Henry Washington:
Five years ago, Martin Castro Silva was working at a bank making 80 grand a year. Not a bad gig, but one thing was eating at him. He was missing the moments with his two kids who were three and one years old at the time. It wasn’t until Martin picked up a pattern that everything changed. And that pattern was all his wealthy clients at the bank were in real estate and one of them was even willing to show him the ropes. Martin knocked his first deal out of the park and replaced half of his salary while working on the side. This had to be it. This was his ticket to freedom. By the second deal, he quit his job and by the third, he was building an income replacing machine. Just last year alone, Martin did 11 real estate deals. Nothing super creative, no sketchy financing, all using a repeatable formula that anyone can replicate.
Now he owns a schedule, he can dedicate time to his kids, and he put his wife and children into their dream home. And it only happened because he took the chance on his first deal. Today, Martin will show you how to do it too.
All right, Martin. Well, tell us about your background and what got you into real estate.

Martin Castro-Silva:
Well, I was hiring my second child. I wanted to be the owner of my time, and I was looking to do something that would give me the freedom to just be with my kids. Yeah. My background is in banking. I worked for Chase Bank for 12 years. I was working at a Fort Lauderdale office in South Florida, very affluent area. And I’ve noticed that there was a pattern of clients that the ones that were in real estate were the ones that were doing well off.

Henry Washington:
What kind of clients were you servicing?

Martin Castro-Silva:
Yes. I was a private client banker, so I was sitting with the big sharks.

Henry Washington:
Okay. So for those who don’t know, when you go to the bank, they have bankers for regular people, and then they have private banking. Some of these banks have a special branch or a special person you can go to and do private banking when you got the real dollars. So you’re saying you were helping the big shops?

Martin Castro-Silva:
Correct. Yes.

Henry Washington:
And you started to notice that a lot of the big shots were dealing in real estate.

Martin Castro-Silva:
Exactly. Yeah. They either own real estate, they were agents, wholesalers. They were somehow connected to real estate. So I met this guy, young guy. He was coming every week to do a wire transfer to close on house. And every time he would come, he would tell me the story. “I’m buying this house for this much. I’m going to paint it. I’m going to do very little stuff, spruce it up and resell it, make 20, 25,000. Remember, it was the pandemic time, like 2021. And I was like, ” What? How is this guy making $20,000 in a month, in two months? “I couldn’t believe it. So every time he would come, I would try to always help him and learn more about him.

Henry Washington:
Okay. So

Henry Washington:
You were using him kind of like a little mentor when he would come in there.

Martin Castro-Silva:
Yes.

Henry Washington:
And get some information.

Martin Castro-Silva:
Yes, yes. When we got a little closer and he introduced me to bigger packets, he’s like, ” Hey, listen to this podcast. It’s going to be good education, good information for you. Since you say you want to start in real estate or want to do something about it. “Interest rates were super low. I took advantage and refinanced my home, got some capital. And then I would just bug him,” Hey, when are you going to have a deal? When are you going to have a deal? When are you going to have a deal? “And then he introduced me to a wholesaling company, Dan South, and they were able to get me my first deal and help me with some financing too.

Henry Washington:
Okay. Well, tell us about that deal.What’d you buy? What’d you pay for it? What’d you do with it?

Martin Castro-Silva:
It was a town home in a city called Lake Worth.

Henry Washington:
How far was that from where you were?

Martin Castro-Silva:
45 minutes.

Henry Washington:
Okay, that’s not bad.

Martin Castro-Silva:
So I bought it. I didn’t have any money then. And my mom had just refinanced because she had a 5% interest rate and then the interest rate went down. She got a 2.5, 2.75. She got pulled some money. And I told my mom,” Hey, mom, I think we should get into real estate. This is what I’ve been hearing from other people. “I was trying to lure my mom into getting into real estate and trust me. So she’s like, ” Oh, but I don’t know. What if he doesn’t sell? “No, everything is selling right now. People are paying. People want bigger houses. So we got that town house and this is what happened. So we bought it in February of 2022. I was still working in the bank. We bought it for 200. It only needed about 25 to 30,000.

Henry Washington:
Did you pay cash or did you get a loan?

Martin Castro-Silva:
We paid 50% of it cash and 50% we got a loan. They gave us a hard money loan, interest only. And I started rehabbing it myself. I was hiring contractors here on the … Not contractors like handymans to do just the bathroom. We did the two bathrooms and we also did the kitchen. But the thing is, I was working, so I didn’t have the time. And I didn’t know that in this business you need to be fast. So it took me seven months to rehab it, just to do two bathrooms and a kitchen. That’s insane. Yeah. Yeah. So we were paying a thousand bucks on interest expense each month. When it was finally ready around August, we listed it. I found an agent that charged me very little commission because I was trying to save money, trying to make the most I could, but didn’t like the service that I got.

Henry Washington:
Of course, you get what you pay for.

Martin Castro-Silva:
You get what you pay for, right? Yeah. We listed it for 320. We ended up selling it for 310. They actually asked me for a concession or something like that. And I said, yes. When I shouldn’t have, I could have fought it a little bit more, but I didn’t know better. But even with all those hurdles, I was able at the end, like net, net, I was able to net $37,000.

Henry Washington:
Hey, that’s a win.

Martin Castro-Silva:
Exactly. Yeah. And even after taking so long, paying 7,000 in holding costs, I was like, what? Had I taken action faster, I would’ve made more money. But I was so surprised. And then that was the moment when I clicked and everything changed because I was like, if I make these two times, three times in a year, I’m going to already surpass my annual salary, so I need to do this more.

Henry Washington:
What were you making at the time at the bank?

Martin Castro-Silva:
Anywhere between 70 to 85,000 because I was a private client banker, so my salary was based on commission. I had a small base and then everything commissioned each month. You get what you sell.

Henry Washington:
So you made about, I don’t know, close to half your salary

Martin Castro-Silva:
On

Henry Washington:
That first deal.

Martin Castro-Silva:
Yeah.

Henry Washington:
That’s the proof of concept. So it took you seven months to do that. So how long until you did your next deal?

Martin Castro-Silva:
I bought it a few months later, but I started working on it full-time, four months later.

Henry Washington:
Full-time. So you left your job in the middle of your second renovation?

Martin Castro-Silva:
Absolutely. And my goal was to replicate my salary the very first year. So I bought the first deal in February. I sold it in September. I bought my second deal. November, I remember because it was Thanksgiving time.

Henry Washington:
How did you find the second deal to buy?

Martin Castro-Silva:
The second deal. So interest rates were low. I also took advantage of refinancing my own house. So I went ahead and this guy that I was telling you about.

Henry Washington:
The wholesaler from the bank?

Martin Castro-Silva:
The whole seller. Yeah. He found me a deal and he introduced me to the second deal. But he told me the second deal was two hours north. But I was like, you know what? Let me just do it because the price point was more aligned toward my resources.

Henry Washington:
It was less expensive than where you were. Okay. So what’d you pay for that second one?

Martin Castro-Silva:
For that one, I paid 170.

Henry Washington:
Okay. And you said you took out a line of credit.

Martin Castro-Silva:
Correct.

Henry Washington:
Is that what you used to buy the second one?

Martin Castro-Silva:
Yes.

Henry Washington:
How did you convince your wife to let you spend your entire line of credit on buying a flip?

Martin Castro-Silva:
I showed them the profits of the other one. It’s like, I have a spreadsheet. Look, this is what we made. If you’re okay with it, let’s go for the next one. I don’t know the market, but we’ll find out. These are the numbers.

Henry Washington:
And she said yes.

Martin Castro-Silva:
She gave me the support. Yeah.

Henry Washington:
That had to feel awesome.

Martin Castro-Silva:
Yeah.

Henry Washington:
All right. So you bought the second one for 170. Okay. How much work did it need?

Martin Castro-Silva:
It was the very first time that I bought a single family home hours. My niece were shaking. Oh my gosh. I was like, okay, this is a different monster because I had to do everything. I need to do floors, paint. The roof was already done, but I had to renovate closet doors, floors, paint the house, two bathrooms, a kitchen. I had budgeted $40,000. I ended up spending $50,000.

Henry Washington:
That’s not too bad.

Martin Castro-Silva:
Yeah.

Henry Washington:
That’s not too bad. People go a whole lot more over budget than that typically on a first or second deal. So you got it done for 50. And what did you sell it for?

Martin Castro-Silva:
Oh, here’s a good lesson. I was coming from the south, right? Complete different market. People paying over asking a lot, 30, 40, 50,000 over asking for single family homes. And I was like, you know what? I’m going to price it high. I’m going to set the market. Oh, you got

Henry Washington:
Too big for your britches. You did your first deal and you

Martin Castro-Silva:
Thought, okay.

Henry Washington:
Okay. But did your agent agree with that or was your agent trying to list it

Martin Castro-Silva:
For us? No, they told me, “Hey, listen, the ARB in this market is going to be 300, 309 the most.” I was like, no, I’m going to listen to 325, 335. I’m going to get my price.

Henry Washington:
With all of your years of expertise,

Martin Castro-Silva:
You

Henry Washington:
Decided.

Martin Castro-Silva:
We went live. A week goes by, I got a cash offer, 300,000.

Henry Washington:
Which is what you originally planned on.

Martin Castro-Silva:
I turned it down.

Henry Washington:
No,

Martin Castro-Silva:
Martin. Yeah.

Henry Washington:
Martin,

Martin Castro-Silva:
Turned it down. I sat on the house for four months and asked me how much I sold it for.

Henry Washington:
What did you sell it for?

Martin Castro-Silva:
300,000.

Henry Washington:
And I bet it wasn’t cash.

Martin Castro-Silva:
It was not cash.

Henry Washington:
It was financing. Oh,

Martin Castro-Silva:
Man.

Henry Washington:
Four months to sell that. But you sold it for 300. So that means you made profit. How much did make?

Martin Castro-Silva:
I made about 35,000, 35,000 on that one.

Henry Washington:
Still a win. So at least you got paid to learn a lesson because some people lose money when they learn a lesson.

Martin Castro-Silva:
Correct.

Henry Washington:
All right. We’ve got more amazing story from our investor, Martin Castro Silva, right after the break. As a host, the last thing I want to do or have time for is to play accountant and banker. But that’s what I was doing every weekend, flipping between a bunch of apps, bank statements and receipts, trying to sort it all out by property and figure out if I was actually making any money. Then I found Baseline and it takes all of that off my plate. It’s BiggerPockets official banking platform that automatically sorts my transactions, matches receipts, and shows me my actual cashflow for every property. My tax prep is done and my weekends are mine again. Plus, I’m saving a ton of money on banking fees and apps I don’t need anymore. Get $100 bonus when you sign up today at baselane.com/bp. BiggerPockets Pro members also get a free upgrade to Baselane Smart.
That’s packed with advanced automations and features to save you even more time. All right. We are back with investor Martin learning about his journey to becoming a full-time real estate investor. Let’s jump back into it.

Martin Castro-Silva:
When I was close to finish that one deal, the one, the first single family home, the same wholesaler reached out and presented me another deal, 30 minutes north. He was selling it to me a little bit cheaper than the first one, but I just didn’t have the money because I had used my money to buy that deal. So I found a private lender, just another client from the bank.

Henry Washington:
Look at you using their resources.

Martin Castro-Silva:
And he gave me a hard money loan. He’s an agent. So I remember telling him, “Hey, listen, if you give me the money, you get to lease this deal.” He’s like, “Let’s do it. ” Yeah. So he lent me 150,000 using the first house, the first single family house as a collateral. And then I used that money to buy the second one. The wholesaler had presented it.

Henry Washington:
Ah, so you took a line of credit out. You cross-collateralized that first asset. Oh, okay. Okay.

Martin Castro-Silva:
Exactly.

Henry Washington:
I like it.

Martin Castro-Silva:
Yeah. I

Henry Washington:
Like it. Was it the same size renovation or was it a bigger-

Martin Castro-Silva:
Yeah, same by box. A little bit more. It was like 45, close to 50,000. Same square footage, three bedroom, two bath. He needed everything. He needed a roof. He needed floors, paint, kitchen, bathrooms, everything. Full cut job. He gave me the money. I bought it and then I learned my lesson, price it right. So I priced it at 299, the second single family home in Sebastian, and I got it under contract in six hours.

Henry Washington:
That’s what I’m talking about. Lesson learned. Lesson learned. So you made the same amount, but you made it a whole lot faster this time.

Martin Castro-Silva:
Correct. Correct. Yeah, I believe I closed those two deals in the same week.

Henry Washington:
And so at this point, you were full-time in real estate. So you had left your job. That had to be scary though. I understand that you wanted to move faster, but just leaving your job, that’s a big step. What gave you that confidence? I

Martin Castro-Silva:
Just didn’t want to miss any of the moments with my kids. Back then, I had a three-year-old and a one-year-old, a newborn. Oh man. And I just took a leap of faith. I talked a lot with my wife. I was like, “Hey, listen, worst case scenario, I can always come back to corporate.” But I want to do something that fulfills me, that gives me motivation because I had lost a little bit of the passion that I had for banking and all those years. I just wanted to change.

Henry Washington:
All right, Martin, these are incredible lessons to learn in your first couple of deals. And how cool to get paid for your first couple lessons. I’m very interested to learn what it was like going off on your own now as a full-time investor who had some experience. So where did you go after your third deal?

Martin Castro-Silva:
Well, one thing that I learned from bigger packets is that you got to let everyone know you’re an investor. So I was talking to everyone, the line, Walmart, anywhere. Anywhere I go, it’s like- Anybody

Henry Washington:
Who’d listen, huh?

Martin Castro-Silva:
Exactly. Hey, I buy houses. I can buy them cash now that I have a little bit of experience how to finance them or how to get them. So I talked to a neighbor of one of my projects because I’ve noticed his property was very distressed. The loan was super high. This

Henry Washington:
Was a neighbor from that first single family home? Same

Martin Castro-Silva:
Street, right next to it. Oh,

Henry Washington:
It was next door.

Martin Castro-Silva:
It was the

Henry Washington:
Literal neighbor.

Martin Castro-Silva:
Yes, yes. And I told him, “If you ever want to sell your home, let me know. I may be able to help you. ” I either buy it myself or find you a buyer. I come from the south, so I know a lot of people trying to move. So it’s like, “Oh, you know what? I do want to sell it, but I’m not ready yet.” Okay. So we exchanged numbers and that was it. When I was almost done, ready to close on that house. The

Henry Washington:
Sale?

Martin Castro-Silva:
The sale. Yeah. He called me up and I bought that house for $150,000, which was $20,000 cheaper than what the wholesaler had sold me that very first.

Henry Washington:
Was it the same size house? It

Martin Castro-Silva:
Even has one more room. It was a four-two.

Henry Washington:
Oh, okay. Okay. How about how much work? Did it need more work? Yeah,

Martin Castro-Silva:
It needed a little bit more work, but still the budget was about 55, 50 to 60,000.

Henry Washington:
Hey, that works out. This is something I learned this from, I think it was Domar Cross who flips. He flips on a TV show out in Florida actually in Tampa.

Martin Castro-Silva:
But

Henry Washington:
He would always put a sign up in the yard of the houses he was renovating that said, “This project is being renovated by…” And it’d have his LLC and the phone number so that the neighbors knew. And he said he would buy deals like that. The neighbors would call him. And so we started doing that. So I’ve done deals where we’ve bought and done multiple houses on the same street just by letting people know. And it’s also just good business to let your neighbors know what you’re doing because they’ll keep an eye on your house for you and make sure. They’ll be like, “Hey, nobody’s been at your house in a couple of days.” Or they’ll tell you, “Hey, there was somebody creeping, peeking in the windows.” It’s just good, good to have the neighbors working for you. So you bought that neighbor’s house. How did you finance that one?
Did you use the line of credit or did you do a traditional bank?

Martin Castro-Silva:
No, this time I partnered up with my siblings. It was almost the end of the pandemic era and they had seen my results. So they made a profit on the sale of their homes and then we partnered up, the three of us. So we bought that house cash. We put the money into it and we made a home rent. We probably made like $65,000.

Henry Washington:
Oh, nice, man. So did you split it all evenly between the three of you?

Martin Castro-Silva:
Yes.

Henry Washington:
That’s so cool that you were able to bring your family into it.

Martin Castro-Silva:
Yeah.

Henry Washington:
So tell me what the sale price was.

Martin Castro-Silva:
We sold that house for 320,000.

Henry Washington:
Okay. So this was 2023?

Martin Castro-Silva:
2023.

Henry Washington:
Here’s what’s cool about this story is you never took no for an answer. If you didn’t have the money, you figured out a way to get the money. You weren’t afraid to talk to your friends and family. And I think all of that stems from a couple of things. A, you have a very strong belief in yourself and your ability to hustle and get things done, but it sounds like you also have a great family structure at home where your wife supported you in everything that you’re doing and you had great motivation in wanting to be able to spend time with your children. And I think that’s the formula. The formula is obviously you need to be able to find good deals, but the real formula is you have a strong reason why and you don’t take no for an answer. I think too many times investors tell themselves no.
They say, “Oh, I would do that deal, but my credit’s not in the right place.” Or, “But I’m not quite sure where I’m going to find the money.” And they let the buts and the nos stop them. And I think a lot of that is because there’s fear. And that fear is either fear of failure. They don’t want to fail or let people down. But I think a lot of the time too, it’s like fear of success. What happens if it works? I got to keep doing this. I think that your belief in yourself and your foundation is really what helps set you up because it just sounds like if you run into a wall, you would just go talk to somebody and figure out how they were doing it and then you would try to replicate it. And sometimes it’s that simple. It’s just surround yourself with people who are doing it and figure out how they’re doing it because I promise you guys, you’re going to run into a brick wall.
I’ve done hundreds of deals and I still run into brick walls all the time, but you’ve got to figure out a way to get through it. When I got started, my very first deal, I ran into a brick wall. I told my fuddy I was going to buy his house and then I couldn’t find the money. And I called my buddy who’s an investor and I said, “Hey, can you buy this deal because I told my friend I would and now I can’t buy it. ” And he told me the same thing. He said, “Henry, yeah, I’ll buy that deal. It’s a good deal. But if you’re going to be in this business, you need to go figure it out. ” And that’s the best part about real estate is there’s a way you can piece a deal together. You just got to be able to do it safely.
And so man, it’s such a cool, such a cool, cool story. All right. We’ve got more amazing story from our investor, Martin Castro Silva, right after the break. All right, we are back with investor Martin learning about his journey to becoming a full-time real estate investor. Let’s jump back into it. So here we are in just the beginning of 2026. What does your business look like now? How many deals are you doing in a year?

Martin Castro-Silva:
Well, I had a really good 2025. I bought 11 properties.

Henry Washington:
Okay.

Martin Castro-Silva:
I was able to flip, bought and sold seven.

Henry Washington:
Awesome. So you bought 11 properties in 2025. I have so many questions. So first and foremost, are you keeping any or do you just fix and flip only?

Martin Castro-Silva:
Yeah, I have two doors. I kept two single family homes, but I mostly flipped.

Henry Washington:
Okay. And what’s your buy box look like? Because 11 deals, you got to have it pretty dialed in. What are you buying?

Martin Castro-Silva:
Yeah, I focus mostly on single family homes, 1,200 square feet, three tools. Sometimes I have to do the two-twos if the square footage allows me to add another room, price point, purchase price, anywhere between 150 to 220 and resale value below 350.

Henry Washington:
Okay. So you like that first time home buyer product? Absolutely. I do the same thing. It’s the same. It just helps you stay safe in an uncertain market because in that price point, if something doesn’t work out, you can probably throw a tenant in it and at least break even. Maybe it costs you a little bit of money, but it’s way better than having to pay those hard money fees

Martin Castro-Silva:
On

Henry Washington:
A property you can’t sell. I love that. And in what market?

Martin Castro-Silva:
I only invest in my city, Vero Beach and Sebastian.

Henry Washington:
So did you move to Vero Beach? Because you weren’t in Vero Beach when you first started.

Martin Castro-Silva:
Yeah. After the same.

Henry Washington:
Wait, wait, wait. Did you move to Vero Beach because of those deals and the price points? That’s awesome.

Martin Castro-Silva:
Herry, I bought the first single family home. I bought the second one, and then I bought the third one. I was like, “I’m getting my deals here. This is the price point. This is what I can afford to do. ” Yeah. That’s why. Yeah. And I told my wife, “Hey, listen, we have a very nice house in Fort Lauderdale, but the drive and I didn’t want to be far from my family, so it’s like it’s time to move.”

Henry Washington:
So you moved to Vero Beach and now that’s where you mainly operate out of.

Martin Castro-Silva:
Yes.

Henry Washington:
I really love that. More affordable too. And so you’re probably able to get yourself a little more house, a little more bang for your buck.

Martin Castro-Silva:
I did. Thank God, yes. I was able to sell my house. I sold my house in 2024, early 2024, able to get on the last wave where prices were high. So I was able to solve that when I’m buying a house here.

Henry Washington:
I love this story, Martin, because of all the hustle that you’ve put in, but one of the best parts about real estate is some of the benefit it allows for us. A, you use real estate to switch markets and live in a more affordable market. Has real estate provided you any other cool benefits? Hat’s a story you could tell us about something cool maybe you’ve done with some of your property?

Martin Castro-Silva:
One time I was just leaving my house, going to work, going to a job site, to a project. And my neighbor, I mean, remember I told everybody that I know I’m an investor and I buy houses. So I was leaving my house and my neighbor waves at me like this. And she stopped me. I was like, “Hey, how are you? What happened?” “I’m selling my house. “I was like, ” Stop. Let me … “I stopped. I pulled up, walked the house with her. She told me what she wanted. I think it was a fair price. And I quickly called my sister-in-law because I knew she was looking for a house. Down south, houses are more expensive so they could get more house for the money over here. So I called her up. I told her,” Hey, listen, you got to come up and you got to see this house because my neighbor is selling and I want you to be my neighbor.
“So she came up and we were able to lock this house up and put under contract and then she got a deal, no commissions, no nothing. So real estate has given me the tools to also help my family members.

Henry Washington:
Oh man, that’s cool. So now you’ve created your own little community over there in Vero Beach. I love this story, man. It’s just a great story about how someone can use real estate to provide them more freedom. Look, obviously you quit your job and you use real estate to do that, but let’s not sugarcoat this. You’ve replaced one job with another. Flipping houses is a job. If you stop flipping houses, you stop making money. So we’re not saying that you retired from real estate, but it has changed your family’s future. It’s changed your future. And when you set out you wanted to be able to spend more time with your kids, have you been able to accomplish that goal?

Martin Castro-Silva:
Yes, I have. I now have a crew that I work with. They’re the ones that take care of the remodeling, the rehab of the projects. And this year in particular, I stopped working weekends. Saturday and Sanders are for just a family. We do family activities and we try to spend as much time together as possible because time flies.

Henry Washington:
Time does fly. My kids are growing up so fast, but it’s so cool. And me too. I left corporate, but I flip houses. So I have a job as well. But the best part is I make my own hours. If I want to take a day off, no one’s going to die. Exactly.
The houses will still get worked on. It’ll be fine. Maybe something won’t go as smoothly as I want it to because I don’t have all the perfect systems in place, but no one’s dying. You get to make your own schedule. And I can spend that time that I choose to spend with my family. And it’s cool to see that you’re doing something similar. And so before we get out of here, Martin, I want you to reach out to some of the people who are maybe in the same boat as you, who have a job, they don’t have the passion for their job anymore. They’d love to replace it with real estate, but it’s scary. It’s scary right now. So are there any lessons you want to share with them or just any words of wisdom you can give people who are seeing this and wanting to do what you did?

Martin Castro-Silva:
I love to answer that, but do you mind if I do it in Spanish for the Spanish areas?

Henry Washington:
Oh, I would love that. That’s awesome. Thank you.

Martin Castro-Silva:
Absolute dehenry.

Henry Washington:
I love it. Thank you so much. Thank you so much for sharing those words of wisdom. There are a lot of people out there who in a very similar position to you who maybe just need that little push. And I love that you were able to do that and you were able to share your experience. One of the best things I love about Martin is Martin’s just a good dude. He’s just a good dude. And this business needs more good people. So thank you so much, Martin, for coming on the BiggerPockets Podcast and sharing your story. I wish you the best as you continue to grow and expand your business in 2026. And thank you everybody for listening to the BiggerPockets Podcast. And also, if you learn something from Martin’s story, I want you to check out episode 1231 from January 26th with investor Neil Whitney.
Neil is another inspiring example of how even basic affordable real estate investing can change your entire financial future. Thank you so much everybody for listening to this episode of the BiggerPockets Podcast. We’ll see you on the next episode.

 

In This Article

Ever heard the saying, “Every home has its price?” According to a new report from brokerage and listings site Redfin, many homes have yet to find theirs.

More than half the homes in the U.S. have been sitting on the market for two months or more without finding a buyer. It’s a far cry from the post-pandemic bidding wars and multiple-offer frenzy, even as the nation still lacks housing inventory.

Redfin’s recent report shows that 52.2% of the houses for sale in late February had been on the market for at least 60 days, the highest level since 2019, totaling $347 billion in value. So, what gives?

Redfin estimates there are 630,000 more sellers than buyers. According to data from Realtor.com, days on market remain below pre-pandemic levels in many metros, suggesting a rebalancing rather than a slump. 

Part of the reason for the clog in the sales pipeline is the disconnect between sellers’ expectations and what buyers can actually afford.

Mortgage Rates Have Put the Brakes on Sales

The $347 billion worth of homes for sale represents a record for this time of year and has been abetted by the yo-yo interest rates, which have made it impossible for buyers and sellers to reach an agreement on price amid the uncertainty.

Jason Gale, a Redfin Premier agent in New Orleans, said in a statement:

“Sellers know it’s a buyer’s market, but they still want to get as much money as they can for their home. So they list on the high end, expecting buyers to negotiate down, and that’s leading to listings staying on the market for a long time. There are still deals to be made, but 9 times out of 10, homes are selling for under their asking price. But sometimes, the price is just too high, and sellers have to pull their home off the market after six months or so.”  

Small Investors Need to Stay Lithe and Liquid to Take Advantage

The hesitancy in the market has created small pockets of opportunity for investors in listings that have languished, where sellers might be getting antsy and looking to cut a deal. In an unpredictable market like the one we are in, it’s important to deal with hard facts rather than speculation and “what ifs.”

Immediate items up for negotiation and concessions could include flagged items from an inspection, along with some closing costs. Underwriting deals with realistic rental numbers—they have been falling in many parts of the country—and will also help you get closer to the finish line.

Where to Snag a Deal

Florida is a unique market because it’s caught between the crosswinds of surging inventory and escalating insurance costs, which have impeded home sales. According to Redfin’s data, Florida is where buyers have the best chance of striking a deal, particularly in Miami, where two-thirds (62.6%) of home listings are stale. In West Palm Beach, that number is 55.9%. 

It’s a similar story in San Antonio, Texas (58.3%) and Pittsburgh (58.1%).

Conversely, if you’re looking to get a deal in the Bay Area of California, you might be waiting a while. There’s still something of a feeding frenzy amongst well-heeled Silicon Valley buyers who have the cash to throw around. In San Jose, just under 20% of the listings are “stale”—the lowest in the nation. Nearby San Francisco (24%) and Oakland (31.1%) are not far behind.

Smaller Markets Have the Biggest Opportunities

The Redfin data shows that the smaller markets in the Midwest and Northeast, where higher rates are offset by lower prices, are where homes tend to move at a clip. HousingWire data shows Michigan, Ohio, and Illinois topping the nation in absorption rates, with Detroit, Chicago, and Cleveland among the fastest-selling markets, underscoring the demand for lower-cost metros relative to supply.

A Perspective for Smaller Investors

If you plan to borrow to invest, as evidenced by the healthy absorption rates in the Midwest, your money will go a long way in lower-cost markets without incurring high risk. It’s also worth noting that higher interest rates and falling rents are causing more would-be buyers to remain renters, meaning there’s not only a healthy tenant pool but also less competition from owner-occupants.

“Although we expect to see the cost of buying a home decrease modestly in 2026 for the first time since 2020, rents are also expected to decline,” said Danielle Hale, chief economist at Realtor.com, in December. “This means that potential first-time homebuyers trying to decide whether to buy or rent will find that renting offers significant near-term savings in most housing markets.”

Why Dating the Rate Is Starting to Look Like a Long-Term Relationship

The phrase “date the rate and marry the house” is often used to describe a strategy for refinancing a property when interest rates drop. However, they have been hovering in the low-6% area for a while; a short-term plunge into high-5% territory was abruptly ended by the breakout of war in the Middle East. 

Although the trajectory is definitely on a downward curve if viewed over the last two years, for buyers looking for a sudden rate collapse to justify their purchases, the advice from most economists seems to be “don’t count on it.”

“This isn’t the kind of PPI (Producer Price Index) report the Fed wants to see,” Nationwide Financial Markets economist Oren Klachkin told CBS News, reflecting on the Federal Reserve’s recent decision not to touch interest rates. “This report suggests inflation was going to accelerate even before the Iranian conflict hit.”

Final Thoughts

A stale market with houses sitting unsold for two months or more is a great opportunity for buyers who can pull the trigger quickly. Sellers will be more willing to negotiate, and if you can secure deals without taking on a lot of debt, now is the time to make money because competition is low and prices are fairly stable. Additionally, many renters are still staying on the sidelines, waiting for rates to drop before buying. It won’t always be this way.

In February, the average was 15.5% of homes with price reductions nationally, with the trend expected to continue. Heading into an election season, the current administration is desperate to change the affordability narrative. 

Ending the war, lowering gas prices, and easing the cost of living must be priorities. That includes lowering interest rates. Buying an investment before that happens could be prudent.

In This Article

I’ve invested both actively and passively in real estate. I owned 15 rental properties by myself and another dozen with partners. Today, I own smaller percentages in around 5,000 units. 

By “passive real estate investing,” I don’t just mean syndications, by the way. I also invest via private partnerships, private secured notes, and the occasional fund. 

Both strategies have their pros and cons. But which one will help you build wealth faster? What are the risks and returns? What kind of labor and skill are required for each?

I went from a net worth of just over $100,000 in late 2018 to over $1 million today. Real estate played a role in that, which I’ll also explain in more detail. 

Returns

Any conversation around the speed of wealth-building starts with returns. 

Single-family home investor Chris Bibey made a case on BiggerPockets that investors should aim for a 6% yield on rental properties. That sounds about right, plus a potential 3%-5% annualized appreciation rate. Combined, that makes for about a 10% annual return, not accounting for your labor (more on that later). 

That’s not bad, in raw numbers. It’s comparable to the historical average stock market return of around 10% for the S&P 500. And while you can earn similar returns passively from REITs, you don’t get the diversification benefit, since REITs correlate so closely with the stock market at large. 

Most passive real estate investments target annualized returns in the 10%-20% range. Some will underperform that, while others will overperform it. I practice dollar-cost averaging with my real estate investments, investing $5K-$10K a month in new passive investments through a co-investing club. Over time, my returns form a bell curve, rather than unpredictable data points from huge investments. 

Some passive investments are income-oriented, others growth-oriented, and others combine both. I’ve made some investments that only pay income returns, such as a secured note paying 15% and a fund that pays a 16% distribution yield every quarter. Other investments don’t pay any income, but project hefty profits when the properties sell. 

Still others pay a 4%-10% yield currently and aim for another 5%-12% (annualized) when the property sells. 

Risk

“Yeah, that’s great and all, Brian, but what about risk?”

Different risks apply to active versus passive real estate investments. Both come with the following risks:

• Market risk: Property values and rents can drop, and vacancies and rent defaults can rise. 
• Management risk: Whoever manages the property can do a poor job—and that goes doubly if you’re the one managing it. 
• Expense risk: After buying a property, the investor discovers more repairs needed than expected. Or expenses like insurance or property taxes could rise faster than expected. 
• Debt risk: Short-term loans could come due at a bad time for selling or refinancing, or variable interest loans could jack up monthly payments. 
• Risk of total losses: If your equity in the deal is 15% and the property drops 15% in value, you can lose 100% of your capital. 

Active investments come with their own unique risks:

• Loan liability: If you default on the mortgage, the lender comes after your personal assets (assuming a recourse loan, which most are)
• Legal liability: Tenants, neighbors, contractors, and anyone else under the sun can sue you at any time, for any reason. I was sued twice when I was an active landlord, and both times, they named me personally in the suit even though I owned the properties under LLC names. Don’t think that LLCs will protect you. 
• Tax risk: You have to track all income and expenses, keep records, and report them accurately on your tax returns. Mess this up, and the IRS can come after you for civil or even criminal penalties. 

And of course, passive investments have their own risks:

• Operator risk: The operator could mismanage the deal due to either incompetence or untrustworthiness. 
• Timeline risk: Passive investors have no control over when operators choose to sell or refinance and return their capital. 

Skill Required

Having done both, I can tell you hands down that active investing requires far more skill than passive investing, as in, an order of magnitude more. 

Active investors need to master dozens of microskills to consistently earn 5%-10% annualized returns on their rentals, such as:

• Forecasting cash flow (it’s not the rent minus the mortgage!)
• Forecasting repair costs
• Building a “financing toolkit” of different lenders and loan types
• Screening, hiring, and managing contractors (a consistent challenge even for the best investors)
• Marketing vacant units
• Screening tenants
• Managing property managers, if you outsource. 

And there are plenty of others. 

Passive investors only need to learn how to vet operators and deals. And even then, they can lean on other investors to help them. My co-investing club meets once or twice a month on a Zoom call to vet new passive investments. We all grill the operator together about their track record, their mistakes, their current deal, the underwriting assumptions, and the risks and returns. 

It takes years to master all the skills of active investing. You can get started with passive investing in an afternoon, especially if you join a community that vets deals together. 

Labor Required

When I owned rental properties directly, my phone was always blowing up about something. The tenants clogged the toilet. The roof started leaking. Rent didn’t arrive, and I had to go through the tedious eviction process: the official warning notice, the waiting period, filing in rent court, showing up for the hearing, scheduling the eviction date with the sheriff, showing up with contractors, etc. 

I kept folder after folder of expense and income records. And I still missed some of the expenses I could have deducted. 

Buying properties also requires enormous work, including: 

• Direct mail or other marketing campaigns to find good deals
• Walking through properties
• “Selling” the seller on selling to me
• Negotiating price
• Collecting quotes from contractors
• Arranging financing 

And renovations? Fuhget about it. Contractors constantly blew their budget and their timeline, with shoddier-than-promised workmanship. City inspectors expected bribes. Everything about it was just miserable. 

Everyone I worked with, from contractors to renters to property managers, overpromised and underdelivered. 

In passive investments, I spend a couple of hours vetting the deal. The end. 

Over the course of a year, each active rental property costs me around 30 hours between managing property managers, contractors, bookkeeping, accounting, etc. If I value my time at $100/hour, that’s $3,000 a year in my labor costs—per rental property. 

Cash Required

A typical rental property requires $50,000 to $100,000 in cash. That goes toward the down payment, closing costs, initial repairs, permits, and so forth. 

If you invest by yourself, a typical passive investment also requires $50,000 to $100,000. 

I don’t like that. It’s hard to diversify your portfolio when you have to plunk down $50K per investment. And it’s nearly impossible to practice dollar-cost averaging. You’d have to be fabulously wealthy to invest $50K a month. 

So? I don’t invest by myself. I go in on these investments alongside other members of my co-investing club. We invest $2,500 or $5,000 or more if we prefer, but collectively we’ll invest $500,000 or $750,000 or whatever the total ends up being.  

That comes with an added benefit: negotiating power. We can negotiate a higher preferred return, a higher profit split, or a higher interest rate on a note investment. 

Time Commitment

I know plenty of real estate investors who crave control over all else. They won’t invest passively. They refuse to surrender control. 

They get to choose when they refinance or sell their properties. But if it’s a bad market for refinancing or selling, you shouldn’t do it anyway. 

I’ve made passive investments as short as six months (a private note with a rolling six-month term). I’ve made others as long as 10+ years (syndications pursuing “infinite returns”). 

For private notes and funds, you know the exact time commitment going into the investment. For private partnerships, you can negotiate the timeline before investing. Syndications will indicate the intended timeline while acknowledging “we’ll play it by ear based on market conditions at the time.”

Tax Benefits

For private notes, you get no tax benefits. The government taxes interest income at the same rates as regular income. 

For private partnerships and syndications, you get virtually the same tax benefits as direct ownership. All expenses are deductible, as is depreciation. 

There are two slight differences. Most single-family rental investors don’t bother doing a cost segregation study because it typically costs more than the tax savings. So they don’t get the same accelerated depreciation as syndication investors. 

On the flip side, single-family rental investors get a little more leeway in using their passive losses to offset active income. If they “actively participate in passive rental real estate activity,” per the IRS, they can use rental losses to offset up to $25,000 of active income. 

But by and large, you get the same tax benefits from passive and active real estate investing. 

Verdict: Speed to Wealth?

I run a business, and I do some freelance financial writing on the side. And I have a 5-year-old daughter, a wife who works nights and weekends, and I’m writing a novel. 

I don’t have time for another side hustle. And make no mistake: Rental investing is a side business. 

I’ve known active investors who have built wealth relatively quickly with a rental investing business. Most of them did it as a full-time business, although some did it as a side business. 

I went a different route. I went from barely over broke in late 2018 to a millionaire seven years later, without any rentals in that period. I invest passively in both stocks and real estate as a set-it-and-forget-it portfolio. 

Some of those passive real estate investments generate a high income yield in the 10%-16% range. I reinvest that income for compound returns. 

Some have gone full cycle, most recently an industrial property that paid out a 27.6% annualized return after two and a half years. 

Most are simply in progress, paying a 4%-8% yield as they stabilize rents. 

It takes a long time to build the skills you need to consistently earn decent returns on rentals. Most people either stand on the sidelines in analysis paralysis for years or just jump in headfirst and lose their shirt by not getting enough education. 

I propose an alternative route: joining a co-investing club to start investing today, while leveraging the community’s knowledge. You don’t need much cash ($2,500) to get started, and you can start earning returns immediately. 

Prefer to start a rental investing business? It’s a great business model. Just don’t try to tell me it’s “passive income” or compare it to true passive investments like stocks, syndications, or notes, because it’s not. It takes more skill, labor, money, and time to get started. 

Dave Meyer:
Is real estate actually a good hedge against inflation? That has long been the logic that holding physical assets like real estate can help protect against inflation. But is this actually true? Are all inflationary periods the same? And does real estate always react the same way? This is a really important question right now and one I’ve personally been spending a lot of time on because even though inflation is far better than it was in 2021, 2022 and so on, inflation risk remains stubbornly present in our economy. From tariffs to the conflict in Iran, to the rising national debt, there are reasons to want to protect yourself against future inflation. The question is, is real estate that protection that you need? Some would immediately say yes to that question, and there is some truth to that, but there is actually a lot more nuance to it. It is not as simple as saying real estate is a great inflation hedge.
You can protect yourself and your portfolio against inflation using real estate, but you need to listen to this episode to know exactly how to do it.
Hey everyone. I’m Dave Meyer, Chief Investment Officer at BiggerPockets. Welcome to On the Market. Today on the show, we’re digging into a topic we haven’t touched on much recently. We’ve talked about a lot in recent years, but it’s been a while since we touched on inflation. And we haven’t been talking about it because thankfully, mercifully, inflation is down from its highs during COVID when we reached up to 9.1%. But the inflation, nuisance, and risk has not altogether left the economy. If you listen to this show, you know that I’ve been saying for years that we are not out of the woods on inflation and I still believe that. It is one of the reasons I’ve said rates wouldn’t come down that much. And so far, that opinion has been proven correct. With ever-changing tariff policies, now we have a war in Iran that has sent oil prices up rapidly.
I think the risk of inflation is going to remain with us for a while. And plus, I’ve talked about this on the show before. I also have these long-term inflation fears that stem from government monetizing our massive national debt, trying to print our way out of it. And although that’s not a this year issue, it’s all the more reason I am personally going to try to position my investments to protect myself against the potential for future inflation. And I want to help all of you do that as well. And this is where we turn to real estate. People love to say real estate hedges inflation. And lucky for us in this industry, there is a lot of truth to that, but not all real estate performs the same. Not all inflationary periods are the same. There are actually different kinds of inflation. We have demand side, we have supply shock, we have monetization of debt.
And building an inflation-proof portfolio takes an understanding of what’s really going on behind the scenes. And that’s what we’re going to do today. We’re going to start by talking about the historic relationship between inflation and real estate. We’ll talk about what the actual mechanics are and which elements of your real estate deals are the best for inflation hedging. Next, we’ll talk about the different kinds of inflation and what we’re seeing now. Then I’ll walk you through four different scenarios for what could unfold in the coming years, and we’ll finish up by talking about what you should do about it. Let’s get into it. So first up, let’s just answer the question, is real estate actually an inflation hedge? Because real estate has long been considered one of the best inflation hedging assets. But the reality is actually a little bit more nuanced than that headline.
And although I’ll just get this out of the way, I will say yes, there is a strong correlation between real estate prices and inflation, a very strong correlation for those nerds out there. It’s 0.94. One is the highest, so that is very high. But there are actually four different ways. There are four distinct mechanisms for how real estate hedges inflation, and it’s not just prices going up. So we need to dig into each of these to understand how we want to structure our portfolios around each of these four mechanisms to make sure we’re protecting ourselves against the types of inflation that we might see in the future. Does that make sense, right? Not every type of inflation is the same, and not every type of inflation corresponds to real estate strategies in the same way. So we really need to understand all of this. I’m going to go through four mechanisms right now.
I think this will make sense to all of you. It’s not super nerdy or anything. This is going to be pretty intuitive. But mechanism one, that real estate hedges inflation is asset appreciation. Property values go up when inflation goes up. Replacement costs to build new buildings go up. And when it costs more to build new buildings, the existing housing stock is worth more. We’ve seen this a lot. There’s a lot of evidence about this. Again, the correlation between National Property Price Index to the CPI is 0.94. But if you look back at historic areas of inflation, in the late 70s, we saw inflation in the double digits, like 11%, but home prices went up 18% at the same time. In 1980, for example, we saw the CPI hit nearly 16%, which is awful. Home prices though went up 20%. So this is mechanism number one.
Over the long run, property investors have beaten inflation about 85% of the time across any five-year period that you picked going all the way back to 1985. That’s mechanism number one. Hopefully that should make sense. Mechanism number two, the second way that real estate hedges inflation is rent income, because as inflation goes up, rents rise as well. They’re sort of inextricable, right? Because rent is actually 40%-ish of the inflation rating. So if inflation is going up according to the CPI, there’s a very good chance that the reason it’s going up is because of rents. We saw this in 2022 and 2023, but this is a great way that real estate hedges inflation because as your expenses increase because of inflation, your revenue keeps up and that’s a great way to hedge. So that’s mechanism number two. Mechanism number three is debt devaluation. Now this one’s a little bit wonkier, but I think this will really make sense to people.
And it’s also, I think, probably the most underappreciated way that real estate hedges inflation. I think this is incredibly valuable. It’s one of the reasons I always talk about on the show the value of fixed rate debt, because when you borrow at a fixed rate, when inflation comes, it means that the dollars that you are paying back to your lender are actually worth less. The nominal balance, the amount you pay on paper stays the same, right? You are always paying, let’s say, $2,000 a month for that mortgage. But if you started and originated that mortgage here in 2026 by, let’s just call it 2036, 10 years from now, inflation will have eaten away the power of your dollars. And so even though you’re paying the bank the same $2,000, it’s actually more like 18 or $1,700 in spending power. I’m just making those numbers up, right?
Those are just a broad example, but it means that over 30 years, you are paying the bank back with increasingly devalued money, which is good for you. That is a really good way to hedge against inflation. So that is mechanism number three. Again, that really only works when you have fixed rate debt is one of the knocks against adjustable rate mortgages. One of the reasons I love fixed rate debt. Mechanism number four, I’m cheating here. There are probably three real mechanisms, but I do want to just throw in tax benefits here as well, because they’re basically the same as usual. They don’t change during inflationary periods. You still have depreciation and cost segregations and 1031s, but they can be even more valuable during inflation because rising rents, rising values when you’re getting your assets are going up, your rents are going up, that’s great, but it also creates more taxable income for you.
And so if you can depreciate away some of those gains from a tax perspective, that can be particularly valuable for real estate investors. So just as a summary here, the four mechanisms, the four ways that real estate hedges against inflation are number one, asset depreciation, property values go up typically when inflation goes up. Number two is rent income. Number three is that fixed rate debt devaluation, and number four are the tax benefits. Hopefully all of this makes sense to you. There are four ways to hedge inflation, but not all inflation is the same. And depending on the type of inflation that we see, some of these benefits might be present and some of them might not be. Not all four mechanisms are available or are beneficial depending on the type of inflation there is. So now we need to turn our conversation now to what are the types of inflation?
How does it vary? Because everyone sees the prices going up, but not many people spend some time thinking about why are these actual prices going up? And the cause of that inflation is going to help us dictate what real estate strategies we want to use to hedge against this risk. People have all sorts of different types of definitions for inflation, but I’m going to sort it into two buckets. This is sort of like one of the more classic economic analyses of inflation. You have either demand pull, that’s one type of inflation, or cost push. Those are the two types, demand pull and cost push. I’ll explain them briefly. Demand pull inflation happens when the economy is growing fast. Employment is strong. Consumer businesses, they’re spending, they’re hiring. And at that point, demand exceeds supply and prices rise. This is Econ 101, right? When you have too much demand for too little supply, or some people refer to inflation as too much money chasing too few goods, all of those descriptions are demand pull inflation.
That’s what causes prices to rise. We’ve seen many examples of this in the late 1970s. We saw this from 2020 to 2022 with the stimulus surge. Yes, a lot of the inflation we saw during the pandemic was because of money printing. But in this framework for thinking about inflation, that is because it created demand, right? People had more money, so they were going out and spending. We did not have a corresponding increase in the amount of stuff that we wanted to buy, and that pushed inflation up. I’ll just give you an example, right? Like cars. Cars got super expensive during the pandemic. It’s because a lot of people had more cash. We were printing money, right? Stimulus checks, all this money was flooding the market. That increased demand. People are like, “I got money to spend. I’m going to go buy stuff.” But they can’t turn a switch and make more cars fast enough to correspond to that demand.
Not to mention the chip shortage that was going on, but hopefully you get the point. People had more demand, supply stayed the same or actually went down a little bit. That pushes prices up. That is demand pull inflation. The second type of inflation that we’re going to talk about is called cost push inflation. And this happens when input costs rise due to supply shocks, geopolitical stuff going on, tariffs, not because demand is strong, right? So maybe there is a shortage in aluminum, and so cans get more expensive. Right now, particularly relevant, maybe oil has gotten more expensive. And as you probably know, oil goes into just about everything in our economy. So if oil becomes scarce or more expensive, prices tend to go up because of that. Now, demand over the last couple of weeks hasn’t necessarily changed for plastic or for oil, but we just saw yesterday the price of plastic is going up a lot.
Oil is going up. We’re going to see shipping costs going up, not because demand has changed, but because the supply side has gotten more expensive. Again, we’ve seen this a lot. We saw it in 1973, the whole oil embargo that pushed up oil prices that led to a lot of inflation. This also happened during the pandemic. I just mentioned cars, but there was all sorts of supply chain issues during the pandemic. I’m sure we all remember that. And honestly, it’s kind of happening right now. The top line CPI number isn’t that high, but tariffs are increasing supply costs.This is definitely true. You could read any sort of report on this stuff. Tariffs are increasing input costs and that also can lead to inflation. Now, unlike demand pull, which is sort of associated with a strong economy, supply push is kind of the opposite, right? It is more typically seen with rising producer prices.
They have lower margins and lower profits and generally lower economic growth. So now you’re starting to see why we might want to act differently if we have demand poll inflation or we have supply push inflation because one’s more associated with strong growth, the other is not associated with strong growth. And how those things interact with real estate are really different. We are going to talk about that in just a second and how to sort of match the real estate mechanisms to the types of inflation. But I just want to call out too, these two types of inflation, right? You can get both of them at the same time. This is what most people … This is one definition, I should say, of stagflation. It is, in my opinion, the worst combination. It’s not good. It is really bad for the economy. You basically get this cost push inflation where input costs are going up alongside rising unemployment, stagnant economic growth.
It’s so bad for so many reasons, right? First and foremost, it makes monetary policy almost impossible. The Fed can’t cut rates because that would worsen inflation, but they can’t raise them too aggressively because that would worsen unemployment.This is what we saw in parts of the 1970s until Paul Volker just decided he was going to crush inflation. Even if that sent unemployment rate up, it actually worked, but it was definitely painful. And so stagflation is definitely something we need to keep an eye on because if you are concerned that the economy is slowing down, but we are still seeing prices rise because of supply push inflation, that can lead to stagflation. And I’ll get to the scenarios in a little bit. We’re not in stagflation right now despite what some people say, but the risk is absolutely there. All right. Next, let’s talk about how each type of inflation actually impacts real estate specifically.
This is where we start to figure out how we’re going to orient our portfolio and investing decisions based on the type of inflation that we see. We do, however, have to take a quick break. We’ll be right back.
Welcome back to On The Market. I’m Dave Meyer. We’re talking today about inflation and how real estate is a good inflation hedge, but you need to know the type of inflation that you’re facing and how to position your portfolios accordingly. Before the break, I explained the difference between demand pull inflation, which is when the economy basically overheats and cost push inflation, which is when input costs rise, basically the cost to make stuff goes up and so prices go up. We want to now talk though about how each type of inflation impacts real estate specifically. When you have demand pull inflation, this is again the kind that is associated with a stronger economy. All four of the mechanisms that we were talking about before, just as a reminder, that’s asset prices going up, rents going up, tax benefits, and debt devaluation, all of those things work together.
This is kind of a good environment for real estate investors. You have strong employment means tenants can absorb rent increases. They can still say low. If you’re in commercial real estate, your NOI rises, right? On top of that, rising wages support home prices. They might go up, they might stay flat, but they at least support them. And when people are feeling good, buyers stretch to qualify that increases demand. So all of these things work together. So when people typically say real estate is a great hedge for inflation, what they mean probably is that when you have demand to pull inflation, real estate’s actually a great industry to be in. This is one of the best assets, the best ways to position yourself for inflation. Now, I want to get to where we are today because I’ll just give you a preview. I don’t think we’re in a demand pool inflation environment, but I wanted to explain this because we will be in a demand poll inflation environment sometime in the future and I want you all to be prepared.
But right now, I think the risks that we have are more on the cost push inflation. And so let’s talk about how that impacts real estate. The reality is that not all four of those mechanisms that we talked about work and they sort of work unevenly, right? Because remember, that cost push is associated with a weaker economy. What happens is replacement costs rise. So this is true, construction costs go up, and that’s actually kind of good for existing owners. If you own a portfolio, you own your home, that is going to put a floor on how low the value of your property can go, right? Because if it’s going to cost more to completely replace it, that keeps the prices of existing homes higher, right? But at the same time, demand is going to get weak. There’s not going to be as many people who want to go out and buy your property.
So even though you have a nice floor for how much your home could go up, your home values might actually not go up in a cost push inflation environment, and I would argue that they can actually go down. The second thing is although rent will probably stay the same, they might not go up. If people are struggling with general affordability across the economy, it suppresses rent demand. People won’t go out and form households or stretch for that more expensive apartment. And so I think when you’re in a cost push inflationary environment, you are less likely to see home prices go up and rents go up, and they might not go up at all. And I think that is a really important insight here. People hear inflation, they think prices go up. That is not necessarily true if you are in a cost push inflationary environment or a stagflation environment.
If there is no demand, even if supply prices go up, that does not mean that asset values will go up. I just, that is one thing I really, really want people to understand because that is the one way you could get yourself in trouble in real estate is if you buy something in an inflationary environment thinking inflation equals asset prices go up and then asset prices don’t go up, but your expenses are going up and your rent is staying flat, that is a situation for trouble. And it’s something that we’re going to talk about more in just a minute because that’s something I want you all to avoid. The last thing I’ll just say is stagflation. Again, we don’t know if we’re there yet. There are some risks of this, so I want to mention it, but when you have stagflation, this is really where the hedge kind of just breaks down, to be honest.
If you have high inflation and high unemployment, there’s almost no way to win. It’s not just that real estate isn’t a good hedge. It’s such a bad economic combination that there’s almost no way for anyone to win, right? You have tenants who might lose their job to rising unemployment that can’t pay rent, vacancy rises even as operating costs go up. So that means you’re going to be making less money, but you’re going to have more expenses. Buyers lose their jobs or face flat wages or whatever, which means that demand for reselling homes goes down, which means home prices could fall, maybe not nominal terms, but in real terms, probably. Cap rates are probably going to rise. And unfortunately, the Fed’s going to be trapped. They can’t cut rates to support the market without worsening inflation. And so you’re going to have a delay in any sort of rate relief.
Now, you still do get some benefit that fixed rate debt devaluation, that still is happening. So you get some relief and depreciation and tax benefits are still there. So you still get some relief there. But I just wanted to call out, like what I’m trying to emphasize in this episode is that in these types of environment, whether it’s a cost push or stagflation, you are not going to get all four of those mechanisms that benefit real estate investors during inflationary periods. That comes during demand pull. Okay. So those are the general ways how real estate reacts to inflation, but what type of inflation risks are we actually facing today? Is it demand pull? Is it supply push? Is it stagflation? I’ve kind of given you some of my ideas behind that, but we’re going to get into that in detail. Then we’re going to talk about four different scenarios that could actually play out and how you should adjust your portfolio accordingly.
So let’s get into it. Let’s talk about this. The current climate, what inflation risks are real estate investors and just everyone in America actually facing today? As you probably know, things have gotten a lot better in the last couple of years. We peaked in terms of the CPI, the consumer price index, primary source that most people look at for inflation. That went up to 9.1% is wild. In June of 2022, it was the highest in over 40 years, but by early 2025, it had declined to 3%. It was kind of on a long downward trend, but it’s been stubborn. For the last couple of years, it’s remained around three. It’s basically flat from where it was a year ago. It was going back down. Then tariffs were announced on the liberation day on April. After that, inflation went back up. Now went back down a little bit.
But I think most people believe that because of the Iran situation, CPI is going to go back up. Oil prices, gasoline, energy prices, big part of the CPI. It goes into everything. Shipping, right? Everything you import or export, that’s going up because ships use diesel, right? Construction’s going up. They use diesel. Plastic has a ton of oil. I mean, plastic is made out of oil. So all of that is going to go up. All of these input costs are going to go up. I don’t know if that’s going to show up in March or April. We don’t know how long this war might last. We don’t know how long oil prices are going to be elevated for, but in the short run, I think it’s fair to say that costs are going to go up. So that’s the situation where we stand for inflation. Just as a reminder, during that time, Fed raised their federal funds rate from year zero to 5.5% to tamp down inflation.
Now it’s in the high threes as of this recording. And although that has helped a little bit with mortgage rates, mortgage rates are still high during this time. We’ve seen real estate really impacted, right? We’re in this great stall. We’re in this slow period where affordability has collapsed. We see home sales stuck near 30 year lows and they might actually get worse in my opinion. I think we’re probably not in for good news there just because mortgage rates have gone up. They’re already super slow in January and February. Mortgage rates have gone up at half point. I think it’s probably going to get slower even though we’re going into the spring selling season, which is not good news. But basically much of what’s happened, the inflation situation and the real estate situation have been really closely tied together. A lot of the boom that we saw in 2020 to 2023 was because of inflation and money printing.
There was a lot of demand pull inflation. We had artificially low money making affordability. Great, that increased demand, right? That is why we saw this boom during COVID. And then when the pendulum swung back the other way to fight inflation, we had to reduce demand. That’s what raising interest rates does. It stops that demand poll inflation cycle because it costs more when people can’t afford things that lowers demand. And so we’ve seen lower demand that has slowed down inflation and it has slowed down the real estate industry with it. So then, even though we’ve come down from 9% to 3%, even though it’s working, it’s slower than we all wanted, let’s be honest. I think we wish inflation went down faster, but it is working even though it’s been required some patience. Why am I so concerned? Why are we even talking about inflation right now if it’s come down?
Well, I would say that there are three different inflationary pressures that we are seeing in the economy right now. The first is tariffs. We’ve talked about this before, but tariffs are inflationary. I know a lot of people like to argue that, but it is true. And even though the top line CPI has not gone up that much, it did go up after the tariffs were introduced. And I’ll just say this, like people say like, “Oh, inflation is down. Tariffs didn’t do anything.” If we didn’t have tariffs, inflation would be lower right now. Look at any reputable study, and you’ll just see that this is true. Study after study, all across the aisle, different political spectrums, tariffs increase inflation. And so I don’t know what it would be if we didn’t have tariffs, but that is an inflationary pressure.That’s just true. Just look at housing in particular.
If you want to look at how tariffs increase the cost of housing, I can tell you, we have seen tariffs anywhere from 10 to 45% on lumber. We’ve seen copper up to 50%. They’ve been changing a lot, so I’m just kind of giving ranges. Cabinets and vanities are up 25%. We see drywall, we see steel and aluminum prices are all up. If you look at the National Association of Home Builders, their estimate is that these tariffs have raised the cost to build a new home by $11,000. If you look at the Center for American Progress, just different methodology for doing it, they think $17,500 per home. If you look at these studies, the Center for American Progress estimated that tariffs will lead to 450,000 fewer new homes being built in just the next couple of years by 2030. And so you can’t tell me that’s not raising prices for homes.
Now, if there’s no demand, prices could come down in the short run, but what is happening is replacement costs are going up and that puts the floor for home prices even higher, even if there’s a temporary dip in prices in the short run. So that is one inflationary pressure, but that is not the only one. The second one is a labor supply squeeze, right? On one hand, I am worried about unemployment going up. So that could mitigate this issue just to call that out. But particularly in housing, 30% of construction workers are immigrants and deportation policies are creating labor pressure, which means that labor costs in construction could go up in addition to what we’re seeing from tariffs. So that is inflationary pressure. The other thing, we obviously got to call out geopolitical risks. We have seen over the last couple of years, supply shocks that have come from war.
Right now we’re talking about the oil prices in Iran, but if you looked at wheat prices when Russia invaded Ukraine, we have a very interconnected global supply chain. And if a war breaks out, a geopolitical situation emerges, whether it’s in Iran or Ukraine or in the future in Taiwan, who knows? But those kinds of things are absolutely supply shock risks for inflation. We’re seeing it right now. The price of oil has gone up 50% in the last couple of weeks. That is going to ripple through the economy. And we’re going to see some inflation. Does that mean we’re going to get to 4%, 5%? I don’t know. Probably not just from oil prices. That’s just my understanding of it. But is it going to make inflation a little bit higher? Probably. The last one I want to mention is sort of a long run structural concern, which is our rising national debt.
I’ve done entire episodes on this. It’s something I think a lot about, but basically we have rising debt in this country. It’s making up more and more of the federal budget every single year. No party has been able to even tame it. It’s just growing at a faster and faster rate over the last, I think it’s like 22 years, right? It just keeps going and getting worse. At some point, the rubber’s going to need to meet the road there and there are different ways you can do that. You can do it through austerity, basically spending less, you can do it through raising taxes, both of which seem politically impossible in the United States right now. I know one party wants to raise taxes. The other one wants to cut spending. Neither of them actually do it. That’s why otherwise you would just see the deficit get under control, but both parties have been in power over the last 22 years.
Deficit has been rising under both parties. So what’s the third option? You print your money, you print your way out of it. We have $39 trillion of debt. There is no rule that says we can’t print $39 trillion and just pay people back. Now you don’t want to do that because there is all sorts of negative consequences. You will see inflation go through the roof, bond rates will go through the roof, mortgage rates will go through the roof. It’s just not good. The value of our dollar will plummet. All of the people who lend money to the United States add good rates will no longer do that because you’re basically screwing them over. There are all sorts of reasons not to do this, but will they do it? Honestly, I don’t know. But there are a lot of people, if you listen to Ray Dalio, a lot of people think that this is a very likely scenario, and it doesn’t need to be complete.
They don’t have to print 39 trillion, but could they print a little bit more money every year? Could the Fed decide, “You know what? Rather than a 2% target, we’re going to do a 4% target so we can print some money and get rid of our debt.” That to me seems like a possible outcome. And if that happens, there is going to be long run inflation. Mortgage rates are going to be higher than they are today. We are going to see bond rates higher than they are today. And so there are all sorts of implications here. My point is that right now we have these four different inflationary pressures. We have tariffs, a labor supply squeeze, we have geopolitical risks, and we have this long-term monetization of our debt. All of these things could be happening, but they are not What demand poll sides? This is cost push inflation risk.
And I want to call out that I am not saying that inflation’s going to go to 4% or 5% or 8%. Actually, I’m going to talk through the scenarios in which I think are more probable. But the reason I am telling you this is that there is inflation risk. Again, I try and make this very clear in every episode. When I say that there is risk of something, that does not mean I’m saying it is going to happen. I’m just saying that there are some variables at play here that mean that inflation reigniting is possible. And if it does happen, it’s going to be on the cost push side, which is not as good as for real estate investors. So that’s the main point here, right? If we see inflation start to rise, it is not necessarily the type that is super great for real estate investors.
Real estate might still be a better way to hedge than other asset classes, but this is not one of those times where real estate investors say, “I don’t care about inflation because I’m benefiting in all these ways.” You probably get debt devaluation. That’s true. You probably get some tax benefits, but will rents and prices rise in an inflationary environment in the next couple of years? I don’t know. I honestly don’t think so. If I had to bet, I would say no. And so I think you need to plan your portfolio accordingly.
I want to talk through four different scenarios that can happen, and I’m going to go through them and we’ll talk about how likely each of them are. So scenario one, nothing happens. This could definitely happen. Inflation might not get that much worse. We’ve already felt a lot of the impact of tariffs. Things might not get that much worse. We’re seeing oil prices go up. I do think that will have inflation go up a little bit, but if demand stays relatively low, it might be fine. And in that case, I think what happens is we stay in the great stall. It’s the stuff that we’ve been talking about for years now. Rates hopefully start to come back down. We get a gradual restoration of affordability. These are things that we were talking about for years. And it’s the situation I felt we were in pre-Iran situation.
It’s still a likely outcome if the conflict is resolved quickly, in my opinion, and inflation doesn’t reignite. If the war ends and oil prices go back down, this is probably what’s going to happen. But we have absolutely no idea what’s going to happen in Iran. It does seem like the White House is signaling conflicting ideas, probably is a negotiating tactic, but we don’t know what’s going to go on. So although this could happen, it is only one of several likely scenarios. The second scenario is what I would call a moderate reinflation. We get CPI from three to 4%, maybe three to 5%. That’s not good. You don’t want to be there, but it’s not runaway inflation. This is kind of like just we’re just going to muck through it kind of case. How does this happen? Well, tariffs become embedded. We have seen, and I’ve read a lot of studies that show that although some of the costs have been passed along to consumers from tariffs, not all of them have yet, and that’s going to continue to drip through the economy.
So we’ll probably see, I don’t think that takes us to four or 5%, but maybe that keeps us at three or the low threes for a little while. I think the real way we get to this where we’re in a higher inflationary environment is oil. If oil prices stay high, if they stay in the 80s or 90s or 100, they were $65 a barrel. By the way, before the Iran crisis, they’re about 98 as of this recording. So up 50%. But even if they don’t go up more or even if they come down just a little bit, I do think that we are going to see … I think the chance of a recession goes up. I think we’re going to see wage growth sort of moderate. And I think rates are going to stay high. The Fed is not going to be able to lower rates as quickly as they want.
And so what happens here is I think we’re going to see downward pressure on pricing. This would raise mortgage rates. Even if inflation doesn’t get terrible, we’ll probably see mortgage rates in the six and a half to 7.5% range. Remember I said earlier this year, I thought it’d be five and a half to six and a half. Just that one point jump, I think psychologically on top of financially, but psychologically is going to be demoralizing to home buyers and investors alike. I think we’re going to see prices go down. We’re going to probably see five, six, 7% price declines. Just as a reminder, this year I predicted between negative four and 2% price appreciation. Right now we’re about flat. I think if we see inflation reignite that we’re going to lose a couple more points in terms of home prices. And I think home sales are going to slow.
No one’s going to be buying. So this is not a good scenario for real estate. And this is kind of one of the things I want to call out. I think anyone who owns real estate currently, if you go into this kind of situation, real estate, it will be a good hedge because you’ve already built some equity, you’re getting that debt devalue. You probably bought at a good price. You’ve probably locked in a good interest rate. But if we’re in this scenario, buying and acquiring new real estate’s going to be tough. Buying in a inflationary environment where prices aren’t going up, but your mortgage rate is six and a half and seven and a half percent, I wouldn’t do it. That doesn’t excite me. So I think that prices would have to really come down. You need to buy eight, 10, 12, 15% below current comps to make something work, which will still happen.
It’s definitely still going to happen, but it’s going to be a slower market. Let’s talk about scenario number three, which is this stagflationary shock. And I got to admit, maybe this is just paranoia, but I worry about this because I actually see scenario two as less likely than this because scenario two, we’re saying the CPI goes up to three to 5%, but the economy’s still going strong. I have a hard time envisioning that. I think that a stagflationary shock is maybe more likely because regardless of tariffs, regardless of inflation, I am worried about rising unemployment. It’s been going up. We all have fears about AI. A lot of parts and segments of the economy are starting to slow down. And so if you get the inflation from scenario two with the three to 5% inflation rate, I think it’s probably more likely than not that we’re going to see that with unemployment at the same time.
And that is not happening yet. But I’m just saying, if inflation goes up, I think we’re probably going to see some degree of stagflation. Now, people throw that word out a lot and panic about it. If we have three to 5% inflation and unemployment stays in the five to 6% range, that stinks. It’s not good, but it’s not like a disaster. If we see inflation go up to five to 8%, unemployment goes to five to 8%, that’s a big problem. That is where the economy really starts to suffer and the Fed really has its hands time. Stagflation, it’s just brutal. It ties their hands. There are few ways to get around the pain. And if that happens, this is where I see transaction volume really low. I think it could go down to like three million. We’re at four million now. It could possibly go that low.
Again, this is sort of the worst case stagflation scenario. Again, I’m not saying that this is going to happen, but if this scenario unfolds, we’re going to see transaction drop. We are going to see home prices drop, right? Inflation is going to erode people’s purchasing power faster than inflation. We’re going to see prices go down. We’re going to see rental vacancies go up because unemployed tenants can’t pay.This is going to be a big issue. We might even see another eviction moratorium like we saw during COVID. All of those things are going to be on the table if we see real stagflation. So let’s just all hope that this doesn’t happen. If it does though, what I would recommend is really just trying to keep liquidity, right? Just have cash reserves to cover six to 12 months, vacancy, debt service ideally. Do not take on any floating rate debt.
Please do not do that. And then be opportunistic.That is the thing. Even in these scenarios, I’m saying transaction value is down, prices are going to fall, rents are going to fall. That could be true. It also means that’s kind of what happened in 2008, right? 2009, 2010, where everyone’s like, “I should have bought back then.” So opportunities will emerge if this happens, right? Especially if people got cash, there’s going to be distressed sellers. You’re going to have a lot of people who want to sell and there’s going to be very few buyers. So buyers are going to have a lot of leverage. So that’s what I would focus on. I wouldn’t use fixed adjustable rate debt, but if you have cash or fixed rate debt, you can qualify and buy in that kind of environment. It’s a good time to reload. But I’m saying to buy that, not just as an inflation edge.
I just think that’s probably a good time to buy, but we’ll see if that actually happens. The last scenario is sort of out in the future, but I did mention this sort of long run monetization of our debt, monetary inflation. I just kind of want to mention that even though it’s not immediate term threat, I worry down the line. So I want to just explain this. How does this happen? Again, US debt continues to grow faster than GDP. Interest expenses become maybe the largest budget item that we have in our federal budget is depressing, but it might be true. Political pressure is going to increase to monetize the debt, right? Maybe I’m wrong. Maybe I’m being so pessimistic, but when I look at our Congress right now, this is both parties. I don’t see either of them meaningfully chipping away at our debt. None of them have done it for two decades.
So maybe I’ll be wrong, but I think the more likely scenarios the Fed says, “Hey, we’re going to change our inflation target to 4%. We’re going to print more money.” That means the dollar is going to lose purchasing power relative to hard assets. The bond market is going to go up. We’re going to need higher yields. That’s going to mean mortgage rates go up. And although it’s a slow moving scenario, this is one of the scenarios where I do think it makes sense to own real estate. If you are slowly devaluing the dollar, that means that that debt devaluation, that third mechanism we talked about before is going to be in full swing. The people who get killed in this debt, the monetization scenario are not borrowers, it’s lenders. This is a scenario a lender would hate. They would get crushed by this because I am paying you for 30 years with increasingly less valuable dollars.
I’m paying them that $2,000 a month, but what they can go and turn around and use that $2,000 for is much less than when it started. In this scenario, you will probably also have nominal home prices rising because there will be more demand if they’re printing more money that’s more money circulating around the economy and will increase demand. Now, I should mention that some of that might be offset because mortgage rates will go up. They will absolutely go up in this scenario. But even with that, replacement costs going up, the debt devaluation, I do think property values do rise in this scenario. So if this thing unfolds, again, it’s a long time in the future, but if we see this debt monetization thing unfold, I think it’s a good time to hold real estate. Maybe the best of these scenarios do hold real estate. So those are our four scenarios.
Remember, number one is nothing happens. We stay in the great stall. I still think this is a highly probable outcome. There is no knowing, but there is a chance that inflation doesn’t really go up. And let’s all hope, right? That’s the best outcome. Scenario two is we don’t see stagflation, but we just see inflation go up. I think that could happen, but I think scenario three is more likely where inflation goes up and we see a recession. That would probably be because we have a geopolitical situation pushing up prices outside of our control. The same time we have AI, we have a slower economy, higher input costs. We might see stagflation for a period. That’s not a great time for anyone. Real estate can help, especially for people who bought and have fixed rate debt, but buying new assets in that environment to hedge inflation may not make so much sense.
So I wouldn’t just jump into that scenario. In that scenario, I think it’s highly unlikely we see appreciation for the next couple of years. So don’t buy it, just assuming that properties are going to go up because everything else is going up. That is maybe the main thing I wanted to convey in this episode. In scenario number four, which is that long-term debt monetization, that’s a great time to buy real estate, in my opinion, especially if you can time that right when that’s just starting and it happens for 10, 15 years while the value of your mortgage payments that you’re paying out are going down, that is a great way to hedge inflation. It’s also a great way to earn a return in an inflationary period. So that’s it. I know it’s a long episode. There’s a lot to talk about. I really wanted to make sure everyone understands this because I see these people on social media right now.
The war in Iran’s going to increase inflation. You should buy real estate. Maybe, but there is more nuance to it. It is not that simple. And so I hopefully you can all understand it. Just a couple takeaways. Real estate is a proven long run inflation hedge. Absolutely. Huge correlation between home prices and the CPI over the last 45 years, but it works really differently. The hedge works differently depending on the type of inflation. Demand pull is good, right? Cost push is mixed. Stagflation is bad.That’s the takeaway. Demand pull inflation, that’s like what we would see with the debt monetization. It’s going to be good for real estate. Cost push, you’ll have a mixed bag. Stagflation is bad. And the current environment, what we’re risking right now is cost push. And that means that we could also have cost push plus rising unemployment, which is stagflation.
So that’s my fear. That is the thing I want you all to remember is that if we see inflation in the near term, it’s probably not the good time. If we see it in five years or 10 years because we’re monetizing our debt, it’s bad for our society. I’m not happy about that, but if you want to hedge against that, real estate is an excellent way to hedge against that. Just some parting thoughts though, no matter what happens, like I think the things that work regardless are number one, fixed rate debt. I kept saying this again, but fixed rate debt is an excellent inflation hedge in all environments. So I really like it. There are times that I’ve used adjustable rate, but for most things, fixed rate debt. Invest in supply constrained markets that protects values no matter what is going on with inflation and keep high liquidity reserves.
It’s the number one thing. It determines who survives during a stagflationary event, who survives during bad times, and gets to see the good type of inflation. That’s what we’re talking about. How do you survive the bad inflation to get the good inflation? Again, not saying we’re necessarily going to have it, but I want you guys to start thinking about this as you build your portfolio strategy. If we start to see inflation, diagnose it. Is it the kind that real estate can help you hedge or not? And you need to make your portfolio decisions based on that analysis. Of course, I will be letting you know if you listen to this podcast, I will update you if inflation goes up, what kind it is and how it will likely impact real estate, but hopefully this episode will help you make some of this analysis for yourself and protect yourself against any potential inflation in the future.
That’s it for today’s episode of On The Market. I’m Dave Meyer. Thank you so much for listening. We’ll see you next time.

 

Dave Meyer:
This is the most boring way to get rich with rentals. It is not flashy. It’s not sexy, but it really works and it actually doesn’t even take that long. In fact, this might be one of the quickest episodes we’ve done just because of how easy this strategy is to explain. And the good thing is that it works for people who have never owned a property and it works for those who own entire portfolios. The reality is that anyone, yes, even you watching or listening to this right now can copy the same steps I’m going to outline to build wealth through real estate. I’ll walk through each step and I’ll show you the math behind how this under the radar boring investing strategy turns average Americans into millionaires. I know it does sound almost too good to be true, but savvy investors have been using this strategy for decades.
This is the most boring way to get rich with rentals.
Hey everyone. Welcome to the BiggerPockets Podcast. I’m Dave Meyer, chief investment officer at BiggerPockets. And today we’re talking about one of my favorite strategies and one of my fundamental beliefs about investing in real estate, which is that boring is better. I’m going to lay it out for you and stay with me because before you decide that it’s overly simple or this is not something that you can achieve, I’m also going to share with you and I’m actually going to walk you through steps and examples about how most average people, average Americans can actually pull this off. So here it is. Buy a house every two to three years, move into it, fix it up a little bit, move out and repeat that four to five times. I know it might not sound that impressive compared to these influencers claiming that they own thousands of units.
Most of them don’t, by the way, but that actually doesn’t even matter because you don’t need to own that many. This simple, boring approach can make you a millionaire. And yes, this is true even if you don’t know where you’re going to get money for four or five different properties, because stick with me, I’m going to explain how all you really need to do is save up three and a half percent for your first property and the process will take over from there. I have had the privilege of interviewing hundreds of investors, and I promise you, this is the most common path to success in real estate investing. You don’t need fancy financing. You don’t need giant deals. You don’t need to take on big risks. This strategy generates cash flow, builds equity, and has massive tax benefits all for low money down. So let’s just talk then about this.
Why does this boring strategy work? Well, moving into an investment property, because that’s the key thing we’re talking about here. Not just going out and buying rental properties, you’re buying one at a time and actually moving into them. Moving into an investment property is commonly known as house hacking. And the reason it’s so powerful and so different from other approaches is that it unlocks the power of owner-occupied financing. This allows you to put less money down. It allows you to get better interest rates. It allows you to even finance some of your repairs. And this gives you the dual benefits of big upside that you get with normal rental property investing, but it also lowers your risks and can increase your cash flow. Now, of course, you can’t live in multiple homes at once, which is why you will need to move every two, three years, which some people might think that is burdensome.
And maybe if you’re not really interested in building long-term wealth, this isn’t for you. But I will show you in a minute that it is very well worth moving every two or three years when you see the numbers and how doing this over and over again can compound into literally millions of dollars. If you do this four to five times over the course of 10 years, my modeling of an average deal shows that you will be cash flowing tens of thousands of dollars a year, maybe up to $100,000 a year, and you will have millions of dollars in equity at your disposal. Let’s start by talking about buying something about the average price in the United States right now. We’re going to call it $400,000, and we’re going to put as little down as possible. Now, if you have more money saved up, you can put more money down.
That is often beneficial. But if you’re starting from scratch, you can put as little as 3.5% down on your first mortgage. Now, that is where this benefit of owner-occupied financing comes in. If you were to go out and just buy a traditional rental property, you’d have to put probably 25% down. That’s normal for an investor loan, but if you go and live in the property, you can put as little as 3.5% down. Now, hopefully you can see that this is a really powerful tool here because instead of having to save up $100,000 for a down payment on this $400,000 rental, you can actually save up $14,000. That’s 3.5% of $400,000. So this is really going to accelerate how quickly you can go out and get that deal, but again, you got to move into this property. Now, you’re going to need more money than just $14,000.
You’re actually going to need some closing costs. I’ve estimated that at about $5,000 per deal. It’s going to depend on what state you’re in, what lender you use, but I think 5,000 is actually a good round number that will work. And then you’re also going to need some cash reserves. Depending on the condition of the property, you might want one month of rent, two months of rent. If the property’s not in great shape, you might want five or $10,000. I’m going to estimate it here at $3,000. So that just shows that for about $22,000, and I’m just using round numbers here as is an example, but this is a very realistic example. For $22,000, you can get into a $400,000 property. I think you probably need 10 grand probably minimum for renovations, and you’re going to need to do a renovation. That’s a key part of building equity.
Don’t worry, you don’t have to do a crazy renovation. We’re talking paints, floors, simple things that you might be able to DIY or can easily pay someone to do for not that much money, but we’re talking about $35,000 here, right? I’m just going to estimate it. We said 22 plus 10 grand, that’s 32,000. For our example, I’m just going to round up to 13,000 and say that to get into this $400,000 property I’m suggesting you buy, you need $35,000. Now that’s not chump change. That’s still a lot of money, right? But it is a lot less than you would need if you were to go out and buy a traditional rental property where you needed a hundred grand just for the down payment. Nevermind the closing costs, the reserves, and the renovations as well. So if you’re sitting there, figure out, how do I get started in real estate?
Think about saving up $35,000. You can also borrow some of this money from friends and family. You can partner with people, but you’re going to probably need something like this, 35 grand to get into this first property. Once you have that 35,000 though, what should you be looking for? What kind of property? Here’s what I would look for. This is personally just me. People have different opinions, but here’s what I would look for. I would look for a small multifamily. So this is a two, three, or four unit property that has multiple units. Now you got to stop at four because the way that these loans work, these 3.5% down loans, you can only go up to four units. If you hit a five-unit building or anything bigger, that’s going to be a commercial loan. It’s not going to work for this strategy. You can do a single family home if you want, but personally, I think the better way to do it is buy a two-unit, live in one and rent out the other, buy a three-unit, live in one, and rent out the other two, or buy a four-unit, live in one, and rent out the other three.
For me, that’s the ideal situation. You’re going to command maximum rent, and it’s a more comfortable living situation. On top of that, I think that what you want to look for is properties that need work, but are in good areas. If you go out and buy a really fancy property that already looks great, you’re not going to be able to do that renovation and build equity. It’s going to be easier for you to manage, but it’s going to actually slow you down. One of the most reliable, best ways to build wealth as a real estate investor is doing renovations. So I think you target properties that need work in a good area. So this is like buying a C class property in a B area, right? You’re going to take it from C class. You’re going to make it a B class property in a B area by doing a renovation.
Or maybe depending on what market you’re in, you buy a B building in an A area if you can afford it. But the key is being able to upgrade the property because that’s what’s going to allow you to recycle your capital in future years and move on to that next property. Now, personally, I like units with at least two bedrooms, ideally three bedrooms. That’s sort of up to you. But one of the things I would be firm on is no big issues, right? You’re just getting into this. Remember we said boring. We don’t want anything exciting going on in these properties. We don’t want structural issues. We don’t need new roofs. We don’t want new HVACs. We don’t want anything messy on title. Experienced investors can make money on that, and you might be willing to do that on your third or fourth property once you’ve done this a few times.
First deal, boring. We want boring stuff where you can throw some paint, you can maybe upgrade a bathroom or a kitchen, you can put new flooring in. That’s the kind of stuff that we want to see in this first renovation. Boring is the name of the game. You don’t want to take those additional risks because you just don’t have to. You can do this with boring, better conditioned properties. And yes, you can do this at this price point. It depends on where you live. Obviously, if you’re living in California or New York or Seattle, you’re not going to be able to buy a two unit for $400,000. But I promise you, because I do this, you can do this all over the Midwest. There are areas of the northeast this is possible. This is areas of the southeast that is possible. All over the country, you can find markets where these numbers work.
So this is what I would target. A two to four unit property, around 400,000. If you can get it for cheaper, even better, but let’s just say $400,000. You want something that you can renovate and it has to be in a good area. Don’t go buy something just because it’s cheap in a not great area. That’s not going to work. You want to find a property that needs work in a decent area and it’s a manageable renovation without a lot of issues. Right after this quick break, I’m going to walk you through in a lot of detail how a boring property just like this can actually generate you thousands of dollars of cashflow and hundreds of thousands of dollars in equity in not that long of a time period. Stick with us, we’ll be right back.
Welcome back to the BiggerPockets Podcast. I’m Dave Meyer. Today, we’re talking about the boring, proven way to build wealth through real estate investing. Just as a reminder, we’re talking about buying a house every two or three years, moving into it, making upgrades, moving out, and moving on. Before the break, I talked about what I would target for a deal, but let’s talk about the numbers. Let’s actually dig into what this would actually mean for you in terms of your finances if you go out and do this. So I put together this calculator actually just to walk you through this. If you’re watching it on YouTube, you can actually look through all the numbers that I’m putting in here. So we’re going to buy this property for $400,000, right? And we’re going to live in it. Now, I’m going to call this a three unit. I’m just going to assume that we’re getting a three unit.
I actually, when I’m buying deals in the Midwest, I target properties at about $125,000 per unit. I’m saying I’m going to buy three units for 400K. That’s actually be a little more than what I’m targeting, but this is absolutely possible in the Midwest and areas of the Southeast as well. I also see this in the Northeast. Now, here’s how these numbers actually work in. We’re going to buy it for $400,000. We have our closing costs at five grand, our reserves at three grand, our renovations at 13 grand. That means that the total cash that we invested, as we talked about before, is going to be about $35,000. Now, in the first year, your plan as an investor is to move in and to make these upgrades. So you maybe move into one unit, maybe it’s the nicest unit, and then you do the renovation on the other two units while you’re living there and get those renters in as soon as possible.
Now, in our example, I’m assuming that each one of these properties, let’s call them two bedrooms each, are going to rent out for about 1,500 bucks. Again, these are numbers literally from deals that I own in the Midwest. I’m using pretty similar numbers. These are not made up. These are absolutely feasible deals that you can be doing. So because we’re only renting out two of the three units, our rent for this first deal is going to be about $3,000 per month. That’s 1,500 bucks each. On top of that, we of course have expenses. So our mortgage payment’s going to be about 2,300 bucks. We have taxes and insurance at 350. We have repairs and CapEx at 240. I’m just estimating these, but these are normal. I’m doing 8% there. I’m doing a 5% vacancy contingency. And then I just did 5% for miscellaneous because sometimes when you’re a new investor, things just come up.
So I’m giving you a 5%, $150 a month budget just to figure stuff out. Most experienced investors won’t put that in there, but I’m giving you a little benefit of the doubt here. You got to have a little bit of a learning period. So all those things together bring our total expenses for the first year to $3,190. If you’re tracking, our rental income was 3,000, meaning that our monthly cash flow is actually negative. It’s negative $190 per month or about negative $2,300 per year. Now you might be thinking, that’s not that exciting and I totally understand that. But what I want you to realize here is that to rent out an equivalent property, like if you didn’t buy this and you were just continued renting instead of doing this house hacking strategy, to live in an equivalent apartment would cost you 1,500 bucks, right? That’s what you’re renting out these apartments for.
So you have this option. You could either continue renting for 1,500 bucks a month, or you could quote unquote, lose 190 bucks a month in cashflow. Now, if you’re doing the math here, what you realize is that you’re actually saving $1,300 a month in your living expenses by doing the house hacking, even though you are not technically cash flowing. This strategy is allowing you to save $15,600 per year in living expenses over renting an equivalent apartment. That’s pretty good, right? I mean, if you put it that way, you can start to see that this is already improving your financial situation in year one. And as I’ll show you in just a second, it gets a lot better in year two, and it just keeps getting better and better every year after that. But I just want to call out even in year one, you’re investing $35,000 and you’re already generating a 40% return because instead of giving that $15,600 in rent away every year, you’re saving that and you can either put that to mortgage renovations or towards your next property, you’re already earning a great return in that first year, and that’s just on your personal cash flow.
In addition to that, you’re also increasing the value of the property. Remember, you wanted to invest $13,000 into those renovations, and in our assumptions, I’m saying, are after repair value. The value of the property, once those renovations are done, actually goes up to 440,000 from 400,000. This is absolutely possible. If you find the right property and invest and do some DIY work, you invest $13,000, you can definitely increase the value of your property by 10%, and that’s what we’re showing here. So on top of that $15,600 that you saved by not paying rent, you’re also making equity, right? You are earning $40,000 in equity, plus you paid off a little bit of your mortgage. You’re talking about total benefit in the first year, like $48,000. That is an incredible start, right? That’s even with the negative cash flow. And again, as you’ll see, that cash flow is going to really grow over time and so will the equity, but this is an incredible start.
Once you’ve done that renovation, what do you do in year two? You just wait, right? Learn the business. That’s what I recommend people do. Just become a great property manager. This is when you start implementing systems where you get the right software, where you build a great team, but basically just live your life and save up money for the next deal. And as you’ll see, as we go from year one to year two, our cash flow gets a little bit better. It goes from negative 190 to negative 127. And then in year three, it goes to negative 40. Now, again, this is not actually you losing money. The property might not be generating positive cash flow, but you’re basically now in year three spending $40 a month on your living expenses where if you were living in an equivalent apartment and renting it, it would cost you $1,500 a month.
So that is a net benefit to you of $1,460 per month. That is a lot of money. That’s like 18 grand a year that you are saving and that you can put towards your future real estate portfolio. So again, it might take you one year, it might take you two years, it might take you three years, but the goal here is just to save up money for the next deal. Now you might be wondering what is enough? How long do you have to wait? Well, enough is basically when you’ve either saved up enough money from your lower living expenses or you have built up enough equity in the property to refinance or most commonly some combination of the both. Now, if you’ve never heard of refinancing, what it is, is basically restructuring your mortgage so you can tap into some of the equity, some of the value that you have created in this property.
This isn’t some risky thing. It’s very common for investors and homeowners like millions of people do this every year. So one option again is to save up that 15,000 a year and that can get you there, but by refinancing, you can actually speed up your next deal. Let me just explain to you how. First and foremost, you need to refinance into a non-owner occupied loan. Now, I said at the beginning, one of the powerful things that we’re taking advantage of with this boring strategy is using this owner-occupied loan to put as little as 3.5% down, but you can’t live in multiple places. And so what you need to do is refinance this into a conventional investor mortgage so that you can go move into another property and use that 3.5% mortgage again, right? That’s the goal here. You can’t have two primary residents. Because you’ve built equity in this deal, you’re going to turn it into a traditional rental, and then you’re going to move on and house hack.
That’s the first goal, is to switch it from a owner-occupied to a non-owner-occupied loan. The second goal of your refinance is to pull out capital, like I was saying, that you can use for your next deal. And this part is really important. So I’m going to walk through some of the details here so you can really understand what I’m talking about. For an investor loan, because you’re going to refinance this property one into an investor loan, you need to put 25% down. When you’re asking the question, when can I move on to my next property? Well, when you have enough equity to put 25% down into this property. Now, I want to be clear. I’m not saying you need to bring more cash to the deal and put it down, but you build equity, one, by doing the renovation. That’s why it’s so important to do this renovation.
Two, from just normal market appreciation, and three, from loan pay down, right? Every month you’re paying your mortgage, you are paying down some of your principal balance and you are building equity. Using our example around year three, year three and a half, I’m just going to use round numbers, but let’s just say our property’s worth about 460. Our mortgage balance is about 330 now. So we have like roughly $130,000 in equity. Now you can’t take that all out because you do have to do two things. You’re taking out a new mortgage where you’re going to put 25% down. So that’s $115,000 using these round numbers. So you’re going to have to keep 115 grand in there. Then you’re going to have to take $330,000 of your 460 total and pay off your old mortgage, right? You have to go pay that off. So between the 330 in your original loan payoff and the 115 you need to keep in this deal, that’s $445,000.
And if the property’s worth 460, if that’s what it appraises for, that means you can pull out $15,000. That’s awesome, right? It’s not some massive thing, but you can see how this is going to help you for that next deal. After three years, you’ve saved $15.50 a year. That’s over $46,000. Plus you can access this $15,000 from a cash out refinance, meaning that you’re going to have now $60,000 for your next deal while you own a cash flowing rental property that’s going to generate you over $1,000 a month once you move out. I hope you can see where this is going, right? Yes, that first year, it’s not the most exciting thing. Yes, you’re saving a lot of money over your living expenses, but just three years later, now you have a cash flowing rental property. You have over $1,000 in cash flow. You have tens of thousands of dollars of equity into this deal.
This is incredible, right? This is an amazing thing, and this is just your first deal. We’re going to take a quick break, but when we come back, I’m going to show you that how if you just repeat this exact process three or four more times, it can absolutely transform your life, turn you into a millionaire, and help you achieve financial freedom. Stick with us, we’ll be right back.
Welcome back to the BiggerPockets Podcast. I’m Dave Meyer, talking about the most boring way to get rich with rentals. We talked about what to do with the first deal. I ran through some example numbers for you of how a first deal might work and how it could impact your personal net worth. Just as a reminder, first couple years, you’re not cash flowing, but you’re saving a lot of money over alternative living situations. So you’re actually building wealth that way that you can use towards your next couple of deals. And after two, three, maybe four years, depending on who you are, you could probably move on to that next property. Now, what did that next property look like? What should you be looking for in that next deal? Well, I told you this was going to be boring, so all you got to do is literally the exact same thing.
Go buy another small multifamily, move into it, fix it up, and wait. The only difference I would recommend is maybe looking for either a slightly nicer property or a bigger value add opportunity, like if you’re willing to take on a bigger renovation, that might work because now you have more capital to play with. Remember, last deal we said 35,000, but using our estimates from … And just our example, using these rough numbers, probably a 50 to 60 grand to play with here. And so if you’re willing to take on a bigger renovation, that’s what I would personally do. Rather than buying a nicer place that’s more expensive, I would focus on building equity. Value add investing is a great way to accumulate more capital to use for your third deal and your fourth deal and to start to see this thing really start to snowball.
So maybe let’s just call it buying a four unit this time worth $420,000. So that’s 105 a unit, absolutely achievable, but you are going to need to put more money into this, right? We’re buying something that needs a bigger rehab. You’re going to need about 20-ish, $22,000 for closing, down payment, reserves, but now you’re going to have, let’s say, 35, $40,000 to invest in the rehab, and that’s a lot of money. That really allows you to push up the value of this property from, let’s say, 420 all the way up to $500,000, which is a totally reasonable expectation, right? You actually could do something like that. Investing 40 to earn another 40, totally reasonable, right? And that’s it. This is the formula.This is the boring way that you can get rich. You just do the same thing over and over again. And if you’re not convinced, let me actually just walk you through what this might look like at the portfolio level.
And we’re going to look at this on sort of a 15-year time horizon. I’ll show you that you’re going to really start to enjoy this benefits just a couple of years into this, but by 15 years, if you do this for 15 years, you are going to completely transform your financial life. So I’m just going to walk you through this. If you’re watching this on YouTube, you can actually see the spreadsheet I’m using. But for everyone who’s just listening on audio, I will describe this to you. Basically what you see, I’ve separated it into two different sections. The first is the cashflow, how much cashflow you’re actually generating to live your life each year. And then I’ve calculated something called total benefit. That is basically the equity that you have in your property plus the cumulative cashflow for all of your properties. So that’s basically the total benefit that you have generated from all of your properties together in a given year.
Let’s talk about cash flow first. In your first year of doing this strategy, you only own one deal and you are technically losing about $2,300 a year on this property. But as we discussed, when you compare that to living somewhere else, you’re actually saving close to $15,000 a year. In year two, it gets a little bit better. You’re losing slightly less money, but again, saving more. Same thing happens in year three. That’s when you actually go out and buy your next property. And this is where your cashflow really starts to increase. Now, a lot of people might think, “Oh, how is it going to increase my cash flow if I’m pulling out money?” Well, it’s simple. That first deal, now instead of renting out two units, remember this is a three unit property, you’re now renting out three units. And actually, in this scenario, your mortgage payment isn’t going to change very much because even though you’re taking out a mortgage on a more expensive property because you’ve increased the value, which is great, by putting 25% down, the amount of money that you’re borrowing is probably not actually going to change that much.
I actually did the math here. And if you look at the, I’ll go back to this single deal, you’ll see that the mortgage payment goes from about 2,300 bucks a month in year three. After the refinance, it does go up to about $2,500 a month, but it’s not that impactful. And when you add the entire new rental unit that you’re bringing rent from, you go from being cashflow negative to cashflow positive. In year four alone, you are projecting from that first deal to make about $12,700. Now, of course, in year four, you’re also buying a new property, which you might be cashflow negative on. So the total benefit in that fourth year when you now own two properties, 10,000 bucks a year in cashflow. That’s pretty great, right? You’re still saving money. You’re still doing better than living in a rental unit, and now you’re earning $10,000 a year in cashflow, and from there it keeps getting better.
By year seven, when you acquire your third property, you’re up to $2,700 a month in cashflow. I should mention that this cashflow is highly tax advantage. So it’s like earning more like $36,000 a year in your job. A lot of money. You’re talking about $3,000 a month now in effective spending power that you’re getting by year seven, but it just snowballs from there. By year nine, when you buy your fourth deal, you’re up to 33,000, and that’s when things just keep getting better. By year 10, you’re at 50,000, year 12, 73,000, and by year 15, you’re getting $93,000 a year in tax advantage cashflow. Again, when you figure out the tax benefits, that’s similar to earning $120,000 a year from just four units. You started with $35,000. You put $14,000 down on that first deal, and then 15 years later, you are earning $93,000 in cash flow.
That’s absolutely incredible. Hopefully you can see this is the way that ordinary Americans can go from having tens of thousands of dollars to having hundreds of thousands of dollars in mostly passive income. And that, my friends, is just the cashflow side of it. We haven’t even talked about the equity side of it. So let’s turn to our attention to that. This, again, like everything in real estate, it happens slowly. In year one, your total benefit, the total benefit of everything that’s going on is around $11,720. It’s good. It’s worth it, right? But it’s not huge. Second year, it jumps up to $50,000 because you did that renovation and now your property’s worth the after repair value. By year three, you’re at $63,000. By year four, you’re at 86,000, and that’s when things really start to scale again, because now you have that second property that we talked about that you’re doing the renovation on.
You’re going to have this massive bump in equity. So from year four to five, you go from $86,000 in total benefit to $155,000 in total benefit. By year 10, you’re up to 588,000, and by year 15, our time horizon for this example, you’re at $1.33 million in total benefit. This is how real estate works. It starts slow. It is boring. But if you have this combination of cash flow, you build equity by doing renovations, you pay down your mortgage. And even if you have average market appreciation … By the way, and this is examples, I put the appreciation rate at 3%, long-term average is 3.5%. So I put it a little below the long-term average, and it is still earning you $1.33 million in total benefit over just 15 years. Now, I know that’s not get rich quick, but what I’ve been talking to you about is as stable and as predictable as it gets.
These are low risk type of real estate deals. There’s always risk. You have to operate well, you have to execute on the strategy, but this is a predictable, reliable way that you can build serious cashflow and build serious wealth through real estate. So I hope you all can see the benefit of this. I hope you are always excited about this as I am, this is the way I started in real estate investing. I was a house hacker myself. And again, I talked to so many people here on the BiggerPockets podcast and it is probably one of the most common ways. I think it is the most common way that I see ordinary people go from living paycheck to paycheck or just living in an ordinary job to having real disposable wealth, having real financial freedom. This is it. It is boring, but it absolutely works.
So before we get out of here and before you go out and start doing this for yourself, let’s just review what this is. The boring strategy is to do owner-occupied real estate investing. Go out, buy a property that needs a little bit of work. Use owner-occupied financing, move into the property, do the renovation, and then wait. Wait two, three, maybe four years, whatever it takes you to save money and to build equity in your property. Then take that money that you save and potentially money that you refinance out of your existing property and go do it again. You got to refinance that loan, remember, because you can only have one owner-occupied loan at a time, but just do that. Continue to repeat as much as you need to. And I know that some people think this is going to be uncomfortable, that you don’t want to live next to your tenants.
I’m sorry. It’s not that bad. I have done it and it’s not an issue. I know people who are doing it in their 20s, in their 30s, in their 40s, in their 50s. You don’t need to be living right next to each other. Find a side-by-side town home with a fence in the backyard. Those exist all over the place. Go do that. Find a primary single family home, live in it that has an ADU in the back, or a mother-in-law suite that you can rent out. There are absolutely ways to make this sustainable for you and your life. So don’t get discouraged by that. This is something everyone can do. And if you are motivated to find financial freedom and to build wealth, I promise you, this boring strategy can work for you. That’s what we got for you guys today. Thank you so much for listening to this episode of The BiggerPockets Podcast.
I’m Dave Meyer for BiggerPockets. We’ll see you next time.

 

In This Article

The FIFA World Cup kicks off on June 11th, bringing with it thousands of international soccer fans desperate for a place to stay and willing to pay thousands of dollars for the privilege. As a result, short-term rental hosts stand to make a fortune, tripling prices and selling out in seconds.

The dizzying prospect of earning $6,000 a night in some U.S. suburbs has even got regular homeowners looking to decamp to relatives while turning their primary residences over to the soccer-crazed hordes, while regular landlords are considering revamping their revenue models to capitalize on the cash flow shock wave.

World Cup 2026: A Unique Tournament

The 2026 tournament is the first time that games will be held in three countries—the U.S., Mexico, and Canada, with 16 host cities—75% of the games will be played in the U.S., with Mexico and Canada hosting 25% each, and an expanded 104-game format that extends the window of peak demand and potential cash flow for short-term rental hosts. 

According to the New York Times, the New York-New Jersey region is expecting more than 1 million visitors, and hotels in host cities have been quick to take advantage, inflating prices by 300%.

A Smash-and-Grab Cash Flow Oasis Amid an International Visitor Drought

For short-term rental hosts, the opportunity to seize on a soccer-fueled gold mine is welcome news at a time when overseas visits to the U.S. are markedly down in the wake of aggressive immigration tactics and conflict in the Middle East.

“Even a perfectly executed World Cup will not resolve the underlying structural challenges facing the hotel industry,” Vijay Dandapani, president of the Hotel Association of New York City, told the Times. 

International inbound travel to the U.S. fell by nearly 5% in January compared to the same time last year, marking the ninth straight month of decline, according to the U.S. Commerce Department’s National Travel and Tourism Office (NTTO). A 22% year-over-year decline in Canadian visitors cost the U.S. economy $4.5 billion in 2025. In total, the U.S. was estimated to have lost $30 billion in tourism dollars.

Popular STR platforms such as Airbnb, Vrbo, and Booking.com realize that amid the booking downturn, the World Cup presents a short window of opportunity to make up for losses elsewhere in the year.

“It’s really this once-in-a-generational moment,” Nathan Rotman, Airbnb’s director of policy strategy for North America, told The Athletic. “It’s a real opportunity for cities to show themselves off, but also to test out whether they can accommodate fans.”

Property manager Bobby Roufaeal, who is managing over a dozen STRs in New Jersey, is tripling rates for his units and expects a single luxury property to generate about $240,000 during the tournament, encouraging hosts to see the potential for significant income. 

“They’re like, listen, I’ll figure it out. I’ll go stay with my relatives for the month or for a few weeks just to be able to capitalize on this revenue,” Roufaeal told Bloomberg, explaining how owners plan to vacate their personal residences to capitalize on the cash flow potential.

$4,000 Income Reality Check

International accounting firm Deloitte, commissioned by Airbnb, estimated that hosts in U.S. World Cup cities could bring in $4,000 on average during the tournament, which translates to $262 per night, even in pricier coastal cities. That number jumps up to $5,700 on average in New York, the highest of all host cities. Additionally, Airbnb has offered first-time hosts an incentive of $750 to use the platform and host their first guests by July 31, 2026.

“Demand for World Cup stays on Airbnb is surging, giving residents of host cities the opportunity to boost their incomes by sharing their homes and the communities they love,” Dave Stephenson, Airbnb’s chief business officer, said in a statement shared with Realtor.com. “There’s truly never been a better time to become a host on Airbnb.” 

Demand Spike and STR Regulation Waivers

AirDNA is tracking demand for short-term rentals in advance of the World Cup. As expected, the numbers will change by city and date as we get closer to the games.  

Municipalities have been forced to adjust their STR policies to ensure there are enough beds to accommodate the surge in visitors. In Kansas City, which will host six matches and where 650,000 visitors are expected to descend on a city with only 65,000 hotel rooms, the demand has had far-reaching repercussions. 

“They [the city] had reached out to the Kansas City Alliance and said, ‘Hey, we are about 500 listings short of what we need. Will you help us bring new hosts to the area?” Tyann Marcink Hammond, president of the Missouri Vacation Home Alliance, said during an episode of the Alex and Annie Vacation Rental Podcast, as cited by Rent Responsibly.

The scope of influence for hosts extends well beyond the Kansas City limits, where short-term rental rules differ markedly, with rental caps and bans on non-hosted rentals. These have temporarily been waived to accommodate the influx. “They understand the economic benefits, and they want that in their community,” Hammond said.

In June 2025, Jackson County legislators proposed an emergency pause on the reclassification of short-term rentals from residential to commercial properties. However, the reclassification tripled the tax exposure for some STR owners, angering many of them.

“This is outrageous, and I absolutely will shut down prior to the World Cup,” Laura Williams, vice president of the Kansas City Short Term Rental Alliance, told KSHB 41.

For small landlords who might not have a regulatory attorney at hand, understanding the quagmire of changing rules could result in fines and forced cancellations during a potential windfall event. Ironically, New York, led by soccer-crazed mayor Zohran Mamdani, has some of the strictest STR rules in the country, banning stays under 30 days, which it has refused to relinquish. This move means STR business goes to New Jersey and elsewhere.

Final Thoughts: The World Cup and Beyond—Where STR Landlords Can Profit the Most

The World Cup has presented an interesting debate: How much revenue can STR hosts in major cities hosting major events make, and is it enough to offset the high cost of doing business (taxes, insurance, expensive properties, and interior furnishings) in those cities? 

For many landlords, the lure of a high volume of revenue over a short period, as opposed to ongoing monthly rental income and the hassle of chasing up rents and dealing with evictions, might be enough to cause them to switch strategies and chase fast cash. 

For cities with stringent STR rental rules, such as New York, lobbying efforts by STR companies and strategic affiliation with event organizers, such as Airbnb’s pact with FIFA, may make them rue the tourism revenue they are turning away. On the flip side, the average income of $4,000 a month, as predicted by Deloitte, means that unless major events are ongoing near your rental property, switching to short-term hosting over long-term renting may be more hype than dollars.

Dave Meyer:
Assets are going on sale. This is how you buy them. In some segments of the real estate market, owners are looking to unload their properties. They didn’t make the right deals a couple of years ago, and now they’ve run out of time. That means opportunity is coming. Someone, after all, has to buy these properties at discount prices, some of which are 60% lower than they were sold for just a few years ago, and that someone could be you. Today, we’re speaking with one of the most popular investors in the BiggerPockets community about how you can spot these deals, how to separate the good from the bad, and how to structure transactions to maximize upside and minimize risk. Hey, everyone. I’m Dave Meyer, Chief Investment Officer at BiggerPockets. Henry Washington, co-host of the BiggerPockets Podcast is here too. Henry, what’s going on, man?

Henry Washington:
Hey, what’s going on? And I’m excited to chat with Brian. This will be my first time on a show with him.

Dave Meyer:
And by Brian, Henry means Brian Burke, who is an extremely successful investor who has been in the game for several decades. Because he’s seen just about everything that can possibly happen in real estate. We like to bring him on the show when the market is changing or feels uncertain because frankly, he’s just been super right about market timing for a really long time. So I don’t know about you, Henry, but things feel super uncertain right now, so I could use a little note of Brian’s knowledge. So let’s bring on Brian Burke and hear his takes. Brian Burke, welcome back to the BiggerPockets Podcast. Thanks for being here.

Brian Burke:
Dave Meyer, glad to be here. Thanks for having me on again.

Dave Meyer:
Yeah, it’s always fun. Let’s just start. You’re well known for being very good at predicting market cycles and timing your portfolio to market cycles. So let’s just get your big picture thoughts on where we sit generally with the economy and the housing market these days.

Brian Burke:
Aside from the fact that luck is a really good virtue.

Dave Meyer:
Well, that’s very humble of you to admit, but you’re either very good or you’re very lucky.

Brian Burke:
Well, one of the two. I don’t know. Sometimes it’s better to be lucky than good, but I’ll pick either one because they both work.

Dave Meyer:
Fair

Brian Burke:
Enough. Okay.

Dave Meyer:
It’s true.

Brian Burke:
Big picture. Where are we? Big picture. Well, I came on this show a couple years ago and I said end the dive in 25. It’s fixed in 26 and buyer heaven in 27. And I’m not really changing my story yet, Dave. I think I’m still pretty close. I think 26 is going to be a transition year. 25, the dive kind of stopped in commercial real estate, I think. I think 26 is going to be a transition year where we kind of find the bottom, we go through that bottoming process, and then we get everything set up and ready for 27 when you’re going to have a little bit more distressed sales, some more sellers that are really pressured to make a move. And a chance for buyers of not just commercial real estate, but residential as well, to have a really good opportunity, I think, to start scaling up their portfolios.
And you and I talked about this, what, six months or a year ago about we’re kind of close to the bottom. This is the time to scale your portfolio if you’re a long-term thinker. If you’re one of those three to five-year holder guys, you’re too early. But if you’re a 20, 30-year player, this is a really good time to buy if you’re comparing it to say 2021.

Dave Meyer:
So what is happening right now that’s making you think this? What are the dynamics that are going on behind the scenes that are changing this? Because I felt like we’re always a year away from hitting bottom the last three years. It’s like you wait for this distress to come. And you’re right, I think it’s both in commercial and residential. You’re like, sellers are just unrealistic. It’s really hard to get deals still. So what’s sort of the catalyst that is going to change that and go from this sort of stalemate that we’ve been in to one where buyers are going to finally have a bit more leverage?

Brian Burke:
Well, I think the first thing is, is that the seller’s having to change their attitude. I mean, a year ago, I knew a lot of people that were sitting on challenged assets, to say the least.

Dave Meyer:
It’s a nice way to put it.

Brian Burke:
Yeah. I’m trying to be nice. Their saying was survive till 25. They had a different saying than I had. They were a little more optimistic, I guess. And it was like, “Hey, I’m just going to wait this out and everything’s going to be fine and interest rates are going to fall and cap rates are going to recompress and rent growth is going to come back and all these things are going to happen and they’re going to be fine.” And of course, when you’re in that situation, you really want to believe that because it’s really difficult to admit to yourself like, “I’m sitting on a house of cards.” Nobody wants to say that. I get it. Now I’m hearing more from people I know who are saying to me, “I’m going to have to let this go back to the bank, or I’m going to have to hand in the keys or I have to sell at a complete wipe out just to get my lender paid off.” I just had two conversations like this a week and a half ago with people I know that are in that situation that a year prior to that were like, “Oh yeah, we’re going to hang onto it and things are going to be fine and everything’s going to work itself out.
” So I think that behind the scenes and the data you don’t see, I think the human factors are beginning to change where owners are coming to grips with the fact that they’re going to have to make some moves here and they haven’t been up until recently.

Dave Meyer:
That makes sense to me. It does feel like the can’s just been kicked down the road a lot. People, like you were saying, just hoping just from some external macroeconomic thing to change that’s going to save them and it just doesn’t feel like it’s coming. And so as those operators, what do they do? Do they just try and sell before they have to hand the keys back? Or what’s the order of operations? Because maybe for people want to buy, is there opportunity as distressed sellers are trying to unload these assets?

Brian Burke:
We just bought several senior housing properties that were through lender short sales where this is a situation where the lender will agree to take less than the loan amount. And we bought these assets at about 45% of the loan balance, which is an extraordinary-

Henry Washington:
They agreed to

Brian Burke:
That. And the lender wrote off all the rest. And I’ll tell you what, I haven’t bought a short sale since probably 2011. So it’s been a lot of years since short sale has been kind of a word going circulating around in real estate investing, but that’s coming back and I think we’ll see more of that. Not so much in the single family home space though. There’s a lot of home equity. So I don’t see that being an issue there, but on the commercial real estate side, I think we’ll see more and more of these types of kind of structured sales and coordinated workouts.

Henry Washington:
Yeah, that makes a lot of sense. It’s unfortunate, but it definitely makes a lot of sense. And I am hearing a lot more of investors using strategies to buy properties like REO properties right now and doing some short sales. And that’s typically when people said they were buying REOs in short sales, there was like 2017 behind that number. 2026, that doesn’t seem like a legitimate strategy, but it does seem like it’s coming back. And I’m even hearing some of that in the single family space. And I agree, there’s a lot of people that have a lot of equity, but it does seem like foreclosures are on the rise as banks are starting to now actually foreclose on people who are behind on their mortgage.

Brian Burke:
Yeah, you’re actually seeing that in the data too. The delinquency rates are up and serious delinquency rates are up even on the single family side, but they’re up from zero to 0.0. They’re still

Dave Meyer:
Below 2019, at least for single family, not for multifamily.

Brian Burke:
Yeah, indeed, yes. And so in multifamily, multifamily delinquency right now is the highest it’s been since the great financial collapse, and it’s increasing, and I think we’ll continue to increase. On the single family side, you’re just not quite seeing that. But I think what you are seeing on the single family side is some general overall market weakness. And
I think, Dave, you and I have talked about this before, and I think that general market weakness is what’s presenting opportunities to single family home investors because you can go out and put offers out on properties that need fixing up and so on without having to bid against 86 other all cash over asking buyers, and you can actually get a decent deal. On the commercial real estate side, there’s still a lot of capital chasing these assets. And by and large, if the pricing is right, they’re trading. There’s just a problem with pricing expectations I think that is still kind of hanging over the market.

Dave Meyer:
You’re saying the irrationality is from sellers expecting something and you think that will come down for multifamily generally speaking?

Brian Burke:
Yeah, that’s right. I think that the psychology is changing where some of these owners are now realizing it’s time to do something and it’s going to be painful and they’ve been trying to push it off, but they’re going to be taking some losses. And I think that they’ll start to see that play out. So yes, that’s exactly right.

Henry Washington:
Do you feel like what you saw with the retirement communities that you purchased, do you feel like short sales are going to be a thing within the commercial real estate asset class as well? Because that I have not seen a lot of.

Brian Burke:
Yeah, you haven’t, but I think you will. And here’s something I’ve been saying about this all along is the biggest problem you see, especially in commercial multifamily, which is large apartment complexes or pretty much any multifamily over five units is considered commercial. But I think this problem is the worst or the most widespread in the largest of properties, over 50 units, over 200. There’s a lot of distress in that sector. And the main way that lenders have been dealing with this has been to kick the can down the road and say, “Well, okay, your loan maturity is now, but if you pay us $500,000 principal reduction, we’ll give you another year.” And the owners/borrowers, their psychology behind that is, “All right, these guys are working with us. They’re going to help us. They’re going to here to save the day.” But really that’s not it at all.
All the lenders are trying to do is maximize their chances of principal recovery. And the moment that the market comes back enough for them to either get all their principle back or get enough principle back that they can stomach the loss, that’s when they’re forcing their hand. And that’s when I think we’re going to see more short sales even in the commercial sector. There have been some already. I think you’ll start to see that increase. And that’s why I say buyer heaven in 27. And I’ve been saying that since I think late 2024. I know everybody’s saying like, “Oh, the market correction is next year.” I’ve been saying 27 for two or three years now because there’s so much out there that’s creating the situation that has to get worked through. And a lot of it is that attitude of kicking the can down the road.

Dave Meyer:
So if you’re a potential buyer, how do you take advantage of this? How do we be you, Brian? We want to be you. I want to buy stuff for 45% of loan balance.

Brian Burke:
Yeah. Well, in the multifamily side, I’m not buying. So well, here’s the difference. So it’s sector specific, right? You have to learn how to play the cycles. This is how you be me, is you learn how to play the cycles. And so I’ll give you kind of a couple of contrasting examples. I’ve just mentioned commercial multifamily and other types of commercial real estate are still kind of in the figuring it out phase of their bottoming process. It takes a little bit of time to let all this stuff kind of work through. I started doing senior housing deals a little over a year ago because I recognized that that market cycle was actually a little bit ahead of the commercial multifamily market cycle and it was coming out of its cycle. And kind of to my point a minute ago, when things start to come out of the cycle and they’re starting to get better, that’s when the good deals are really found because you can start getting the, the lenders are like starting to force hands and saying, “It’s time to move.” Buyers are finally like, “Okay, we’re past the bottom.
We can finally sell now, but they’re still selling at an incredible discount.” Multifamily’s not quite there yet. I think that happens next year. And I think next year we’re going to start to see something similar happening there. So if you’re sector agnostic, you go where the opportunity is. That’s what I did. If you’re really like dead set, multifamily is my thing, that’s all I’m going to do, then you just let the clock work that self out. And you just spend more time this year playing more golf or spending more time on the beach. I did that for three and a half years. I didn’t buy a single multifamily deal. Sometimes you just got to sit on the sidelines and let this play out.

Henry Washington:
I think one of the things that, to your point is why the multifamily sector hasn’t quite gotten down where people want it to be to start buying is because it still seems like even with a substantial discount, some of these deals still don’t pencil. And you bought yours at such an outrageous discount. Is that because that was the price point where the deal penciled and where buyers were actually willing to pay? Because my concern is when these things do start to come up, even investors with new expenses and higher interest rates are still going to have a hard time making a discounted price work on some of these assets that people overpaid for. That’s fair.

Brian Burke:
Yeah, you’re absolutely right, Henry.That’s a very astute observation. And so on a couple examples, okay, on the deals that we bought, I’d mentioned these assets we bought at like 45% of the loan balance. It was an 11% cap rate on newer assets built after 2000. So those numbers work. Those really, really work. I’ll

Dave Meyer:
Take it.

Brian Burke:
Yeah, right? Yeah. Who wouldn’t? And it’s possible because we were doing principle to principle off-market transactions that were coordinated directly with the lender and that kind of stuff. When you’re just going out and talking to brokers and being the highest bidder on listed assets that are widely marketed across a broad buyer pool, then the numbers are really challenging. It’s really difficult to make those work. And I mean, you guys know this, you’ve done residential flips and you know that if you go on the MLS and try to buy a brand new property on the MLS, you’re not getting into discount that allows you to do a flip profitably. You find it in the margins, writing letters and going to foreclosure sales and all the other things, that’s where you find opportunity. So sometimes you got to get a little scrappy and look for opportunity kind of across the niches because that’s really where that opportunity is.
And I agree with you in multi right now, it’s really difficult. I don’t know how you get five cap deals in a 6% borrowing climate to work. You’ve got a negative 1% leverage and it doesn’t work. Now, how do these deals work? A couple of ways. One is as rent growth comes back, the income stream from the property will increase and that will increase the property’s value. So even if the price stays the same, kind of like the value of proposition begins to get better because you might pay the same price for the asset, but has a higher income stream, or maybe the expenses get more under control. Insurance, believe it or not, has actually started to come slightly down in price, at least across our portfolio. So we’ve seen some relief there that increases income. So it doesn’t have to be fixed by cap rate decompression necessarily, although that still may be a factor, a little bit lower interest rates, a little bit higher cap rate, but a lot more income because we have rent growth and expense compression will make a lot of difference.

Dave Meyer:
I want to learn more, Brian, about these ways to get scrappy. How do investors listening to the podcast right now find these deals? Because I’m with you. I think they’re going to be there, but like you said, you’re going to have to position yourself to get this deal flow. We got to take a quick break, but I’m hoping you can enlighten us right after this. Stick with us. Welcome back to the BiggerPockets Podcast. Henry and I are here with Brian Burke talking about opportunities that he sees coming in 2027 for commercial multifamily. I do want to get your take on the residential market, Brian, as well. But before the break, you talked about getting scrappy, finding opportunity in the margins. Can you give us some specific examples, maybe some actionable things that the audience can do to position themselves to at least see these deals when they start to materialize?

Brian Burke:
Yeah. I think no matter what it is that you’re buying, you’ve got to be out there and looking for this stuff actively. It’s not going to come to you. I think that’s probably the biggest thing. People want to say like, “Well, I’m going to wait for the email to come into my inbox about this great off-market deal.” Truly. Yeah. Right, exactly. It’s like that’s probably not a deal. I mean, you’re looking at a deal that everybody else passed on and now it’s hit your inbox. So you got to get yourself out there. So some specific examples of what we’ve done. So going to conferences and talking to people, especially where owners are present, I think is really good. Even brokers, and I don’t want to discount brokers to say that they don’t earn their commissions because they do. I mean, brokers are out there talking to all kinds of people.
And if you can have conversations with brokers and be well positioned to be that buyer that gets the call when the broker says, “You know what? Our deal just fell apart. Escrow got canceled and we’re desperate. They got to get this thing back in contract. We know you can perform,” that kind of stuff. There’s a lot of deals to be found just like that. Now, that requires a lot of reputational capital, right? Yeah. How can you get yourself in front of lenders, special servicers, banks? One great way is management companies. People always want to be like, “Oh, property management companies, they all suck and this and that. ” Well, come on. I mean, property management companies are the ones that are getting called by these lenders to say, “We’re going to take over this asset. We need you to come manage it. ” You want to know these property management companies and they can sometimes give you leads into things.
So try to go through the management company side. I bought several REO apartment complexes back in 2011, 2012 after the great financial collapse at extraordinary discounts that were brought to me by the property manager that was brought in by the lender. It’s a great way. Another way on the residential side is foreclosures. I’ve bought probably over five or 600 houses at foreclosure auctions on the courthouse steps where you’re bidding against other professionals, not a lot of amateurs who are just driving the price up to the moon. So there’s a lot of different channels you can look for these assets, but they all require an extensive amount of work and the deals won’t just come to you.

Henry Washington:
Brian, I want to play a little game with you. Since I am not a large scale multifamily buyer, I’m just a normal real estate investor and I want to try to connect the dots for maybe somebody else who’s just your average everyday normal real estate investor, but wants to prepare themselves for taking advantage of some of these opportunities. So I’m just going to spit off to you some of the things that I think I might do if I wanted to get in front of these opportunities, and then you tell me with your experience if these are good ideas or if they make sense.

Dave Meyer:
Or if they’re dumb.

Henry Washington:
Or if they’re dumb. Yes, please feel free.
So here’s how I’m thinking about it. If I have an idea that some of these things might be coming, especially if I’m a backyard investor, so let’s kind of narrow it down. I’m not nationwide. I want to buy in my market. First place I would start with are banks that I currently have a relationship with. Maybe I have loans there, maybe I have deposits there, and letting them know to let me know, because if I’m a good operator, to let me know if some of these opportunities come up and they’re looking for good operators to take over some of these assets, to put me on the front of their radar, contact me, let me take a look at the deal and see if it’s something I could do with it. That’s probably the first place I would start because I have a warm intro already.

Brian Burke:
First of all, it really depends upon the bank that you’re talking to. If you’re talking to Chase, Bank of America, et cetera- They don’t care. They’ve got REO departments. They don’t care. Yeah. 100%. Yeah. They’re not even going to deal with you. Most banks, what they do is they have a specific broker list that they’ll go to when they have an asset that comes back and they hand it off to a broker for that broker to list it and sell it on the open market. And they’ve got this whole channel set up already. Now, where you may find that this would work is if you’re at a smaller local bank, maybe something that has one or two branches. That

Henry Washington:
Is what I was thinking.

Brian Burke:
And they have a lot of small multifamily and small balanced commercial lending. If they’re lending out $50 million on 200 unit apartment complexes, you’re wasting your time, but if they’re loaning out a million five on a 10 unit deal or a $700,000 loan on a commercial strip, small little strip center kind of a thing or a little retail property, there you might get some traction if you can get in front of the right person. And there are banks like that. So that’s where I think if you’re going to employ that strategy, focus on it, employing it that way, as opposed to any of the other larger banks.

Henry Washington:
My two other strategies were going to be to call the title companies and find out who are the brokers that are selling the REOs, because they’ll at least have some exposure to who those brokers are that are representing, or the agents that are representing those REO deals when they get transferred, when they get sold, and then try to build relationships with them. And the last strategy would be to manufacture warm introductions to lenders. And I do that in the residential space right now by being members of the chambers of commerce and all the cities where I transact, because all of the community banks are members there, and I now magically get warm intros or they just will take my call because I’m in the same chamber.

Brian Burke:
Yeah. Now that’s a good idea. Getting the relationship, not like, “Hey, I’m looking for a deal.” Not like, “Hey, I’m a real estate investor. And if you get an REO, you need taken off your hands, put me on the top of your list.” That’s not it. But just general networking of having everybody know who you are and taking your call when it’s important. And maybe you find out about an REO that they get, you can call your friend who happens to be the bank president and say like, “Hey, what are you guys going to do with this thing?” And maybe you’d be able to head it off that, “Oh, we’re going to list it with so- and-so broker.” “Oh, I know so- and-so broker. He’s in the chamber too. I’ll give him a call and kind of work on it that way. “I mean, I will say this, no amount of effort, what I say is a total waste of time.
All the things that you mentioned are all things that you should probably do, but if you’re asking me to handicap your results and say,” Okay, 80% of your results are going to come from 20% of all the things you’re talking about and you only want to focus on that 20%, “that 20% wouldn’t include going to Chase Bank and saying,” Hey, if you get a REO, put me on the top of your list. “That’s not going to be in that 20%, but it only takes one, right?
So getting yourself out there every way that you can is the right thing to do, but I think you’re going to get the most of your results with management companies, brokers, and to a lesser degree, maybe smaller bank presidents at smaller commercial lending banks.

Dave Meyer:
We do have to take one more quick break. Stick with us. Welcome back to the BiggerPockets Podcast here with Henry and Brian Burke talking about the market, how to take advantage. Brian is a hot topic these days, but curious your opinion on syndications. You’ve obviously raised syndications, but you’ve been on the GP side of things, but a lot of them aren’t doing well. And I think that is given the premise, the whole financing structure of syndications a bad name. I have my own opinion, but let me just ask you, do you think those are coming back? Do you think syndications are things that investors should be looking at as we go into 2027? If you’re not someone who’s going to go out and do these strategies, could you still get in on these opportunities by investing in someone else’s deal?

Brian Burke:
Are syndications still a viable path? The answer is yes, but you have to be investing in a syndication that’s investing in a viable path. So if you’re investing in assets that are just going nowhere like multifamilies that don’t pencil, that’s probably not going to work out very well for you. And I think if it’s a little bit early right now to invest in multifamily syndicates, if I’m being quite honest, and it pains me to say this, being a multi-decade multifamily syndicator, but one that hasn’t bought anything in three and a half years and still isn’t, I think it’s still just a little bit early. And here’s why. And this is a distinction I think is really important, Dave, because we’ve talked about on this show and we’ve talked about on prior shows about a distinction between owning long-term assets like smaller multifamily, single family rentals, those types of things in your own personal portfolio for a long-term hold.
That’s much different than investing in a syndication that has a three to five year, we’re going to get a 20% IRR in this short window of time type of a mentality. That just does not really work right now because there’s still so much uncertainty about when is the market correction going to begin to happen and it hasn’t started yet. So you’re treading water until it does. I would just wait. And when the market starts to show clear evidence that it’s recovering, that’s the time to get in because your three to five year window is going to produce some really incredible results. Do you buy on the exact day of the bottom? No, but you don’t have to. If the market corrects for 10 years, it doesn’t matter if your three-year window begins now or a year from now or two years from now, you’re still out in three years and you’re still capturing the upside gain.
So I think there’s just no rush to get into those right now. And except of course, some types of real estate really are on fire right now and syndicates in those spaces are working out quite well.

Dave Meyer:
Yeah, I completely agree. I’m glad you explained that distinction that syndications just means investors pooling their money essentially to buy a bigger asset. So it frustrates me when people are like, syndications are bad. It’s like, no, you might have invested in a bad syndication. Operators are bad. Yeah, they’re bad operators. They’re bad deals, bad market timing, but the concept of putting your money with other people and experienced operators, I still think is a good one. But to Ryan’s point, you need to be able to underwrite the business plan, you need to understand the market cycle that you’re buying into. But if you understand those things, there’s nothing wrong with investing with an experienced good operator.

Henry Washington:
I mean, there’s two parts to it, right? You have to be able to evaluate the deal, so evaluate the underwriting, but you also have to evaluate the operator and evaluate the syndication itself. And I think those are two completely different skillsets. I mean, most people have a general understanding of how to underwrite a deal when they get into a syndication, but is there any quick tips or tricks of the trade you can give us to like, how do we vet these operators that are putting these syndications together?

Brian Burke:
Well, I happen to know somebody that wrote a book on this entire subject that gives you about 350 pages on exactly everything you look for.
And BiggerPockets published that book. It’s called The Hands-Off Investor. I wrote that in 2020, and it’s just as applicable today as it was back then that there are a lot of things you need to be looking at. And all the things you just mentioned, Henry, 100%. You need to be able to look at the asset and kind of the underwriting and the sponsor, but there’s one more piece to it. You also have to be able to understand the structure and what does the debt look like, when is the loan maturity, and where are we in the cycle? And some people would say, “Oh, all floating rate loans are bad, or all bridge loans are bad. It’s toxic.” Well, not necessarily. They sure as heck are bad when you’re doing them at the very top of a cycle. When you’re 10 or 12 years into a bull run, that’s not the time to get aggressive on short-term loan maturities and bridge loans.
But at the very bottom of a cycle, they serve a very useful purpose and are a really good tool, and you have a lot less risk of maturity at the bottom of a cycle than you do at the top. So kind of understanding and being realistic with where are you in the cycle, how is the capital being structured? What’s the experience of the sponsor? What’s their track record? Have they ever suffered through a down cycle and how did that work out for them and what was the outcome and what did they learn and maybe what do they do differently now than they did before the market cycle or important factors? But also the underlying real estate and its very thesis. Is it a sector of real estate that’s working right now with the overall macro environment or is it one that’s just not ready for prime time yet and you’re just trying to get ahead of it and you’re taking a gamble, that’s a bit of a roll of the dice.
So there’s a lot of different factors to think about and you need to think about all of them.

Dave Meyer:
Thanks, Brian. I think that makes a lot of sense and really good advice for people who want to get into the more passive side of real estate investing. Still a great way to do it. Highly recommend, Brian, I did read your book before I made my first syndication investment. I think I’ve read it two or three times and highly I recommend it if you want to learn how to do this stuff well.You’ve appropriately made some distinction between commercial and residential. We only got a few minutes, but tell us what are your thoughts on residential right now and the way that investors should be approaching residential deals in this climate?

Brian Burke:
Well, I think the residential market has gotten weaker over the last couple of years. I think four years ago, the residential market was really hot. Multiple offers, especially in my local area in Northern California, multiple cash offers on every listing, frequently well over the asking price. But now we’re not seeing that. I’m still a small time house flipper. I have a little side house flipping thing going on and we had one of our flip houses sat on the market for 11 months before we finally got it sold. And we made a profit on it still, but it was a long … That never would’ve happened two years ago. Two years ago it was like if you were on the market for more than three weeks, something was really wrong. Home sale transaction velocity is at its lowest rate since the early 1990s, if you would believe it.
And another interesting statistic that I saw is that the percentage of homes owned as rentals is declining and is at a significant low point from prior history. So that tells me that there’s an opening for residential landlords because there’s fewer of them. And I get it. A lot of them are frustrated and don’t want to deal with some of the landlord tenant laws, in which case you just invest somewhere else. But there’s fewer landlords in the single family space now, and prices are softening, transaction velocity is down. All of those things are kind of spelling opportunity to me, to the long-term holder. If you’re a newer investor trying to just make your first real estate deal and you’re looking … A lot of early real estate investors turn to single family homes because it’s accessible and understandable. It’s a great place to start. That’s where I started.
I think this is a better time to be deploying that strategy than it has been over the last five or six years or so, for sure. And if you’re in this for the long game, which I think you should be, then this has some compelling opportunities. And I think this is a really good season for you to really get out there and start to build that portfolio you’ve been dreaming about.

Henry Washington:
I agree with you. And some of the things that we’re seeing are, first and foremost, we’re seeing some of the best spreads on deals that we’ve seen in several years if you subtract COVID. Now, what’s not as good is rents aren’t growing as much as we would’ve previously anticipated. And so what I hear right now a lot of is flippers are getting out of the business because the market is slowing down. And some of that is true. But when I hear that, what I really hear, it’s not people are bad at flipping. It’s that flippers are bad at buying and they’re not adjusting their numbers to account for how different the market is. And I love the single family asset class because of the protections that it provides, because yes, it’s a smaller asset. It’s easier to understand. It’s easier to hold onto if things aren’t going as you planned because it doesn’t cost as much.
But that only works if you’re adjusting your underwriting and you’re truly buying them at a price point that allows you to do that. And the flippers and people I see that are struggling right now, it’s not that they don’t know how to renovate a house and it’s not that they don’t know how to market or sell a house, it’s that they didn’t buy it right and that is killing them.

Brian Burke:
Well, I couldn’t have said it any better than that, Henry. You nailed it 100%. But one thing that I think is key for people to listen to and what you just said right there is that flippers are getting out of the business. And what does that spell to you as a aspiring real estate investor?

Henry Washington:
It’s money for me, baby.

Brian Burke:
Yeah. It’s one less competitor writing an offer on the property you’re trying to buy. And so that’s music to your ears, right? So I think that’s 100%. Now here’s one reason why I like single family residential as an asset class, and that’s because I say that the best deals out there are like a needle in a haystack. Well, there’s about 300 million haystacks in single family residential. There may only be a hundred thousand haystacks in commercial multifamily, but there’s a lot of haystacks to look for needles and there’s a lot of deals out there. And if you look hard enough and you look in the right places, you can find them. And that’s really all it takes.

Henry Washington:
And I got my metal detector, baby. I’m good.

Brian Burke:
That’s what you

Henry Washington:
Need

Brian Burke:
Here.

Dave Meyer:
Yeah. I didn’t realize how easy it would be to find a needle at a haystack if you had a battle to three. That’s right. All right, Brian. Well, thank you so much for being here. As always, really appreciate your insights.

Brian Burke:
Thanks for having me back.

Dave Meyer:
For BiggerPockets, I’m Dave Meyer. He’s Henry Washington. Thank you all so much for listening. We’ll see you next time.

 

Ashley Kehr:
Today’s guest was on the show before, but what’s happened since then is where the real lessons are because buying the deal is one thing, refinancing it in this market, that’s a whole different game.

Tony Robinson:
So if you’ve ever wondered what actually happens after the episode ends, after the Instagram posts, this is the behind the scenes of how a real estate investor navigates a refinance in today’s lending environment.

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

Tony Robinson:
And I’m Tony J. Robinson, and today we’re welcoming back Danielle Daly. She’s previously been on our show talking about her investing journey, and now she’s back to catch us up on what’s changed. And we’re going to go deep on a refinance you just completed. Danielle, welcome back to the show. You are now a two-timer on the Rookie Podcast. Happy to have you back.

Danielle Daly:
Hello. I feel honored. Not sure how I got here, but second time’s the charm. Thanks for having me.

Ashley Kehr:
You’ve also been on the BP rookie panel at BPCon several times too also. So a familiar face to the rookies. But for anyone who didn’t catch your first episode, give us the 60 second overview of who you are and kind of what you’ve been working on since we last spoke.

Danielle Daly:
Yeah, 60 seconds. Oh man, I will do my best. Well, hello everyone who I do not know. My name’s Danielle Daly. I currently work at BiggerPockets on the advertising sales team, and I’m also an investor. So last time, if you saw me on the Brookie podcast, I had just bought my first property. I am now on property number three. So since then, I’ve been maintaining co-living strategies and I’m also living in my house on my own. So my first two properties are now fully rentals, but really been working on getting a property per year since we last spoke.

Ashley Kehr:
So the first two properties were house hacks. And this third property, you’re not house hacking.

Danielle Daly:
So I’m sort of house hacking. I’m actually renting out to my brother right now. Oh,

Tony Robinson:
That’s the easiest house hack.

Danielle Daly:
Yeah, it’s the easiest house hack, but I did go into this without wanting to house hack. And then he decided to move, so it worked out great. But I just hit a point where I think I’m kind of not wanting to have roommates anymore. Go back really quick. That’s the shift in strategy.

Ashley Kehr:
Besides the house hacking element, have you done any kind of short-term rental, long-term rental, or has it just been the co-living, having roommates in the extra bedrooms?

Danielle Daly:
Yeah, so I’ve only done co-living right now. So it’s long-term strategy, co-living. I’m looking at leases anywhere between six and 12 months. I am considering diving into midterm rentals as the market does sort of shift, which I’m sure we’ll dive into during this episode. But yeah, I’ve only done long-term as of right now.

Tony Robinson:
As your portfolio, it’s kind of shifted and grown, Danielle. I guess is your … Well, you actually just kind of hit on that. Hold on. Let me see. There’s a different question that I wanted to ask too. Oh, I think you hit actually both of those. Actually, let me ask one follow-up question. So now that you’ve turned your first two properties into true investment deals, give us the quick numbers. What was it doing when you lived there and what are both of those properties doing now in terms of cash flow?

Danielle Daly:
Yeah, so when I was living there, I’ll just go each property in time. So the first property, I was making about 250 bucks a month. So it was pretty minuscule, but I also lived for free. So that was my first house act, lived there, rented out the rest of the rooms. And then my second property between having now two at that point, living in the second house hack, renting out the rooms, I was breaking even. So between both properties, still paying nothing, there was no cash flow, but I was not paying anything to live. So the first two properties.

Ashley Kehr:
What would you have had to pay if you were renting a room very similar? And if you rented your room to yourself, how much were you saving in rent?

Danielle Daly:
There’s two ways to look at that. If I was going to go rent a room in someone else’s house hack, call it about 900 on average in the Denver Metro. If I was going to go get an apartment, that’s a different story. That could be upwards of 2,500 to have a one bedroom apartment within Denver. So big range, obviously, but definitely saving at least, call it eight to 900 a month at the low end if I was renting just a room and a house.

Ashley Kehr:
And you’re making $250 cashflow and you’re building equity in a property that is appreciating and your tenants are paying down the mortgage.

Danielle Daly:
Exactly. Yeah, it is a no-brainer. Absolutely. It was an amazing thing to do. It’s gotten me to where I’m at today.

Ashley Kehr:
What has been one of the biggest lessons that you’ve kind of learned through this experience that you’ve done so far in your investing journey?

Danielle Daly:
It’s a great question. I think there’s a couple of different lessons. The first one is you should have reserves. I am all for being a little bit risky. It’s just me. I don’t have a family yet, so I’m all for it. However, I think I got lucky with my first property where the entire year nothing went wrong. Literally nothing. I think I maybe called a plumber once in the first year. So I’m like, oh, real estate’s easy. This is great. I’m making 250 bucks a month living in this property, living for free. This is awesome. I think that reality hit me when I got the second property. So the second property, love it. It’s a great property, so this is not a complaint. However, the things that went wrong were almost funny, for lack of a better word. I was like, “This is crazy. This is like a movie.” I had a couple flooded bedrooms that happened in that house due to, that was a whole other story in itself.
Had a lot of plumbing issues, had to get a new AC unit, ended up having to get an entire HVAC unit for one of the houses. It was just thing after thing that popped up. So it made me realize, wow, okay, I need to have reserves. And the reason that is a huge learning lesson is when I got to the third property, my TTI, my debt to income ratio was actually a little bit too high. So I was not even able to get a loan for that HVAC system that was quite expensive. So I would’ve been in a little bit of a tough spot if I did not have reserves to be able to pay that in full. So definitely have reserves. And then the second thing is I have to remind myself, and for all of you listening, definitely keep this in mind. This is the long game.
We’re playing a long game here. This is, for me, houses that I plan to hold for the next at least 30 years. So I have to remind myself when expenses like CapEx do pop up that, okay, we’re in it for the long game. This is part of the expense of owning a home. This is just part of the process that if I can just hold on, I will be completely set for retirement with just these three properties. So those are my two learning lessons.

Tony Robinson:
Danielle, you talk about reserves. How much do you feel is maybe a baseline? And then Ashley, maybe even a question for you too, how much is too much? Because I also think you can get to a point where you’ve got too much sitting in reserves if you just always continue to collect that. So how did you set a threshold for yourself, Danielle, on what the minimal amount of reserves are that you want for a property?

Danielle Daly:
That’s such a good question, Ashley. I definitely want to hear from you after in terms of the too much because Tony, just as a quick side note, I really love that you asked that because I’m actually diving into just setting myself up in terms of investing outside of real estate, making sure I’m diversified. So as I’ve gone down that rabbit hole, I realize if you have money sitting there, it’s wasting away due to inflation. I don’t want it just sitting in my account. So for me, I’m trying to figure out how much do I need for real estate versus how much do I want to allocate to other investments and potentially more real estate? So for me, that number is about 10,000 per property. Let’s say 15,000 per property if you really want to be a little bit more risk averse, but I would say at least 10,000.
So for me, 30K, having it cash, liquid or in a high yield savings, something that I could just pull out very easily so that I have it in case something like that pops up because I don’t think something crazy would pop up in all three houses at the same time, but you also never know. So that’s my number, Ashley. I would actually love to hear what you think is too much.

Ashley Kehr:
Yeah, and mine fluctuates. Oh, we’re going to buy a house. Okay, let’s pull money out of reserves and let’s use it to buy the house and then we’re going to pay it back when we finance. And so it’s constant money management and moving, but base lane is between 30 and 50,000 I keep in a savings account. I would say it probably never drops below that 30,000. And I have about, I think I’m at 20 properties now, but also small. Single family homes are 1,100 square feet. So my roof replacement costs, my HVAC replacement costs are not as large as, what are you buying? Four, five bedroom homes. In Denver. Yeah, in Denver. So my CapEx expenses are way lower per a property. But one thing that I also do is I have $200,000 line of credit. So I also keep my line of credit for if I ever needed to pull off of it.
So when I do the no-no and pull money out of my reserves to pay for the down payment on a new property or something like that, I have my line of credit still, but then I work to replenish my reserves. But I used to think that I needed a lot more, but I’m definitely not as conservative as I used to be kind of knowing in my head, okay, not all of my HVAC systems are going to need to be replaced at this single moment in time. So I definitely am not as conservative as I used to be too, but I think that having the line of credit as kind of a backup has really helped me with that too. But as a rookie, I recommend being super, super conservative. And I also have other income streams that I can pull from if I needed to put cash in.
But I’m also keeping my, besides my savings, just my actual property accounts, I usually leave a pretty healthy amount of cash just sitting in those two that just from the cashflow building up in there too.

Tony Robinson:
Yeah. For me, it’s slightly different, right? I mean, because A, we have a lot of different partnerships that kind of infiltrate our business. So I can’t have just like one large bucket. So we actually do have a separate reserves account for every single property. And the goal for us, again, it depends on the property. For our bigger properties, we try and get closer to maybe like six months of reserves. And then on the smaller property, I have tiny homes that are less than 400 square feet that were built in 2022. I’m not super concerned about having a lot of money in reserves for those. So maybe it’s three months of reserves for those properties, but we do have our separated out by property. And the reason that we … It’s a little trickier for me is because if property A has an issue, I can’t necessarily tap into the reserves for property B because they’re two separate partnerships, right?
So we really do have to make sure that each individual property is funded appropriately.

Ashley Kehr:
We’re going to take a quick break, but when we come back, we are going to cover Danielle’s refinance and what you need to know if you’re planning to do one two. We’ll be right back. Okay. Welcome back. So Danielle, let’s start. Why did you even decide to refinance your property in the first place?

Danielle Daly:
Well, I’ve been wanting to refinance at least one of my properties since buying all of them. I unfortunately. I missed the wave of the 2020 through 2021 crazy interest rate era. So unfortunately, all of my properties-

Tony Robinson:
And Danielle, I don’t want to pour salt on the wound, but Ash, what’s your lowest interest rate right now?

Ashley Kehr:
I didn’t buy anything when interest rates were low and I didn’t refinance. So my lowest interest rate is I think a 4.25.

Tony Robinson:
Got it. My lowest right now is a 2.65%.

Danielle Daly:
Oh my gosh.

Ashley Kehr:
So every time you do bring this up on an episode, Tony, it is-

Tony Robinson:
I’m pouring salt on your wound too.

Ashley Kehr:
Yeah. Affecting me too.

Danielle Daly:
I don’t want to pour salt in the wound, but I’m going to do it anyway. Go ahead. That is half of mine. My lowest is, what is it right now? I think it’s actually 5.1, so it’s pretty good. But my second property is a 6.6. And then my third property that I bought was a 7.1. I say was because that is the one I decided to refinance. Rates basically got down to, I mean, they’re around six right now, but they were down to 6.2, 6.3- ish when I went to refinance. And I have a really great lender who helps me watch rates and he actually reached out and said, “Hey, this could be a good time to look at doing a refinance.” So decided to move forward with it. And we’ll get into the numbers, I’m sure, but it just was something for me to reduce my monthly mortgage because that’s what I care about, is having the lowest expenses possible over the long term.

Tony Robinson:
And as of this recording, I just saw this news earlier this week, but rates dropped below 6% for the first time in I think three years. And I just pulled it up right now and the 30 year fix is at 5.98%. So we’re just under six, but I think six was like, and just based on from people who are much smarter than me, what a lot of folks are saying is that there’s this psychological barrier at six. And once we get below six and that number swaps from a six to a five, that starts to change the buyer psychology and hopefully we’ll get more people coming back into the market and kind of building up the real estate industry again. But with that, as more buyers come in, SASE does maybe the competition and we put some more upward pressure on prices. So I’m really curious to see how rates and supply and buyers kind of play out for the rest of this year because five, we haven’t been here in so long it feels like.
So yeah, we’ll see what happens.

Danielle Daly:
Yeah. And even that’s a great point too, Tony. On that note, there’s also, I think for rookie investors, we’re just getting started who have their first or second properties, you want to figure out one, how much reserves do you have on hand? How much is your income? How much money do you have to be able to spend on a refinance because it does cost money. So for me, we ran the numbers. It was a pretty low cost. I’m in a position where I have the extra cash, and so I wasn’t going to sit here trying to time the market. I kind of had a feeling we would get below a six at some point this year, but I also knew I can always refinance again. That’s number one. Technically, you’re supposed to wait six months, but some lenders will work with you. You could just do it again.
But two, it was a low cost for me because of a few different factors, which we can dive into, but it was a low cost. So for me to have savings for my mortgage moving forward, it was worth it to me, but I think it’s more of a personal thing at that point of someone trying to wait and time the market versus being okay with the savings that they could lock in now.

Ashley Kehr:
Now, Danielle, the thing I think of is refinancing is like, oh my God, all the closing costs I have to pay again, the fees, the commitment fee, all of these things. Can you break down before we actually get into the loan amount and things like that as to what were the fees like for the refinance process and how did you decide that it would be worth it to go ahead and refinance?

Danielle Daly:
Yeah. So the closing costs, I should have had them pulled up right in front of me, but they roughly ballparking it, there were roughly about 8,000 for closing costs. So it’s pretty similar to closing a normal loan when you do a refinance. The lender I work with, because I’ve consistently worked with him on all three properties, he offers a little bit of a discount, so it’s typically in credits. So it was I think roughly maybe like 2,500. Do not quote me on these numbers in terms of the discount that I got towards those closing costs.

Ashley Kehr:
No, we’re going to fact check you at the end of this episode. Please supply the document. We’ll never know. Even if they’re way off, we’ll never know.

Danielle Daly:
Totally be off here. But yeah, between his credit and then another thing is the timing that I closed on the loan. It was earlier this year back in, I think it was January, late December, early January. Because of that timing, I actually didn’t pay. You basically skip a month that you have to pay for your mortgage. And so my mortgage was at the time already at roughly 3,400. So that’s another 3,400 towards closing costs that I basically, you pay it over the course of the loan, but considering as our mindset should be as an investor, I don’t really care about an additional payment towards the end of the loan because I expect tenants to be paying that off. So that was also part of the savings, so to speak, of what I didn’t need to pay. And then I might be missing something there, but whatever it was, it basically came down to me paying a couple thousand dollars for the refinance out of pocket.
So it wasn’t really a huge cost to me. And then I end up saving about $250 a month on my mortgage. So if you do the back of the napkin math on that, that’s taking you, what, a couple of years, I think, to get back to pay off basically what you paid for the refinance.

Ashley Kehr:
Yeah, probably even less.

Danielle Daly:
Yeah, even less than that. For me, in the position that I’m currently in, that was worth it. For me to lock something in, to know I can always refinance again, but to spend a minimal amount for me to be able to lock in a lower rate, especially considering I also have a 2-1 buydown to complicate things even further, that was worth it to me. For some people, it might not be at that point in time. It wasn’t a super reduced rate. It went from a 7.1 to a 6.6. So it’s something, but for me it made sense at this point in time.

Tony Robinson:
Danielle, were you able to wrap any of those closing costs into the actual loan itself?

Danielle Daly:
That’s a great question. Actually, I’m not 100% sure.

Ashley Kehr:
Well, I guess, did you take more? We could kind of get into that piece, Tony, as to if she took more. I guess the way to answer that is, did you write a check at closing?

Tony Robinson:
Yes.

Ashley Kehr:
Okay.

Tony Robinson:
Because I refinanced my primary residence when rates got super low. I think when we bought our house, this was in 2018, we’re at like a 4.7 or something, a 4.8 or something like that when we bought. And when rates got super low, we refinanced, we got down to a three. And I just looked it up while you were talking through your numbers and our total closing costs were 11 grand, but we had zero out of pocket cost for that and it just got rolled into the new loan. So we were able to refinance without actually spending anything out of pocket on this deal. And every lender is slightly different on how they allow you to do that, but that was the benefit for us.

Ashley Kehr:
I have a question because I’ve never refinanced a property that had escrow. So is your escrow money rolled over to the new loan or is part of that closing cost you prepaying for another year of insurance and property taxes?

Tony Robinson:
That is a good question. And I’m looking it up here.

Ashley Kehr:
I don’t consider that really a closing cost because you’re going to pay that anyway. So that would even reduce the amount of fees that you’re paying.

Tony Robinson:
Yeah. So that was actually separate, right? So I did have to prepay some of the insurance and property taxes, but that 11,000, that was the appraisal, the origination fee, which was the majority of that, and then all the other escrow fees.

Ashley Kehr:
What was the origination fee on that?

Tony Robinson:
It was 8,800.

Ashley Kehr:
Oh my God, wow. My small local bank charges like $1,000.

Tony Robinson:
That’s crazy. And then I had another 500 for the appraisal and then another $1,800 in escrow fees, but zero out of pocket.

Danielle Daly:
I wish I had that. Definitely.

Ashley Kehr:
Okay. Tony, let’s just wrap up your example real quick. So you paid that money or that money was wrapped into your loan. How did your payment change and how much were you saving each month?

Tony Robinson:
Yeah. Gosh, I would have to look up what my original principal interest and taxes payment was, but after this refinance, it was $2,900 was the principal interest taxes and insurance. Before that, we were definitely, I don’t know, I think it was like 35 maybe, 36, if I recall correctly. So it was a pretty big reduction in our actual monthly payment.

Ashley Kehr:
So you recouped that money in the same less than two years.

Tony Robinson:
Yeah. Easily, easily, easily, easily. And we locked in this 30-year fixed 3% rate.

Ashley Kehr:
Well, really, you didn’t even have to pay it out of pockets.

Tony Robinson:
Yeah. Right? So it was like a no-brainer for us.

Danielle Daly:
That’s substantial. Yeah. I wish we were in that kind of market. Unfortunately, my numbers are not as impressive.

Tony Robinson:
Different times. Different times.

Danielle Daly:
Definitely different times. Yeah.

Ashley Kehr:
Now, Danielle, let’s go over the numbers of your house. What was the purchase price, your original loan balance? What did it appraise you and what did you take actually at the refinance?

Danielle Daly:
Yeah. So my original purchase price, this was a year ago, roughly a year ago. It was December 25, or sorry, December. That was not a year ago. December 24. I originally bought it for 565,000 and it did actually appraise at the same value. It was again, only a year later. The loan amount before the refinance was 528,000 and it was 524,000 after that year, since most of it has gone to interest versus principal, most of my payments, unfortunately.

Ashley Kehr:
Which is so depressing to look at when you look.

Danielle Daly:
It’s so sad. I paid off 4,000 in principle in a year. That’s like one mortgage payment. Great. But hey, progress is progress. And I didn’t pay most of this because of my first two rentals paying more than half of this mortgage. So there’s that. For the numbers in terms of rates, the rate was initially 7.1, but I actually did have a 2-1 buydown. So the 2-1 buydown being you’re locking in that 7.1 rate, but for the first two years, you basically have a rate that is a point lower each year. So for example, year one was a 5.6 rate that I paid at that house or at this house, it was about 3,400 a month that I was paying for the mortgage. And then year two, it was structured to be a 6.6, which would’ve been about, call it almost 3,800, a little bit under that for the mortgage.
And then I would’ve been locked in for years three through 30 at that 7.1 interest rate, which would’ve been a little bit over 4,000 a month for the mortgage. So that’s what it was. I basically locked in a 6.6 rate, but because I was only halfway through the 2-1 buydown, I’m currently paying at a 5.6 rate right now.

Tony Robinson:
Oh, so they still honor the 2.1 even though you- Really? Wow.

Danielle Daly:
Yeah. So it’s kind of cool. So it worked out where I am now. Yeah, I’m right now paying about 3,500 a month, so pretty similar payment to what I was paying. Or sorry, now it’s at a 6.6 because I am in year … Or no. Yep, nope. 5.6 because they honored it and then I locked in a 6.6 for years through 30. So they’re honoring being able to stay within that 2-1 buydown.

Tony Robinson:
I was just going to say, Danielle, I actually never knew that when you refinance it, if you were on a 2-1 buydown, that the new loan would be able to honor that original buydown. I’ve never heard of that before. So I just learned something new. So for all the rookies that are listening, that’s a question to ask. If you did buy something and you’re refinancing and you’ve got some sort of buydown, ask if they can honor that going into the new loan. Because imagine if you went from a 7.1 to a 5.98, what we just saw today, and you still got that buydown, now you’re in the fours, which is crazy.

Danielle Daly:
Exactly. And that was kind of what made me want to do this, is that they still honored that because in theory, I’m in year two of the buydown at a 6.6. So if they didn’t honor that, I would just be kind of like, there wouldn’t be a huge sort of upside because I could have saved another year of money during that 2-1 buydown. But so it made sense for me, but it is worth noting I still paid a little bit out of pocket. It just in my situation made sense. And if I get the chance to do another refinance, I probably will, if it makes sense at that time.

Ashley Kehr:
With this, when you switched the loans, did you stay with the same loan company and is that part of why they honored it?

Danielle Daly:
That is another great question. No. So my lender, he was with a specific company and he actually switched companies, but he’s still someone that I love working with. So now I have a loan that is with a different provider versus my other two loans. But realistically, at first, I’m very detail oriented and sort of OCD where I’m like, I want them all at the same place. And I know that sounds like such a small minute detail.

Ashley Kehr:
No, trust me, that would be so nice. I have a couple loans with Shellpoint and their dashboard is like, “Here’s this loan, here’s this loan, here’s this loan.” I’m like, “Ugh, if only all of my loans could be. ” And then one just got sold of course to somebody else and now it’s a new dashboard and stuff.

Danielle Daly:
Business idea for whoever wants to create that, right? Some sort of consolidation platform where you could see all your loans and just access it through one platform or dashboard, that’d be great.

Tony Robinson:
Good idea.

Danielle Daly:
But yeah, no, I just have basically two different loan providers now, but it’s simple. I mean, it’s the same. The dashboard is the same. It’s just two different logins.

Ashley Kehr:
Which seems minuscule, but it actually gets annoying.

Tony Robinson:
Well, Danielle, walk us through the actual process for the refinance from the moment that you decided to, “Hey, I think I might want to refinance to actually sitting at the closing table,” what were those steps in between?

Danielle Daly:
Yeah, so it was actually very simple and it really replicates buying a house. It replicates the loan process of just a normal purchase aside from it being one a little bit more simple. Two, you just already have experience. So I already had the documentation and the paperwork ready of what was needed. And three, I was actually able to close virtually, which I would assume you might be able to do that maybe with a regular loan as well. But with this, I was able to just have a notary online and just be able to sign it and everything was done virtually. So it was much more simple, but realistically, it was a very similar process as buying a house in terms of the paperwork that’s needed. It takes a few weeks. You’re working with your lender just to kind of get what’s needed, but it was really simple.
It’s just basically providing a bunch of paperwork and making sure that you run through the numbers with your lender and you understand what you’re committing to.

Tony Robinson:
And what kind of loan was it? Was it like a traditional conventional loan or some other type of super secret refinance weapon?

Danielle Daly:
I’m not that cool yet and not that experienced. Just a conventional. This is standard conventional.

Ashley Kehr:
Was it still your primary at the time that you got to do it, refinance it as a primary or did you have to refinance it as an investment loan?

Danielle Daly:
Yeah, so this luckily is my primary.

Ashley Kehr:
Oh, okay. Okay.

Danielle Daly:
Yeah, that’s a great point just to call out is that my first two properties, if I ever want to go refinance that, those would be investment loans, or I don’t know if that’s the proper word for it, but having to be an investment loan means a little bit of a higher rate. So with my primary, that’s another reason that I felt not at all pressured, but I felt like this was the right time to do it while I lived here, just to not even worry about the market, don’t really care if interest rates go up or down. Obviously I want them to go down, but if they don’t, let me lock it in now. And that’s what I mean by not caring what happens in the future. I don’t want to time things while I’m living here, since I potentially will move again, this isn’t like my forever home necessarily.
I wanted to just be able to do it now while I had that lower rate of it being a primary.

Ashley Kehr:
And then after that, you’ve got to get a HELOC before you move. So you have the HELOC on the property.

Tony Robinson:
Hey, get all those in place.

Danielle Daly:
Yes, you mentioned that’s on my list.

Tony Robinson:
I’m actually going through a HELOC process right now on my primary and they don’t even do a true appraisal on the property, just like a virtual kind of desk appraisal where they just do a quick summation of what they think that the value is. Was it the same process for the refinance or did they actually do a full appraisal?

Danielle Daly:
So what’s interesting is originally they weren’t going to have to do an appraisal and it was, I don’t remember the exact reason, to be honest offhand. I just know my lender was like, “We’re good. We don’t have to do one. We’ll be able to get away with it, ” probably just because it was so soon that I bought the property and unfortunately that actually changed throughout the loan process. And so this is one thing worth noting. So because of the relationship I have with my lender, the appraisal would’ve cost, I think like 800 bucks or something. It’s somewhere between five and a thousand bucks to do an appraisal that I would’ve had to pay out of pocket. And my lender ended up covering that cost just because originally I was presented with not having to do an appraisal. So that would’ve been slightly frustrating to be like, “All right, hang on.
” I was told one thing, so he was great about just covering this cost for me, but we did end up needing one.

Tony Robinson:
And then what was the timeframe from start to finish to actually get the refinance done? Was it a typical 30-day timeframe or was it maybe faster because it wasn’t as involved of a loan?

Danielle Daly:
Great question. It was a little bit less. It was like three and a half weeks. So very similar to a normal timeframe faster by a few days.

Ashley Kehr:
Tony, for the HELOC, I’ve never actually gotten a HELOC on my primary residence, just investment properties, but what is the timeframe looking for that? Especially if they’re doing just a desktop appraisal, I would assume that it would be an even shorter timeline.

Tony Robinson:
I’m going to tell you right now because it’s moving pretty quickly. I want I’m going to say, and I’m looking up when I started that application with them, and I want to say that I started that maybe 10 days ago. And I’ve already got a conditional pre-approval. I’m in the final stages of underwriting where there’s action flags and final documentation, but it looks like potentially next week we should be at a point where we’re closing. So we’re talking start to finish potentially less than three weeks, which is insane. I wasn’t expecting it to move that quickly, but it is. Now, part of that I think too is that I’ve been just super on top of it. And much like you, Danielle, just being a real estate investor, you tend to have a lot of those things that they request just already dial up and saved in a foldage you can upload quickly.
So I would get an email about like, “Hey, we need this, ” and I’d have it up to them same day. So I think me really being on top of it has allowed it to move more quickly. But I mean, yeah, less than three weeks and we’re able to tap into all the equity.

Ashley Kehr:
Are you using the same bank or lender that you have your mortgage with for that property?

Tony Robinson:
No.

Ashley Kehr:
I didn’t know maybe because they already have a lot of the information.

Tony Robinson:
No. Yeah. It’s my bank where I have my car loans with them and they’re just a super easy to use credit union and I just call them. I was like, “Hey, what do you guys have? ” And that ends up working out great.

Ashley Kehr:
Did you get an introductory rate?

Tony Robinson:
I did, and it was like five point something. You have to put a certain amount on it to start with, but I’m like, “Yeah, I could probably swing that. ” And then it’s like five something I think for the first however long. So it’s pretty solid. All right guys, we’re going to take a quick break, but while we’re gone, if you have not yet, please subscribe to the Real Estate Rookie YouTube channel. So you can not only hear mine and Ashley’s voices, but see our lovely faces. You can find us at realestaterookie and we’ll be right back afterward from our show sponsors. All right, we’re back with Danielle. And now that you’ve gone through this refinance and you’re at this next phase of growth in your investing journey, what does the next version of Danielle as a real estate investor look like? And what are you intentionally doing differently this time as you go into your next deal?

Danielle Daly:
That’s a great question. And just to be completely transparent, I am not looking for a deal right now. I’m on a little bit of a pause from buying my next property, though I love real estate and absolutely plan to buy more, but I think I’m just transitioning from co-living. I want to kind of take a pause on that and potentially get into multifamily in the future or something that is not co-living. And I love co-living, so don’t get me wrong. Love it. It’s been fantastic.

Tony Robinson:
Let me ask that. Why shift away from that strategy if it’s worked well for you? Not necessarily co-living in the sense of co-living plus house hacking, but just strictly co-living. And the reason I ask- Renting by the room. Yeah, just renting by the room, because we actually have a lot of investors that we’ve interviewed who have leaned into that strategy. And I think about the Nassau’s in the Pacific Northwest who buy four bedrooms and turn them into eight bedrooms. There is, I think, a lot of momentum in that strategy. So what for you specifically is making you lean towards something else versus where you already have some experience?

Danielle Daly:
Yes. It’s a personal decision. Co-living is an amazing strategy. I absolutely make more cashflow objectively by renting by the room versus renting to a family. But I think Tony, you touched on most of the reason that I think I’m going to make a switch is that it’s becoming pretty saturated. A lot of people are in the market in this co-living, or a lot of people are doing this co-living strategy now. So it’s getting to the point where it’s a little bit saturated and really competitive on pricing to where you have to list rooms for a lot cheaper. So when I first, this is just a very basic example, but when I first listed my first property, I got about 950 per room. I, for that same house, am listing rooms for 850 or lower between eight, 850. So rent, I’m not saying rent has necessarily fully gone down as a whole in the Denver Metro, but specifically with house hacking, it’s just really competitive.
So rent is slightly reducing in multifamily and that pushes downward pressure on renting by the room to be a cheaper option. And then when you have more people doing that, you have to be more competitive in order to make your room stand out. So I think that’s why I wouldn’t necessarily want more, but I do continue or I do plan to continue maintaining my co-living properties as co-living strategies. I don’t plan to convert those yet because the numbers would not make sense. The second thing to note on co-living is if you are not self-managing, it is more expensive to hire a property manager. So call it anywhere between what? Is it 10 to 12% maybe to hire a typical property manager, call it ballpark, it would be closer to that 15 to 18% to do, or call it 15 to 16 or 17 I’ve seen on the high end, to manage a property that is co-living.
So I eventually would like to be hands-off. That is my next phase. My next version of Danielle is to be a little more hands-off with my properties. I’ve been so hands-on. I manage literally everything. So that is part of why I would want to not necessarily purchase more of those. I think that that would either, A, be more work for me, or two, it would be more money in taking out of my cashflow versus me just having a family in there and then having them pay utilities and having a property manager be a little bit cheaper. So that’s at least my thought process.

Ashley Kehr:
I think there’s a lesson in this story and is that you can build a strong foundation with something like you have with co-living, but then you also have to be flexible to pivot as the market changes, as your strategy changes. And I think that’s exactly what you’re doing. You know that this strategy has worked great for you, but it’s also time to pivot and not … And maybe even diversify a different market, a different strategy, things like that. And that’s such a great attribute to have is to recognizing when it is time to pivot and change your strategy into something else. But Danielle, before we wrap up here, you are self-managing, you have a full-time job. What tools are you using to help you manage these properties?

Danielle Daly:
So I only use a couple tools at the moment, but they’ve been absolute lifesavers. I work or I use Rent-Ready to kind of work through all my property management needs in terms of managing tenants, running background checks, applications. My tenants pay rent through there. It’s made it really, really simple for me. So love that tool. I also use Baseline, which is a newer tool. I just started using this actually. I hit the point where spreadsheets are just becoming complex and I now have a CPA and she does not like spreadsheets. It’s just something that it’s like, all right, let’s get a little more advanced here. Let’s make this a little more professional. So baseline is sort of like a banking tool where you could basically have a debit card for each of your houses to be able to transact and have everything be super organized for bookkeeping.
So I personally only use those two tools right now, but it’s been a total game changer because the organization is key and I was 100% working from a spreadsheet for the past three, over three years. So it’s been really helpful to start feeling like, okay, I’m running a business. I’m not just doing a little side thing with one house. And it’s mentally allowed me to be a little bit more hands off. Of course, I’m still managing the property when things come up, but having systems processes, tools that I’m using, it makes me feel like I’m running a business. So I think I’ve actually handled situations that occur with the houses in a more professional and business minded manner because of using these tools, if that makes sense. So yeah, those have been great for me.

Ashley Kehr:
And Danielle and I both love Baselane and me specifically their bookkeeping aspect. And if you are a pro member, you also get Baselane smart bookkeeping. So all you have to do is log into your BiggerPockets.com Pro account and you have access to these features and so many more as a Pro member. So you can go ahead and check this out at biggerpockets.com. Danielle, thank you so much for joining us today. Where can people reach out to you and find out more information?

Danielle Daly:
So feel free to reach out to me on LinkedIn. Just go ahead and look up my full name, Danielle Daly. You can also reach out to me on Instagram. It’s Danielle F. Daly, D-A-L-Y. Feel free to reach out. I would love to connect if you’re in the Denver metro area, but those are probably the best ways to reach out to me.

Ashley Kehr:
Well, thank you again for taking the time to join us and share your experience and also the refinance journey for yourself. I’m Ashley. He’s Tony, and we’ll see you guys on the next episode of Real Estate to Rookie.

 

In This Article

Can you go from broke to millionaire in five years? Yes. But it’s not easy—if it were, everyone would do it. 

It took me seven years to reach a seven-figure net worth after restarting from scratch. But there are plenty of people out there who have done it in five years or less. 

Aside from winning the lottery or inheriting money (which you can’t duplicate), there are ultimately just two paths to becoming a millionaire. But each offers endless options and ways to combine the two together. 

The Simplest Path: Save and Invest

Save a huge percentage of each paycheck. Invest it well. Repeat every paycheck for years. 

It’s not sexy, but it works. Over time, your investments take on a life of their own, generating income that you reinvest for compound returns. 

Granted, it takes a lot of money invested every month to reach $1 million in just five years. At a 10% average annual return, it takes around $13,000 a month. 

I’m not here to sell a fairy tale. The math is the math. You’ll need to earn a high income and then show the restraint to not spend it, but rather to save and invest the bulk of it. As you earn more, you’ll need to resist lifestyle inflation and just invest most or all of your raises. 

Don’t like the idea of living like you’re broke even though you earn a high income? Then do what everyone else does and spend most of what you earn, and don’t build real wealth. You’ll look and feel rich (for a while, anyway), but you won’t actually be rich. 

If you get aggressive with saving and investing, however, you’ll make fast progress, even if it takes you a little longer than five years (like it did for me). Here’s a breakdown of how much you’d need to invest each month if you want to hit $1 million in 10 years. It’s much easier, requiring less than $5,000 a month at a 10% average return. 

Higher Risk and Reward: Start a Business

Most people who become millionaires within just a few years do so by starting a successful business. 

“I’ve been broke twice and rich three times,” shares Oren Sofrin, owner of Eagle Cash Buyers, in a conversation with BiggerPockets. He happened to choose a business model that combines investing, but that isn’t the only business path available. “A friend of mine launched a $9/month Canva template bundle for wedding planners and hit $1.2 million annual revenue in 26 months. Another friend learned Google Ads in three months, started charging e-commerce stores $3,000 a month retainers, and cleared his first million in 22 months.”

Of course, not every business explodes in revenue. In many ways, running and growing a business is much harder than clocking in as a W-2 employee. It takes a certain drive, vision, ambition, and energy that most people just don’t have. And this is why most people don’t do it. 

Most people think that all the money in the world is a giant pie, and if they want more of it, that has to come out of someone else’s slice. Entrepreneurs know better. They know that they make their own pie and grow it. And their pie adds to the larger pie of the economy, creating new jobs and value, rather than taking anything away from others. 

The Side Business Plan

You don’t have to choose between a W-2 job and starting a business. Work your job, save and invest as much as you can, and build a business on the side to boost your odds of success. 

Plenty of workers launch real estate side businesses, buying and managing rentals or flipping houses. One path that can prove particularly effective is the BRRRR method, because it lets you recycle the same down payment to add many rental properties. 

“The combination of leverage, forced appreciation, and long-term rental income is powerful,” notes Claudia Beiler, owner of The Chris and Claude Co, when speaking with BiggerPockets. “You’re not just relying on the market, you actively create value, and build significant wealth within five years.”

The Path I Took

My wife and I combined many of these strategies to get there in seven years. She works a W2 job and a side hustle. I run a business, and do some freelance financial writing on the side because I enjoy it. Neither of us has a huge income, but we kept our expenses extremely low, living overseas without a car.

On the investment side, every month I invest in both stocks and passive real estate investments. I keep the stocks simple with index funds. For real estate, I invest $5,000 at a time alongside other members of a co-investing club. Every month, we vet a new investment, such as private notes, private partnerships, and syndications, as a form of dollar-cost averaging. 

In my co-investing club, we aim for annualized returns in the mid-teens or higher. And those higher returns help us progress faster toward those big, hairy financial goals. 

Concentration for Income, Diversification for Wealth

In your career, you should become a niche expert with concentrated expertise and become one of the top 10% of people in your field. It’s how you succeed and earn more income. 

You can, of course, invest in the space where you’re an expert. Some employees have stock options in their employer’s company. Active real estate investors inevitably have some investment capital tied up in properties. 

But you don’t want too much of your investment portfolio tied to your industry or career. That leaves you overexposed to one risk point. If your company falls from grace and all your money is in its stock, you could lose both your job and investment portfolio in one tumble. 

Many of my fellow members in the co-investing club are active investors who buy rentals, but they also invest passively to diversify. They don’t want all their money tied up in a few rentals in a single market. 

By all means, invest in yourself and in your business, especially when you’re young. But as you build wealth and get to a $100,000 net worth, a $500,000 net worth, to $1 million and beyond, you need more and more diversification. It shelters you from risk and gives you more opportunities for breakout investments.

Finally, it helps you generate additional income streams, making you less dependent on your day job. “Millionaires rarely have one source of income,” adds Sofrin. “Multiple streams provide risk protection and acceleration at the same time.”

That’s the road to financial freedom: stacking up streams of income so that you can do work you love, regardless of what it pays. 

In This Article

It feels like every other headline you read about homeownership goes something like: “Is the American dream dead?”

Click-baity as apocalyptic headlines are, plenty of strong data support the argument that homeownership is slipping out of many Americans’ hands. And that has implications for us as real estate investors—including people like me who rent their home while also investing in other people’s housing. 

The Data on “Forever Renters”

A 2025 study by the National Association of Realtors found that the median age of first-time homebuyers reached an all-time high of 40. As my father told me when I turned 40, “You’re now middle-aged.”

The data doesn’t get any rosier from there. The same report found that first-time homebuyers make up just 21% of home purchases, a record low. The median age for repeat homebuyers is 62. 

Consider another study entitled “Giving Up” by Northwestern University’s Seung Hyeong Lee and the University of Chicago’s Younggeun Yoo. They found that Gen Z “will reach retirement with a homeownership rate roughly 9.6 percentage points lower than that of their parents’ generation.” 

The study also cites a Harris Poll survey revealing that 42% of Americans and 46% of Gen Z respondents agreed with the statement: “No matter how hard I work, I will never be able to afford a home I really love.”

Yikes.

Implications for Investors

If this pattern continues playing out, it could affect real estate investors in the following ways.

An older, more stable tenant pool

Historically, a huge percentage of renters have been young adults ranging from college students to thirtysomethings. They’ve aimed to buy a home before “settling down” with either marriage or kids. In 1991, the average first-time homebuyer was just 28 years old. 

As Americans wait longer to buy homes—or just rent their whole lives—that means that landlords get to rent to older, more stable tenants. That means:

• Workers who are more established in their careers
• Families with children in school who don’t want to move
• Older adults, such as empty nesters, who have larger net worths and fewer expenses 

That’s potentially a more attractive renter pool than rowdy twentysomethings who move every other year. 

Longer tenancies

Older, more established renters tend to move less frequently. And as anyone who’s ever owned rental units knows, turnovers are where most of the cost and labor lies for landlords. 

In other words, longer tenancies are all upside for rental and multifamily investors. Lesley Hurst, landlord and owner of Penn Charter Abstract title company, is already seeing this play out in Pittsburgh, telling BiggerPockets: “My rental properties cash flow well, largely because we’re seeing a more stable, long-term tenant base. That reduces turnover and vacancy risk and helps me earn consistent rental income without relying solely on appreciation.”

Higher-end rentals

Not every renter wants to buy a home. 

“In Wichita, I work with plenty of people who could buy but choose to rent because it’s more flexible and more affordable than buying at today’s interest rates and prices,” explained Derek Grandfield of Freedom Property Investors in a conversation with BiggerPockets. “It’s changed how we think about our properties, focusing more on making them comfortable and livable for the long haul, not just quick turnovers.”

Also consider extremely expensive markets like San Francisco, where the rent-to-price ratio is nearly 36. It just doesn’t make any financial sense to buy there, even for the upper-middle class. 

Senior living investments

Lifelong renters theoretically have fewer ties to their homes and are more open to moving into senior housing. 

That runs the gamut from active adult communities up to assisted living and nursing homes. Either way, the “silver tsunami” is coming, and there isn’t enough infrastructure for it, so these senior living investments could continue to do better in the years and decades to come. 

Huge appeal for entry-level homes for sale

Not every Gen Zer has given up on homeownership—they’re just pessimistic about it. But plenty of investors have built business plans to meet their needs.

For example, my co-investing club partnered with an investor who buys vacant land parcels and installs manufactured homes on them to sell to first-time homebuyers. They price them at literally half the local median home value. And they sell like hotcakes. 

The Rise of Renter-Investors—Including Me

My family and I sold our prior home and have rented for the last 11 years. At first, we did so as expats living overseas, but even after moving back to the U.S., we continue to rent for flexibility. But that doesn’t mean I don’t have any real estate. 

I own an interest in over 5,000 units around the country as a passive investor. In fact, I keep investing in new passive real estate investments every month as a member of a co-investing club. 

I may or may not buy a home again in the future. Either way, I want plenty of diverse real estate in my “set-it-and-forget-it” portfolio. That includes a mix of hands-off JV partnerships, syndications, and secured private notes. 

Even among homeowners and active investors, too many don’t bother to diversify their real estate investments. Their home makes up a disproportionate amount of their net worth, and they have tens or even hundreds of thousands of dollars tied up in each investment property. 

That’s not a diverse real estate portfolio. I invest $5K-$10K at a time, every month, to practice dollar-cost averaging with real estate as I do with stocks. 

Whether you rent or own, get more intentional with diversifying your portfolio. Don’t try to pick the next hot market or asset class—just steadily keep investing small amounts in new real estate investments.