-on landlord.

Risk mitigation in a changing market

Yes, the Southeast is booming, but every market has its own set of risks, including insurance costs, weather-related challenges, and regulatory shifts. Our team has the local knowledge and industry relationships to help you avoid pitfalls and maximize returns.

Final Thoughts

The migration wave isn’t slowing down. Families are moving, corporations are taking notice, jobs are following, and the Southeast is where they’re all landing. For investors, this is one of the clearest opportunities in decades.

At Coastal Equity Group, we make sure you’re not just following the crowd; you’re getting ahead of it. By focusing on new-construction rentals in high-growth Southern markets, we help investors build portfolios that are cash flowing today and appreciating for tomorrow.

So if you’ve been waiting for a sign of where to invest next, here it is. The South is calling. Let us help you answer.

Dave:
Do you think you can’t invest in real estate because you have a lower income wrong? It is not only possible to invest in real estate, but I think it’s the best way to improve your financial situation if you’re at the lower end of the income ladder, even if you only make $50,000 per year as an example, there are financing options, government programs and investing strategies specifically designed to help you get into your first real estate deal and progress towards financial freedom. From there. Today I’ll break down why investing in real estate makes sense even if it seems unachievable. At first glance, I’ll share which strategies to focus on if income is your main barrier to entry and I’ll share a few programs to check out that could be a total game changer.

Dave:
What’s up BiggerPockets community? I’m Dave Meyer and welcome back to the BiggerPockets Real Estate podcast. Today we are tackling one of the most common questions I hear from our community. Basically, I want to start investing in real estate, but I’m only making $50,000 or less per year. Is it even possible? And lemme just tell you right off the bat, the answer is absolutely yes. In fact, some of the most successful investors I know started with modest incomes and limited capital, and today we’re going to break down exactly how you can get started even on a tight budget. First, I’m going to share seven different funding options to consider if you have a low income. Then I’ll talk about my favorite investing strategies for people who are capital constrained and I’ll finish up the episode by going sort of step-by-step through how to take action on your first investment.

Dave:
So if you’re making $50,000 or even a little more than that, this episode is designed specifically for you. Let’s dive in. We’re going to start with talking through different funding options because we need to get this big question out of the way, right? I’m sure there are a lot of folks who are on the lower end of the income spectrum thinking that they want to get into real estate investing but just don’t know how to get the capital and how to finance these deals because real estate is amazing, but it is a very capital intensive business. You do need money to get into this business, but the good thing is that real estate investing is not necessarily like buying a traditional home. You don’t actually have to put down 20% of the full purchase price to acquire the asset, and there are actually seven different options to consider if you want to invest with a lower income and not everyone is going to work for every investor.

Dave:
That’s why I’m giving you a couple of different options here. I’m not going to go super into depth into each of them. I just want to show you that there are possibilities out there if you’re willing to search and figure out which one of these actually works for you. Option number one is an absolute classic. It is an FHA loan and this is absolutely perfect for folks on the lower end of the income spectrum because they were designed specifically for low income Americans to get them into the housing market. So if you are doing a house hack or potentially even a live and flip, I’ll explain that in a minute. This is a really powerful strategy. Now, it is important to know that FHA loans are only available for people who are owner occupied. You have to live in the property that you buy with an FHA loan.

Dave:
So house hacking or live in flips really are the only options here. You can’t just go out and buy a duplex, rent it out to two people and use an FHA loan. But for people who are just getting into the game and have a lower income owner occupied strategies like house hacking and live in flips are two of if not the two absolute best strategies to get started. So these sort of work really well together. The reason FHA loans are so great for people who are getting started with a lower income is that you can actually put as little as 3.5% down on a property. So I know the traditional amount that most people hear is putting 20% down, but this is a government sponsored program where you can put as little as 3.5% down. So if you’re talking about buying a $300,000 property, for example, your down payment will be close to $10,000, which is a lot easier to stomach and get together than $60,000 like you would be putting down if you put 20% down.

Dave:
Or as a real estate investor, often you put 25% down and then in that case you’ll need $75,000 to put down. So it’s a lot better. The other really incredible thing about this is when you put 3.5% down, you don’t have to just buy a single family home, you can actually buy a two, three or up to a four unit property, and that’s sort of why it works so well for house hacking because you can live in one of those units and rent out the other one, two or three units that you get. It’s also great for people who have relatively lower credit scores because credit scores for an FHA loan can be as low as five 80. You definitely still want a higher credit score because the higher you go in your credit score, the better rate you’re going to get. But if you have low credit, these options are still available.

Dave:
The debt to income requirements can be up to 57%, which is much more lenient than a conventional loan. You’re allowed to get gifts for a down payment if that’s something available to you and you can actually count some of your expected income up to 75% of it towards your qualifying income. So all of these things together make it an incredibly powerful way for lower income folks to get into the real estate investing game because it addresses head on the hardest part of getting in the game, which is figuring out that money for your down payment instead of putting 20 or 25% down, put as little as 3.5% down with an FHA loan. So that was option number one. Option two is a different but somewhat similar approach to getting into the game. This is using a conventional loan with low down payment options. There are some more traditional banks now that allow you to put three or five or 10% down, specifically usually for first time home buyers.

Dave:
So again, this is going to work for people who are going to embrace the many, many benefits of owner occupied strategies like house hacking or the live and flip. With a lot of these options, you don’t necessarily have PMI private mortgage insurance, FHA loans. One of the downsides I should mention of that is yeah, you can get in with a lower down payment, but there are some additional fees. It’s called PMI on top of your normal principal and interest payments that make your monthly mortgage payments a bit higher and obviously that’s not ideal. It can hurt your cashflow or how much money you’re saving. And so with these conventional loans with low down payment options, you can potentially avoid them. Now there are trade-offs because they probably have higher interest rates. The underwriting might be a little bit more strict than some of the things I mentioned in the FHA loan, but don’t overlook these because more and more lenders are offering these kinds of financing and it can be a really good way for low income folks to get in the housing market.

Dave:
Our third approach for low income people to get into the real estate gain is a little bit different tactic, which is partnership strategies. If you can’t get together enough capital to put a down payment on your property either putting 20 or 25% down or for some folks, it’s not going to even be possible for three or 5% down and that’s totally okay. This is a similar situation for how I got started. I really had no capital to put into my first deal, and so I used a partnership strategy and this is a very, very common way for real estate investors to get into the game. I know a lot of people put on social media that they’re buying all these properties. A lot of those people are using partnerships. This is very common. Not many people have all of this money that they can invest into real estate right away, so they go out and find someone to partner with.

Dave:
Now, there’s tons of different formats for partnerships, but I’d say there’s basically two different approaches that you can consider to get off the bat. One is a down payment partner or partners if you don’t have the capital to go out and make this down payment, see if you can find someone in your network who does have an interest in real estate investing who wants to partner and support you and can contribute some or all of that down payment. Now you should mention it doesn’t just need to be down payment. You’re also going to need closing costs. You should also have cash in there, but basically find someone who can bring the capital that you need and then your job in that deal is to go find a deal, operate that deal successfully and create a successful partnership. Another way to do it is maybe you don’t have great credit or you don’t work a W2 job, so you can actually go find a partner who maybe does have a credit and who can qualify for finance or has a higher debt to income ratio.

Dave:
That’s another form of partnership that you can go out and seek. So whether you want to call this private money or partnering, whatever it is, the idea here is go out into your network and to be honest with you’re first getting started, it’s probably going to be friends and family. Go see if you can raise some money from friends and family to get into your first deal. Now if you don’t have friends or family that can provide that capital, totally understand a lot of people are in that situation. You can go and look for partnerships or money outside of that circle, but I just want to be realistic that that is a challenge if you’re going to partner, looking first to friends and family is going to be the easiest way to do that. If you need to get pulled together 2, 3, 4 different partners to get that first deal, that’s okay.

Dave:
For me, I think the most important thing is to get into that first game. I had three partners on my first deal, and again, this is a very normal way to get into real estate investing. Number four, our creative and seller financing. When you don’t have enough capital to put down to buy a property, you can look into things like seller financing if you haven’t heard of this before. Basically when the owner of a property doesn’t have a mortgage on their property, and that’s actually about 40% of people right now, you can go to these people and see if they would be willing essentially to be the bank for you. So instead of buying your property with a mortgage and making mortgage payments every month to Chase or Wells Fargo or whatever, you actually just pay those monthly payments to the seller. And although you’re still going to have to pay something every month, the terms of that loan are very flexible.

Dave:
Basically, whatever you can agree to with the seller is possible. The interest rate is entirely negotiable. The down payment is entirely negotiable. The amount you pay for the property is entirely negotiable. So if you’re one of these people who doesn’t have capital, you don’t want to do a partnership looking for seller financing can be a great option. Now it’s worth mentioning not every seller wants to do this and you do need to make it worth the while for the seller. I had someone approach me about seller financing a deal I own outright right now, and they wanted to put 10% down. They wanted to pay market rate and they wanted a 5% interest rate. I said, why would I do that? I’m going to make the same amount of money and basically lend you money at a lower interest rate than I can make elsewhere.

Dave:
So you have to remember that the seller is not going to be doing this out of the kindness of their heart, and so sometimes you need to pay a little bit higher of an interest rate. Sometimes you might need to pay a little bit over market comps for that property in order for the seller to agree to something like this. So don’t expect the world on these kinds of deals. You have to find a mutually beneficial structure so that you and the seller both benefit from this kind of deal financing option number five, don’t overlook these down payment assistance programs. There are so many different state and local municipalities that offer down payment assistance programs specifically to help low to moderate income buyers get into the housing market. Oftentimes these are grants that don’t need to be repaid. They’re just money that you essentially get for free.

Dave:
Sometimes they’re structured in the form of zero interest loans for down payments and closing costs. Sometimes you get a credit at closing and you don’t have to come out of pocket for any of these things. There is a huge variance in what is offered, but absolutely look into what is available to you if you live in a city, Google the name of that city and down payment assistance programs or first time home buyer assistance programs and see what they have. Do that for your state as well. Also, ask your lender and ask your agent about them because they absolutely should be familiar with what programs are available in your area and help you figure out how to navigate those things. Option number six is only available to certain segments of the population, but it is an amazing tool for anyone who has served in the military.

Dave:
There is something known as a VA loan. This is for military veterans or active military, and it offers zero down payment options. That’s right, you can put $0 down if you’re active military or a veteran. There is no PMI like there is with an FHA loan that saves you hundreds of dollars per month. You still get competitive interest rates. They’re often better than FHA loans and just like an FHA loan, you can buy up to a four unit property as long as you’re going to do the owner occupied thing. So this is an awesome option for anyone who qualifies for it. And similarly, our seventh and last financing option is USDA Loans for Rural Investment Properties. This is another government program that allows you to put sometimes zero down. You get below market interest rates. These properties do need to be in rural areas. They need to be designated by the USDA to be in certain areas, but if you are looking to buy a property in those areas and you meet the other qualifications, USDA loans can offer you a 0% down way to buy your first property.

Dave:
So those are our seven options for low income folks to look for if they’re trying to get their first real estate investment. And like I said, not everything is going to work for everyone, but the key takeaway here is that there are multiple different financing paths available to you that honestly higher income investors can’t even access. So your job is to look at the seven different options that I just outlined here and figure out which of these works for you. You got to do more research. We have tons of resources on BiggerPockets. You can go learn more about each of these in more detail, but figure out which one is going to work for you because it’s not going to work for every single person. But I bet for 80 90% of people listening to this podcast, one of these options could actually work for you. So go check these out. Now I need to turn our attention to which strategies, which types of deals work for lower income investors. We’re going to get to that right after this quick break. Stay with us.

Dave:
Welcome back to the BiggerPockets podcast. I’m Dave Meyer, sharing strategies and tactics that lower income investors can use to get into the real estate investing game. We talked about seven different financing strategies before the break, and next I want to touch on two investing strategies that can be really effective even if you’re only making $50,000 give or take. And again, we have tons of episodes, resources on BiggerPockets that you can use to go dig into these in more detail because I’m just going to provide an overview so that you can select which ones you want to do more research on. The biggest bucket of strategies that work for low income investors are the ones that I mentioned before the break, which are owner-occupied strategies. These give you access to the best financing options like FHA loans, like VA loans, low down payment, conventional mortgage. These are all available if you are willing to do the owner-occupied strategy.

Dave:
Now, there are two different ways that you can use occupied and we often talk about one of ’em, but the second one I think is one of the least appreciated overlooked strategies in real estate investing. The first one though is house hacking. You’ve probably heard of this, but basically it’s where you buy a two to four unit property using an FHA loan. You could use a conventional mortgage, but for purposes here, it’s about using a low down payment loan live in one unit and rent out the others, and the rental income from your tenants should cover at least some of your mortgage payments so that you’re saving money every single month. You don’t need to be cashflow positive in these situations. The goal of a house hack is actually to reduce your living expenses as much as possible so you can save up as much money as you can to go out and buy your next deal.

Dave:
And this is just an absolutely proven no-brainer model. I have seen people effectively live for free while building equity and learning the landlord business. It’s awesome. And again, the beauty is that you’re using owner occupied financing. If you’re low income, you can put as low as 3.5% down. You’re getting great rates, you’re getting more lenient qualification requirements than a normal investor loan. And plus you get to learn property management, sort of the training wheels for being a landlord while you’re doing all of this. But that is not the only owner occupied strategy that you should consider. There is also the live in flip strategy. Live in flip is basically when you flip a house, but it’s the house that you are actually living in. And there’s a really key difference here because when you go out and flip a home in a traditional way, you are using hard money most of the time, which is super high interest rate debt.

Dave:
Usually it’s 10, 12 up to 15%. Sometimes you can put 10 or 20% down, but you’re still making a large down payment. You have to pay for materials somehow to actually go and flip a house, whether you’re taking out a loan or paying for that out of pocket. And the whole game of doing a flip is doing it quickly to reduce all of your holding costs, like your loan payments and your taxes and your insurance payments. So you want to do it quickly. The live and flip though takes a lot of that pressure off because if you buy correctly, you can use one of these owner occupied types of loans, maybe a VA loan or a low down payment, conventional mortgage option, and you can take as long as you really want to do the flip. But basically you should give yourself about two years because there’s this really awesome part about the live and flip, which is that if you live in that property for two years or more, you have to basically live in it for two out of the last five years that all of the money that you make on that live and flip all the profit is actually exempt from taxes.

Dave:
You do not pay capital gains tax on that, and that is incredibly powerful. So basically you could do the live in flip and then hopefully generate enough equity, go and sell it, and then when you do that, you can either go buy a house hack or you can buy a rental property or you could just go and do another live in flip. And I love this option again because it has a lower down payment option for lower income investors. Now, the types of properties that you’re going to need to do this for will change because for an FHA loan, there are specific requirements for the house that you need to hit, and oftentimes it can’t be in really bad shape to get an FHA loan. But on the flip side, there are other government programs that allow you to borrow the money that you need to renovate a home like a 2 0 3 K loan.

Dave:
Awesome option for people here to consider if they want to do a live-in flip strategy. Or you could just go out and look for a conventional mortgage with a low down payment option, use that to purchase the house and then either come out of pocket to buy the flip or potentially partner with someone to buy the materials and pay for the labor that you need to do a flip. But I would highly recommend considering this if you’re handy, if you’re willing to get your hands dirty a little bit, this could be an incredible wealth building strategy, especially early in your investing career when you need to build up equity that you can use to go out and buy subsequent investments. This is a really good way to supercharge your equity growth early in your career. So those are two great strategies for low income investors to get started.

Dave:
The third is the Burr strategy. If you haven’t heard of Burr, it stands for buy, rehab, rent, refinance, and repeat. And it is basically a strategy that allows you to recycle at least some of your capital into multiple deals. The idea is you go out and buy a property, you have to put some money into that deal as a down payment. You need to put some money into that deal to renovate the property. But once you’ve built up equity and improved the value of your property, you can refinance it, take some money out of the deal and use it for your next property. This is why Burr is so popular, especially for people who have limited capital, but it’s honestly just popular for everyone because it allows you to be very efficient with the capital you want, and that’s valuable to everyone, whether you’re a low income investor or a super successful investor.

Dave:
Now you can sort of do a burr with an owner occupied hybrid, but if you were going to do a burr without owner occupied, you are going to need some capital. This isn’t a no money down strategy. You still need to find money somewhere to go purchase this property and pay for the renovation. You can do that through some of the financing options I mentioned above. A common way to do this would be through partnerships, but you are going to need some capital. But the reason I like this is because Burr, if you can get that first injection of capital, you might not just be able to buy your first property. That might help you get your first and second property or your first, second, and third property because it’s a very efficient use of the capital you have. So I really recommend lower income investors learn about the Burr strategy and see if it’s something that you can realistically pull off.

Dave:
So those are my three favorite strategies for low income investors. Of course, you can do other things. You can go out and buy a traditional rental. You can go out and buy a short-term rental or a midterm rental, but you’re going to need a partner, right? And if you don’t have the money, you’re going to need to go out and find someone who does to buy those kinds of deals because either you’re going to owner occupied and maximize all the programs out there for owner occupied people or you’re going to have to partner. It’s just one or two of those things. I know people overcomplicate this and come up with all these different strategies, but you’re going to have to do one of those two things if you don’t have the capital to just go out and buy rental properties on your own, and that’s okay. This is what everyone does, so don’t think this is some unusual way to get into real estate investing. This is probably the most common way to get into real estate investing. That’s why I know that people listening to this can make this work for them because it’s worked for so many other investors in the past. Now that we’ve talked about financing options and strategies, let’s just talk step by step, what do you do to go out and land that first deal? We’ll get into that right after this quick break.

Dave:
Welcome back to the BiggerPockets podcast. I’m Dave Meyer talking about how to invest in real estate on a lower income salary. So $50,000 give or take. Before the break, we talked about seven different financing options you can use to get into the game and some of my favorite approaches for low income investors to start their career with. Now that we’ve done those, let’s just talk step-by-step, action plan. What do you do? Because I get it, if you don’t have a ton of capital get started, it could be really daunting to look at the price of homes and think, how can I actually go out there and do it? So we’re going to go step by step. What do you do? Step number one, and this isn’t what I recommend for everyone, but for lower income investors, step number one is go talk to a lender and understand your financing options.

Dave:
This is something so many people just skip over. There are tons of people who reach out to me almost every day saying, I don’t know if I can afford a home. I don’t know if I can get a house hack. I don’t know if I could do a live and flip. Well, you know how you figure that out. Go and talk to a lender. These are people whose entire job it is to tell you whether you can afford these types of homes, and best of all, it’s entirely free. So if funding is your number one concern, you do not need to go and guess about what you can afford. Go talk to lenders and see what they have for you. I recommend you meet with two or three different lenders and compare programs, and that’s not just necessarily go talk to different brokers. If I were you, I’d talk to maybe two different brokers.

Dave:
Just go see someone who will shop around on your behalf and then maybe go talk to two local banks as well. Because local banks or credit unions sometimes have their own programs or will have incentivized to lend in their own communities, and they might have programs to help you out that you’ve never heard of or a broker may have never heard of. So go talk to three or four of these people. If you qualify for things like a VA loan or A-U-S-D-A loan, you definitely want to talk to lenders who have experience with that and talk to these lenders about DOW assistance programs in their area. In my experience, good lenders who specialize in your market should know about this. Now, you might talk to some lenders who are on a national basis, and that’s okay. I’ve used national lenders too, but just talk to a couple local ones and see if they know some things that you can learn about down payment assistance, and as you’re talking to these lenders, do that research about city municipality, regional state level programs that you may qualify for.

Dave:
At the end of the day, the goal of this whole step of talking to lenders is to get a preapproval to understand the maximum amount that you can get a loan for because that will set your buy box later in our step-by-step guide so you understand exactly what your budget is for going out and getting a property. This I think is the most important thing that low income investors can do because it takes all the guesswork out of it for I think the majority of people out there listening to this podcast right now, you’re going to find out that you can afford something that actually makes sense, and that’s incredibly empowering and motivating for you to go out and get their deals. When a lender tells you, yeah, I’ll lend you a couple hundred thousand dollars to go get you into real estate, that is awesome.

Dave:
So go have those conversations and see what you qualify for. There will be some section of people, it’s small that won’t qualify, and the lender will tell you, actually, your credit’s too low or your DTI is not good enough, and honestly, that’s okay too. You want to know that because at least you are taking away the guesswork of Can I buy this? Can I get into real estate? And you’ll get a very specific answer from the lenders about what you need to go out and do to be able to qualify. Maybe you need to work on credit repair, maybe you need to pay off some credit card debt. I don’t know. But it is better to know the barriers to you getting a mortgage than to just stay out there guessing. So step one, go out there and talk to some lenders. Understand your financing options.

Dave:
Step number two is define your long-term strategy and goals. You need to figure out what you’re aiming for because I know especially for people who just really want to get their first deal, you could just say, I’ll buy anything that makes sense, and I totally understand that sentiment. That is how I started in real estate, but 15 years into this, I have recognized that starting with a plan and a strategy actually really helps you go a lot faster than just diving into any old deal. So figure out where you’re trying to go and over what timeline. If you are a long-term buy andhold investor, which is what I think 80, 90% of real estate investors are out there trying to build wealth for the long-term, then I think looking into house hacking or a traditional renter property, if you want to partner with someone, are really good options and you want to focus on getting a defensive deal.

Dave:
Now, I know a lot of people out there are saying that cashflow isn’t that important, and that is a worthwhile debate. Personally, I believe that cashflow waxes and wanes in importance depending on where you are in your investing career. But if you are lower income and getting into your first deal, cashflow is absolutely essential, not because it is going to make you rich, not because it is going to change your life instantly and you’re all of a sudden going to retire, but because it reduces your overall risk when you are a low income investor, your goal of your first deal is to get in, hold on, learn, and get a little bit more financially free. If you do not have cashflow, it calls all of that into question because unlike someone who’s say, starting with a ton of money, if they buy a deal that doesn’t cashflow and a water heater breaks and they need to come out of pocket two grand to pay for that, that’s okay.

Dave:
But for folks who are low income and trying to get into that, you can’t have that situation that brings in too much risk into your first deal, and so you need to really understand how to analyze deals well, to understand the real metric of cashflow, which incorporates the potential for expenses on things like water heaters and roofs and HVACs and all the other stuff that inevitably breaks. You need to take all that into account and still make sure that you are getting cashflow. That is the strategy I recommend for anyone who wants to be a buy and hold investor and getting in with a low income. Now, if your goal is to just try and make some money as quickly as possible, which might be okay because you want to buy rental properties later without a partner, then I think a live and flip is awesome.

Dave:
I actually think anyone who’s willing to take on the inconvenience of a live and flip because it is inconvenient you’re living in a house that you’re flipping anyone who’s willing to do that though, it’s one of the best ways to start, even if your goal is long-term buy and hold because it allows you to build up that equity and buy properties in the future. So you just need to figure out what your goals are, like a one year goal, a three year goal and a five year goal are usually what I recommend to people. If your one-year goal is just get a cash flowing rental, then go out and do a house hack. If your one-year goal is to build up as much equity as possible to buy deals in the future, go do a live and flip. The whole point though of this step is figure out where you’re trying to go over the next five years and back into a plan that works for you.

Dave:
Step number three, go educate yourself and do some market research. Once you figured out, Hey, I want to do a live and flip, or I want to buy a house hack and I have X money to spend, which is where you should be entering step three, then you got to go make sure that you can really pull this off by learning as much as you can about these topics. So if you want to be a house hacker, go read the book on house hacking or listen to all of the millions of episodes we have on BiggerPockets about house hacking and how to be successful at it. If you want to be a live-in flipper, go read a book about live and flip or listen to the many podcasts Mindy Jensen has put out about being a successful live and flipper. This is where you just have to be good at being a real estate investor.

Dave:
This is true whether you’re low income or high income, you got to learn the skills to make sure that your first investment goes well As part of this education, it’s not just learning the tactics and things you need to do, you also need to do some market research. This is where you have to pick where you want to buy a house because although it is really an oversimplification to say real estate’s location, location, location, there is truth to that old saying that location matters a lot and where you live and flip might be different than where you want to buy a house. Hack might be different than where you want to do a burr, and so you need to find the right market for the strategy that you have selected. Now, all things being equal, you want to invest in your own backyard if you’re first getting started.

Dave:
That’s usually my recommendation because that allows you to take advantage of the owner occupied strategies and it allows you to just keep an eye on your deals and get good at managing those deals over time. Now, if you want to partner with someone you can do out of state investing in a low price market, that is absolutely possible too. If you live in an expensive market on a lower income, maybe you need to go invest in the Midwest, you can afford something there, you can absolutely do that, but that’s probably going to take a partnership option because you’re not doing owner occupied, and that’s okay. Just at this stage of the process of buying that first deal, you need to go out and figure out where you’re physically going to buy those properties, tons of resources again that are free on BiggerPockets that you can go do that.

Dave:
Step four is starting to get deal flow and analyzing those deals. Deal flow is basically you need to look at a lot of different properties before you go out and select them, and you need to figure out where you’re going to get that deal flow from. For the vast majority of people getting your first deal, especially if you have a lower income, is going to come from a real estate agent. You don’t really have to overthink it that much. Go on biggerpockets.com/agent, find an investor friendly agent and ask them to send deals that fit your buy box. At this point, you should have a buy box decently well developed. You should know what your maximum budget is based on what your lender has told you. You should know what type of property you’re looking for based on the strategy and goal work that you’ve done, and you should know where you want to buy based on your own education and research about different markets.

Dave:
So go find that agent, tell them what you’re looking for. Hopefully they can refine your strategy with you and give you some input on what to look for, but figure out what your buy box is and start getting those deals sent to you. Now, a lot has been made in recent years about off market deals, and if you have access to off market deals, great, you should pursue them. That’s a great thing to do, but it is hard to get off market deals if you’re income because a lot of the strategies you use, like sending out mail, putting up flyers or direct marketing, any of these things, they cost money and they cost time and just given where the real estate market is today, more and more good deals are going to be available on the MLS are going to be in front of agents.

Dave:
And so for most people, I would recommend that strategy. Start looking at a lot of deals and start analyzing those deals. Analyze as many as you can. Analyze five a day, analyze 50 a week if you have to really get confident in how well you can run the numbers. Tons of resource on BiggerPockets how to do that. I wrote a whole book called Real Estate by the Numbers on how to do that, but we have tons of different webinars. We have all sorts of free stuff that you can check out as well if you want to get good at analyzing deals. But the main thing I want you to remember, any deal that you look at as a new investor, if you’re not doing a living flip, if any sort of buy and hold, whether it’s a burr, it’s a house hack, it’s a traditional owner occupied, it has to cashflow.

Dave:
Just don’t look for a deal that doesn’t cashflow. If you are low income, that is too risky. You do not want to have to come out of pocket to float your deals. You want to make sure that after maintenance costs are factored in after vacancy costs are factored in after capital expenditures are factored in. Those are things like those big ticket items like replacing your water heater or your roof every decade or so. Those things have to be factored in and after you factored them all in, it has to cashflow within the first year or do not buy it. That is the best advice I can give you for a low income investor because you’re in a situation where you’re not going to be able to afford to pay for a $5,000 water heater if it breaks in the first month. So you really need to factor all that in to make sure you are not going to be putting yourself in a bad personal financial situation by buying these deals.

Dave:
And I promise you, these deals absolutely do exist. You just need to be disciplined to go out and find them. It might not be on the first deal you analyze. It might not be on the 20th deal you analyze. It might be the hundredth deal you analyze, but this is the job of an investor. If you are expecting that you can come into this with low income and just find a deal in the first day or two, I’m sorry, that is not what’s going to happen. If you are coming into this with a lower income, you’re going to have to hustle a bit to figure out where these deals come from, and this is how you hustle. Look at a ton of deals, get very good at analyzing deals. These are skills that anyone can learn. You get very good at it, and that’s how you protect yourself and get into the game.

Dave:
That’s step five, step six. Once you’ve done that, you just start making offers. Make offers. Talk to your agent, figure out what you are willing to pay for different properties. Be willing for people to say no to you. That’s okay. Figure out what you’re willing to pay for properties. Negotiate hard because we are in a buyer’ss market right now. This is a big change from where we’ve been over the last couple of years, and buyers actually have leveraged negotiating power right now. So the way you should approach these offers is you don’t want to be greedy, don’t insult people or make stupid offers, but go out there and make offers that are mutually beneficial and you think actually reflect the value of the property to you as an investor and stick to it. Stick to it. Be willing to walk away from deals that don’t make sense.

Dave:
Just keep going until you find the one that works for you. And then step seven is just scale and repeat. Once you’ve done this, once, everything gets a lot easier. If you do a live and flip, you’ll have equity to go buy your next deal. If you do a house hack, you can save up enough money to go do a second house hack a year later. If you do a partnership in a bur, you should be able to efficiently recycle some of that capital to go get your next deal. Or if you want to partner, once you’ve done one deal, the amount of people who are going to be willing to work with you and partner with you and lend to you is going to go up exponentially. The difference for me as someone who does private money lending difference between someone who’s done no deals and one deal is pretty considerable, and the more experience you get, the more options are going to be available to you.

Dave:
So once you get that first deal, everything will get proportionally easier for every deal you do from there. So those are our seven steps. Just as a reminder, step one, talk to lenders and understand your financing. Step two, define your strategy and goals. Step three, do the education and market research. Step four, talk to an agent and start analyzing deals. Step five, make offers and get your first deal. Step six, scale and repeat. That’s it. And before we get out of here, I hope what you are taking away from this episode is that your income doesn’t define your potential as a real estate investors. Some of the most successful investors I know started with less than $50,000 per year and built incredible wealth through real estate. The key is to accept and to start where you are. Use the tools available to you like FHA loans and house hacking, and focus on cashflow over appreciation. Do not try to get rich. Quick focus on building wealth steadily and systematically. Your first property is always the hardest, but once you prove to yourself that you can find finance and manage a rental property, the second one becomes easier, and the third one is easier still. That’s what we got for today’s episode. If you found this helpful, make sure to leave us a review and share with anyone who would benefit from it. For BiggerPockets, I’m Dave Meyer. See you next time.