Dave:
Do you think living in a big expensive market means you can’t invest in real estate? Think again. Today’s guest works at demanding travel heavy day job, so he’s building a rental property portfolio as a backup plan and he’s doing it in and around New York City. This is not a story of an already rich person buying properties in cash. It’s about using hustle and persistence to build towards financial freedom, even in one of the country’s most expensive markets, Ben was even willing to sleep in the office he was working in to kickstart his investing career. And although that type of sacrifice isn’t for everyone, it might just be for you.
Hey everyone, I’m Dave Meyer, housing market analyst and head of real estate investing at BiggerPockets, and today we’re bringing you the story of an investor named Ben Chester and I’m super excited to talk to Ben because he’s one of the very few people I’ve ever met who’s doing basic rental property investing in New York City. Ben isn’t buying giant apartment buildings for millions of dollars. He’s also not buying really risky properties in suspect areas. He’s found a way to acquire one bedroom apartments that cashflow in some of America’s most expensive zip codes. So on today’s episode, Ben’s going to tell us the exact formula he found that makes these deals work even when starting with six figures of debt personally that he had. He’ll tell us the story of how he turned Billy Joel’s house. Yes, actually Billy Joel’s house into a cash flowing investment property, how he can offset almost all the taxes from his W2 career with real estate investments and he’ll give us his advice for other investors who want to stay local but live in hyper expensive markets. Let’s welcome Ben. Ben, welcome to the BiggerPockets podcast. Thanks for being here.

Ben:
Thanks so much for having me.

Dave:
Alright, well let’s jump into your backstory a little bit. Tell us a little bit about the circumstances that led to you getting started as a real estate investor.

Ben:
So a lot of people I graduated school didn’t get. The best job was making $30,000 a year, which in New York City is basically the poverty line and I was spending all my time at the office, but all my money was going towards rent. So trying to run this experiment where I actually decided to secretly move into my office full time. Hold on. Where were you working? So I mean when I say office, it wasn’t too bad. It was actually a sleep clinic. I was doing medical research for pharmaceutical trials.

Dave:
Oh, okay. So there were beds in these?

Ben:
There were beds and the beds were not always a hundred percent occupied. So there’s a lot of nights where I actually had a pretty cozy hotel room in midtown Manhattan.

Dave:
Wait, were your employers aware of this experiment?

Ben:
No, they thought I was a hard worker. So this is 2012, so shortly after I got the job Hurricane Sandy hit and I was the only one that actually showed up at the office that day, so they thought I was a super hard worker. They’re like, oh my god, Ben came in Armageddon and the hurricane, it turns out I was just living there so I had nowhere else to go, but I got promoted and kind of moved up pretty quick after that, which was awesome.

Dave:
As far as I know, that is the first time hearing this on the show. I feel like that’s something you see on TV or in a movie where someone moves into the office to save money on rent, but you really did it. Say you gave up your apartment, you need to know how you pulled this off.

Ben:
I was in a lease so I couldn’t actually just pack up and leave, which it was my original desire to do, but because I was on the hook for that rent, I actually put it up on Craigslist and started renting it out. Furnace rental, stay as long as you want. I thought I needed to cast a wide net to get someone interested in the rent, but there was crazy demand actually for a furnace, flexible housing there

Dave:
I imagine.

Ben:
And so I kind of hung onto the job as long as I could at the sleep clinic, but that experiment kind of ballooned into an actual full-time massive business where we got venture capital investment for it and we were trying to pitch it as a tech company to get the better valuation, but what ended up happening was we were getting crazy pressure to grow super fast and so we were taking on lots and lots of inventory, but those of you that are in medium term rentals or any seasonal rentals, it’s very ebbs and flows in terms of demand. So we would grow crazy quick and then have these big troughs of vacancy, which ultimately killed the business. I actually left that business with over $120,000 worth of personally guaranteed debt that I put under that business and it was gone. So I was basically starting from nothing with, I mean less than nothing. I had 120 k of debt that I had to recover from.

Dave:
Oh wow. What a roller coaster. I mean what do you do at that point?

Ben:
Yeah, so I mean it was pretty devastating. Not only that, it was the debt, but also I had spent years of my life building this business and it basically imploded so needed to basically figure out how to survive and I didn’t want to leave New York, which was like my dream was always to live there in the first place. So I definitely didn’t want to leave the city, which I think a lot of people end up having to do.
And so what I do is I got a W2 job. I really had no other choice. I had to do it just to pay off this debt over time. And then I also got an apartment. I had this whole skill set of how to rent apartments. I knew how to work with landlords in the city from that experience. So I found a one bedroom apartment with my girlfriend at the time. We moved into a one bed and then we had the landlord reconfigure it to basically turn it into four. It was like, I’ll call them rooms, but I used

Dave:
Spaces in New York

Ben:
And then we rented, we had got three roommates, so it was my girlfriend and I and then three roommates and so we have five people in a one bed, one bath. But what was great about that and we did that for about a year and a half, what was great is it covered all of our housing expenses, so we literally weren’t having to pay to be there, we just had to coordinate roommates, which can kind of be a pain, but it was worth it. And then all my W2 income was basically going towards paying off debt and also a little bit towards retirement and stuff like that.

Dave:
I grew up in the New York City area. I understand what you’re talking about when you said a one bedroom just magically turns into four bedrooms, but maybe you could explain that to people who aren’t familiar with that

Ben:
Particular one. We had actually the super was also a contractor and he built temporary walls basically, so it felt nice. It was actually sound privacy and stuff a little small, but it was livable. And then there’s other situations where there’s one where I literally lived in a walk-in closet with my co-founder. This was prior to that, but when we were launching the first business, we lived in a duplex on fifth Avenue, which was amazing, beautiful be place, but we rented the rest of it out and then we stayed in the walk-in closet together. Unbelievable. I love it.

Dave:
Alright, so you sort of got back on your feet doing this strategy. It sounds like something you knew from the business you had started kind of replicating that for yourself personally. Did you then at any point scale to a traditional real estate portfolio or did you just keep doing this kind of hustle mentality going forward?

Ben:
Well, the goal all along was to basically do this just to get out of debt and basically graduate to the next level, which was going to be ownership. And so I saved up about a year and a half of saving and paying off debt aggressively to get to the down payment. One thing that’s really helpful, when you mentioned finding a job that you can live in, one version of that a lot of people have access to is a travel job. So if you’re in a job where you’re getting put up in hotels and they’re paying your expenses, which that was, I was able to not only get my rent cover, but also I was able to get food and I wasn’t spending a lot when I was on the road. So combination of that, I basically aggressively put close to everything towards saving for an apartment, got my first down payment, moved into a New York City, which is not easy to do, got rejected from a few because they had seen my history with all these apartments I had and the press from having this business.
They’re like, are you going to do this in this apartment? I was like, no, no, no. Which wasn’t trying to build a new tech business there and bringing strangers and all that. But what I did do is I found a one bedroom apartment in and I say one bed. It was basically a closet in Hell’s Kitchen. You probably know it in one of the grungier areas. In 2019, my girlfriend moved in, also my brother move in. So we have three people now, which felt like luxury. We had our own place. We’re spending probably $750 each to live there, which is super cheap for New York. That’s unheard of. The principal payment on every single mortgage was about the 700. So I was pretty much from a net wealth perspective breaking even though I was paying into it now, I was paying off that mortgage. I was at least neutral on

Dave:
Housing. Everyone, we’ve got to take a quick break, but we’ll have more with Ben right after this. So I found this thing called the Lennar Investor Marketplace, and honestly it’s kind of genius. It’s built by Lennar, one of the top home builders in the country, and it’s a new platform for investors who want turnkey new construction homes. These are professionally built reinspected and rent ready. From day one, you can browse properties across more than 90 markets. You can see verified rental comps, neighborhood data, and even handle financing, title and insurance all through Lennar’s in-house network. It’s everything you need to make data-driven investment decisions in one place. Go to biggerpockets.com/lennar and explore the homes available right now. Welcome back to the BiggerPockets podcast. Let’s jump back into my conversation with Ben Chester. I’m curious though, this is a common question that I get a lot and I think is pretty common in the real estate investing community, whether it’s New York or LA or San Francisco or any of these pretty expensive markets. Why did you choose to buy a home versus say, continuing to rent and investing in either midterm rental, short-term renters, whatever you want somewhere else if you wanted to get in real estate? What about this approach made sense to you?

Ben:
I had no idea. I just knew I just need to buy real estate and so first step was I got to live somewhere. If I can find a place I can hang onto. I also viewed as every month or every year landlords are raising rent. So there’s always this kind of unsettling feeling. If I want to stay in New York forever, there’s a chance I could get priced out. I won’t be able to afford here if I’m renting. But if you buy, you’re pretty much locked in. Of course co-op fees can go up, but it’s not like a landlord raising rent on you. So if I could just lock in a place and have a 30 year fixed rate and at this point it’s still below 3% too, I knew I’d be set basically where I could make sure at a minimum I’d be able to afford New York as long as I wanted to stay there.

Dave:
Oh, that’s great. Okay. I like that approach. And so it sounds like that worked for you.

Ben:
It was fantastic. Again, this is 2019, the first apartment basically locked in. I viewed it as I’m set, I’m going to be able to stay in New York no matter what and then COVID hits. Meanwhile, I’m still making W2 income. I’m still traveling all the time. I didn’t really care if my living conditions were terrible. I was like, as long as I have a place back in the city to stay in, it’s okay. But I started looking, it was like the world’s changing right now interest rates are still pretty low at this point. I actually started looking in Texas and I discovered that I would save on taxes if I moved to Texas during COVID. I also could find a lot of really great quadplexes and houses there that would basically cashflow if I bought the old fashioned house hack, you move into one unit, rent the other three out, you can basically cover all expenses. But then with the tax savings on my W2 income, I actually would come out ahead even if that property only broke even. So house hacked with a friend there for a short period of time during COVID. It was like a great experience.

Dave:
Did you know what you wanted to buy? Were you looking for a duplex or are you still just doing the roommate thing?

Ben:
I had no money still everything was still going towards, I had some of that debt left and also was still not making any cashflow. So all the income that’s coming in, I was saving it for a down payment and at that point I had only maybe 20, $30,000 saved up and my friend was in a similar boat, which is enough for a down payment. So we ended up using an FHA loan, which now you can do this with a conventional 5% down, which is amazing. But we use a 3.5 with a higher interest rate FHA loan in Dallas. And so we paid, it was like 30 to $40,000 total to get into this property cashflow from day one with the unit that we were living in. And it basically created this springboard where the tax savings, even though it was making a small amount of cashflow, it was just we were saving on taxes. And then on top of that, we were also basically able to start to build equity in there and get the tax benefits and everything over time.

Dave:
So what was the place? Tell us about

Ben:
It. So it was a quadplex still have it today. It was four units all next to each other, basically four townhouses in a sense, all combined under one roof. So it was super nice. It was an area in northwest Dallas that was appreciated a bit and then became a good source of income and also for tapping in for equity for some of the later purchases that they ended up making.

Dave:
And what happened after that? You left Texas or what was the next move?

Ben:
So now rates are starting to move back up at this point. So I had basically acquired a couple properties I had with this one in New York that had a rule where you could rent it out after a certain period of time. So I got it as a long-term rental and then I was going back to New York and looking for another place to live, and so acquired another co-op through a similar method. This time I was with my brother who was going to move to New York for residency and also another one who’s an architect, two of them. So we’re all going to basically live in a place that I could find together and kind of house hack, which we did. And now the snowballs are really starting to take off. And so every couple of years I’m getting a new apartment in New York and then I’m also starting to get enough cash where I can start thinking about down payments outside of the city for more conventional rentals. You’re pulling off something

Dave:
That’s pretty tough, which is by most people struggle to just pull off a single acquisition in New York, but you’re pulling off multiple. So when you move back from Texas, what is your financial situation? Are you making a lot of cashflow off the other two rentals? Is that helping you with the down payment or how did you actually finance this third purchase?

Ben:
Yeah, so the main thing I’m always looking for is just I want the property to break even because keep in mind, I’m planning to keep this W2 job, so I have enough money coming from that. If I can break even on the properties with conservative underwriting, I don’t want to expect me or kohl or anything, but as long as a conservative will break even with the tax benefits of appreciation, I’m happy. So at this point there’s not really much cashflow spinning off the properties. Everything’s breaking even and there’s enough for reserves, so lose a water heater or stuff. I could handle that without flinching, but I wasn’t living off of it at all. What was good though is I had this W2 job, so I was having enough where I was getting a little bit of savings starting to go. So there were some creative strategies I later used to tap into those retirement funds, but basically I was coming back to New York with enough to put down a down payment on another co-op essentially.

Dave:
Do you mind sharing us with us the price point of these new co-ops?

Ben:
Yeah, so at this point I’m still looking at it about entry level, so half a million dollar range, which is entry level for New York.

Dave:
Okay, that’s not as bad as I thought you were going to say. I mean that’s close to the median home price in the US right now. That’s not like crazy New York pricing where everything’s $2,000 a square foot.

Ben:
This is true. But keep in mind these are one bedroom apartments with something wrong with them at that point. So if they’re

Dave:
Right, you’re not getting the luxury apartment at 500 grand

Ben:
Like the toilets in the living room. Yeah, exactly. There’s something not quite right about the place.

Dave:
All right. So you’re back in New York, you had your stint in Dallas. Now three properties sounds like six units. Where do you go from there? Still buying more in New York City,

Ben:
Basically looking for anything. So again, I don’t really have a form strategy yet. I kind of dabbled in New York and the multifamily, so I was kind of looking everywhere to see what would stick. The problem was in New York City was getting harder and harder to find those units that would make sense. Not impossible still. And I actually did end up buying another one we could talk about later, but I was still just looking around New York at this point. One thing that happened too is I got my license as a realtor to try to basically stretch the money further. I was like, if I can get paid a commission at the same time of acquiring these, it kind of offsets the acquisition costs. It could be a good strategy. And I started to look around MLS and then also just on Zillow, everywhere around Manhattan, Manhattan wasn’t making a lot of sense. And also the cashflow, it’s not very interesting. Even if you could find something that makes sense, it’s still just breakeven. So I started to expand my search and one hour radius of the city and I found a lot of really interesting waterfront properties, particularly where they’d be same price point, half a million dollar houses needed work. So they’re not beautiful, ready to go houses, but they’re on amazing pieces of land.

Dave:
Are these far from the city or they vacation destinations? What kind of locations were you looking in?

Ben:
So I knew that the property themselves, as long as they’re close to the city, I felt like people would probably go as long as the house was a destination in and of itself. So to me, I was like my friends and the people I know, they probably would travel an hour to go to a lake house and it doesn’t necessarily matter where that lake house is, as long as it’s nice enough and it’s accessible, you’ll probably get eyeballs there. And it was kind of just a gut thing. There weren’t any comps at the time. There wasn’t really any sort of clear data that it was a good decision. I was just like, I think we can make this work.

Dave:
And your plan was to renovate them though it sounds like you hadn’t really done that yet at scale, you’ve done kind of putting up these walls, but now you’re talking about taking something that’s not very nice and turning it into a destination that’s like a pretty big

Ben:
Shift. It was massive. It was way more than I expected too. And at this point I started listening to BiggerPockets where it’s always about value add and people are dealing with contractors and stuff. So I’m like, okay, it seems doable, but oh my god, it’s way harder than you think. And also I had no idea how to price out properties either like renovations and rehabs, but I did know that this was a beautiful lot. I found this lake house that was on a double lot on a lake that was within an hour of the city and it’s just like, okay, it needs a new bathroom, probably needs some updates to general updates to the outside and some safety stuff, electrical way more than you would normally get for a normal house. But it was lendable. I could basically finance it and I was like, you know what? Worst case scenario, now I have enough W2 income coming in that even if it takes longer and it implodes, I can at least sustain the mortgage on this and have it. Worst case scenario, I could just rent it as a long-term rent.

Dave:
How about financing the furnishing? Because that, I joke about this on the show, but I think the worst underwriting mistake I’ve ever made in real estate is just totally missing how much it was going to cost to furnish

Ben:
Short-term

Dave:
Rental, especially if it’s a big one that you’re trying to make a destination, you got to spend money to make it cool. You can’t just throw Facebook marketplace stuff in there. How do you pay for that part of it?

Ben:
Yeah, so actually this is another creative financing that I found along the way almost by accident. I know you’ve mentioned before on previous shows, the 0% credit card hack with you can get a 0% intro a PR on a business credit card. Well, so I basically did that and I was thinking I got a 20 k limit on the card. So I was like, okay, that’s great. At that point, I had a new LLC for every single property that I had acquired. So I had a couple LLCs with cards that I never used 0% intro on, but they had credit lines. And a cool hack that you can use, at least with Amex and Chase is you can actually take credit lines from those other businesses and put them onto the 0% card and it’s free. They let you do this, you just call ’em up, it takes like six minutes. So I turbocharge that intro 0% card to basically fund the entire rehab. And so I didn’t pay any, I think between 12 and 18 months I didn’t pay anything at all in terms of interest and I just paid it off by the end.

Dave:
Alright, time for the disclaimer though. This is a great idea. If you can pay this off. Using this kind of loan can be a very effective strategy. I hear people do this most commonly in short-term rentals. I think this is kind of a common approach to doing this, getting the 0% interest. It’s a way to get pretty much free financing, but if you don’t have a plan for repaying that back and it’s got to be a good plan, this could be really dangerous. So it is one of those things where you kind of want to use these when you don’t really need it. If you are like, I’m banking everything on using this 0% interest rate credit card, I wouldn’t do that personally if I were you. Ben has a W2 job, he has other resources, he has other assets so that if something goes wrong, he can take care of that. We talk about this a lot on the show, there are different kinds of debts. There’s good debt, there’s bad debt. Credit card debt is bad debt. If you’re not paying it off, that is super expensive debt. It can really snowball into a trap. So you just want to be careful with that. But again, if you know what you’re doing and you do it carefully, it can be a good option for you. So how’d this one work out? Big shift in

Ben:
Strategy. So I bought the property for a little over 500 K, ended up expecting 30 K, 40 K total to put into it. That was a new bathroom, electrical updates that I didn’t even realize were that severe. That ended up being more complicated than I thought. And then I put in new HVAC system in it ended up costing more like 150 K for all the rehab plus the holding costs plus also the furnishings because I overbuilt it more than I needed to. And also I probably did more work than I really had to, but as a result it ended up being, and again, my goal was just to break even, but it ended up cash flowing a ton and it ended up being a really amazing entry point into the Airbnb market around New York City.

Dave:
How are you managing it? Did you do all this stuff yourself?

Ben:
Yeah, so I was doing it myself just by default. I was like maybe I’ll put a manager in eventually. And I started interviewing property management companies, but through BiggerPockets I actually stumbled upon this short-term rental loophole and I was like, you got to be kidding me. This can’t be real. This is unbelievable. And so I read the books on it. I went through three or four different accounting firms until I found one that was like, yeah, well let’s do this. And so basically, as long as you’re working a W2 job and you’re self-managing your Airbnb, you can take the losses including depreciation, including any bonus depreciation that you’re using, which could be substantial. Take all that and apply it as a loss against your W2 and come to effectively, you can get close to paying no taxes, which is insane. That’s when I was like, oh my God, this is the new strategy.
It makes sense. I’m going to keep my W2 job. I’m going to acquire as many Airbnbs as possible and just to make sure that I’m maxing out those losses every single year on paper so I can basically offset my taxes. Remember, I’d started out thinking, I want to control my housing costs. I thought that was the biggest expense that a person would have, but really the biggest expense no one thinks about is actually the tax side. I’m like, this is a game changer. Not only am I not really paying for housing, I could also completely undo my taxes or not have to pay them and offset them if I do this the right way.

Dave:
Stay with us as we take a quick break. We’ll have more with Ben right after this. Welcome back to the BiggerPockets podcast. Let’s get back into my conversation with investor Ben Chester. I think the sort of journey and evolution of philosophy and strategy about investing is common, that you don’t really start for the tax benefits, but eventually you get to a point where you realize that if you maximize your tax benefits, it can significantly increase your returns. I’m not talking about 1% or 2%. It can make five 10% difference in your rate of return each year, which is amazing. That’s better than buying bonds sometimes. That could be better than investing in the stock market just from the tax benefits that you get.

Ben:
It is insane. And I think about it, my job is commission based largely sub in a tech sales job where I can put more effort in and get more pay. And the amount of effort I put into getting more pay is way harder than just saving on the tax side. So you can end up going a lot further by saving on taxes and having to go get a second job or just work 40 more hours a week or something like that.

Dave:
Can you give us a number? How much do you think one of these saves you in taxes per year?

Ben:
So there’s a limit. If you’re single in taxes, you can do up to $305,000 of tax offset per year. That’s the limit that you can’t do anymore in that against your W2. I’ve maxed it out every year with a lot more carrying over.

Dave:
Yeah, just for everyone understanding what Ben’s saying is if your salary, I’m just going to make this up, Ben, is 250,000, but you had that $305,000 of losses, you can carry over $55,000 in losses into the next year.

Ben:
Exactly.

Dave:
Yeah, it’s pretty amazing. Yeah, it’s great.

Ben:
It’s insane. You can do that.

Dave:
Yeah. So you’re essentially offsetting all of your W2 income?

Ben:
Yeah, essentially,

Dave:
Just so everyone understands, to get a hundred grand in depreciation offset, what kind of property do you need to buy?

Ben:
So it’s actually not that crazy. A hundred grand in depreciation offset. Now again, there’s the tax deduction and there’s actual, with the tax savings you’re making, so you really need to figure out your effective tax rate. Most people are probably between 30, 40% if you’re in that range. And you can buy, let’s say a million dollar property with a cost segregation study. You got to separate land, you got to make sure it’s the right type of report that you build. So there’s a whole thing that goes on where you have to hire an engineer to do it and make sure you have the right type of separation of the asset to figure out what’s bonus depreciable. Generally, you can get at least 20, 30% of the purchase price back is a straight eligible for bonus depreciation. So if you just want a hundred K, you buy a 300 K property, you’re looking pretty good at getting a hundred K write off.

Dave:
And so that’s giving you a hundred K write off. And if your tax rate is let’s say 33%, you’re saving $33,000 in taxes by buying a property. I’m curious, what’s your read on short-term rentals as a strategy right now as we’re entering 2026?

Ben:
The problem with short-term rentals that you don’t get with the long-term stuff is it’s nice. You can still pair in long 30 year fixed rate debt, which is the only type of debt I use other than the intro to credit cards and stuff like that. But really the substantial mortgages, I’m only looking at 30 year fixed rate. I think it de-risks the long-term horizon. But the problem with short-term rentals is you’re also locked in not just to steady long-term rents, but you’re really relying a lot on the economy. People having disposable income to travel. The region can change a lot, lot more dynamically than 12 month leases tend to change. So one thing I look at, and this is partly why it makes a lot of sense around New York City, is I want an area that people will travel to my house, not to the area.
A good example is the most recent purchase I made was, this is unbelievable, back to maximizing purchase price and finding something that would make sense within an hour radius in Manhattan. On Zillow. I kid you not Billy Joel’s house was listed on Zillow and it was listed for $2 million. And I’m like, well, that’s a lot. I did the math. I’m like, that’s a lot of bonus depreciation and I could get a lot of write offs for that. So I underwrote it, looked at it and dug into the history. It turns out it was owned by JP Morgan. There’s this huge history around the house and super interesting, really unique thing on Hudson River, pretty close to Manhattan. And so I bought it.

Dave:
Wait, you bought Billy Joel’s house?

Ben:
I bought Billy Joel’s house. It’s literally up on Airbnb. That’s awesome.

Dave:
How did we not get to that scooter in this episode? That’s the coolest thing I’ve

Ben:
Heard. So this is what it culminated in, which is great. So I bought Billy Joel’s house, it’s like up on Airbnb again. I did a pretty big rehab project on it, but I was able to use, again, intro credit cards. So I used that to make sure I could front the rehab on it, bought it for 2 million, put about 300 K into it. That’s now worth about 2.6. This is only a year later. And with the tax savings that I got, it was close to a million dollars in tax savings that are going to

Dave:
Carry over for multiple years. Oh my God, that’s

Ben:
Unbelievable. That was from last year. That was still 60% of the bonus appreciation. So if it was even six months later, it would’ve a hundred percent have been even more. But

Dave:
Wow. That’s incredible. Ben, congratulations. You really figured out a very creative strategy. You’ve obviously gone and taken what you learned from your business, which isn’t exactly short-term rentals, but I’m sure you learned a lot about just maximizing space, extracting value out of properties and applied it to a really cool way of making money in an area of the country where people constantly say, you cannot be a real estate investor. And I just want to commend you for being so creative and obviously hustling very hard to figuring out the right way to do this.

Ben:
Thank you. I think each deal is kind of in a vacuum. It doesn’t matter where it necessarily is. If it can pencil out, it makes sense. And I think New York, you got to be a little bit creative. It’s not always one size fits all. It’s not going to be a print and repeat type of a place, but you can definitely find unique properties and unique deals. And even on the apartment side, there’s still tons of things you can find to limit down payments, to figure out how you can use leverage or work with the landlord seller financing. There’s things you can still do to make sure that you’re buying into the market you’re interested in.

Dave:
So before we get out of here, Ben, as we enter 2026, what does your portfolio look like today?

Ben:
So right now I have about eight properties. Most of those are in the state of New York, three Airbnbs including Billy Joel’s house, which is the big one. It’s

Dave:
Awesome.

Ben:
It’s the

Dave:
Coolest thing you could say. That’s such a good bragging point.

Ben:
Thank you. And I hung on to my W2 jobs, so still focus on that and kind of building that company at the same time. Also looking for more Airbnbs. So

Dave:
Awesome

Ben:
Strategy out into future years is to keep maximizing this loophole. It looks like it’s going to be around for a while longer, so I’ll keep exploiting it as long as I can and just keep building the empire.

Dave:
All right. Well, next time I’m in the northeast to visit friends and family, I want to stay at Billy Joel’s house.

Ben:
You’re welcome. Anytime it’s called Craig’s.

Dave:
Craig’s an estate. Thank you. Awesome. All right. Well Ben, thanks so much for being here. We appreciate it.

Ben:
Thanks so much for having me. It’s been a dream to be here.

Dave:
And thank you all so much for listening to this episode of the BiggerPockets podcast. I’m Dave Meyer. We’ll see you next time.

Ashley:
Tony, I love when we get to talk to rookies who have jumped into not just one, but multiple strategies early on because let’s be real, most of us start with one deal and slowly branch out,

Tony:
But today’s guest went from lending to flips to rentals, all while balancing a W2 and navigating some tough rookie lessons. And that’s what we’re diving into today. How to diversify as a rookie and what you learn when things don’t go according to.

Ashley:
Welcome to the Real Estate Rookie podcast. I’m Ashley Kehr.

Tony:
And I’m Tony j Robinson. And let’s give a big warm welcome to Shalom. Shalom. Thanks for joining us today, brother. Thank you so much for having me. I’m super excited to be here.

Ashley:
So Shalom, how did you get first started in real estate and what pulled you towards real estate investing in general?

Shalom:
Okay, that’s a loaded question. Let’s rewind back to COVID. I was in college. I went to brewery college, had no idea what I wanted to major in, but my friend did this internship in real estate. He’s like, Hey, if you want to learn more about it and maybe get paid while you’re sitting at home doing nothing, try it out. And so I applied. I got in and it was amazing. I learned so much about institutional real estate, what it means to underwrite a deal, look at gross rent, net rent, what does vacancy mean? What are building expenses? How do you value building with a cap rate? And OI, and I just loved that sphere. I felt that I’ve never actually applied myself in anything so hard as I did with real estate. And so I loved it so much. I changed my major to real estate finance and doubled down on learning as much as I can about real estate.
After that, I’ve interned at many different companies within real estate, private equity with Mac Real Estate group. I’ve worked at different public REITs doing retail work and underwriting deals, development deals, and then couldn’t find a job at real estate no matter how good my resume looked like. When I graduated school, I was looking for a job in New York, but I couldn’t find one real estate job in New York. That’s when my first real estate deal landed in my lap. The phone rang and it was a deal I couldn’t refuse. We jump into that in a minute, but that was my first private money lending opportunity.

Ashley:
So first of all, I want to get into how private money lending was actually your first insight into real estate investing, but I want to mention the fact that your major was real estate finance. I didn’t even know that was a major and I want to go take a community class now to learn about real estate finance, but I think that’s awesome, but that must have set you up for some kind of success. What did that major actually entail? Is that deal analysis? Is that how to structure the financing on a deal that set you up for becoming a lender?

Shalom:
So this major essentially is getting me ready to work at an investment, think like JP Morgan, Wells Fargo on their real estate underwriting teams or at a private equity firm where I am underwriting either value add deals or development deals or managing a large portfolio of thousands and thousands of units. So it’s a very high level and once you get into these fields and you intern in these places, you get very, you’re a professional in one certain aspect. You only do asset management.

Ashley:
It’s very niche.

Shalom:
Yeah, very niche, yeah. You’re only doing property management or you’re only underwriting construction costs or you’re only underwriting different value add deals, not development deals. So that’s what the major prepared you for. It taught you a lot about how Fannie and Freddie Mac work. What does the national mortgage market look like and different ways that institutional real estate moves. Whenever you want to finance a skyscraper in New York City, it’s very different than when you go in and get an FHA loan and putting down 3.5% your rate on a skyscraper is probably a floating rate. It’s probably tied into a bond that several pension funds and then life insurance companies are investors of versus when you’re putting down three and a half percent FHA property, it’s a lot simpler of a deal, but it’s also okay, this loan gets lateralized with a thousand other loans and then gets sold in a bond to bond investors.
So I learned kind of the theory of real estate, but never practicing the real estate. I also noticed that a lot of people who I network with back in the day that are working at these real estate companies have golden handcuffs where they don’t want to do a deal themselves because they always do an analysis paralysis, they analyze a deal to the very t and oftentimes you guys know this very well when you’re dealing with single family or 2, 3, 4 unit properties, it’s really, really tough to get every single expense underwritten to the cent value. So where your NOI is going to be. So that’s kind where I started with my college and then kind of grown into, made the transition into real estate investing myself.

Tony:
Sham. It’s interesting because you started at the most advanced version of real estate investing as it exists, which is the large institutional type investing, whereas most people solely kind of graduate up to that level. So I’m curious, was that experience, what led you to think of private lending as your first deal? Because a lot of new real estate investors, I don’t even think they understand or comprehend what it means to be a private lender, let alone have the confidence to make that their first deal. So how, if at all, did your experience working in private equity lead you into becoming a lender on your first deal?

Shalom:
So yes and no. It kind of gave me the idea of private lending because I saw private credit funds invest hundreds of millions of dollars into the residential space across the nation and I saw that that was an opportunity, but I didn’t think it was an opportunity for me. I don’t have a hundred million dollars. I don’t know about you, Ashley and Tony, but I don’t have a hundred million dollars just lying around the bank and I didn’t think it was an opportunity for me. Certain life circumstances came about where I couldn’t commit to a rental property and I was looking for an investment that was very similar to one with the return without the commitment to one. Because whenever you buy property, you have closing costs, you have transaction fees, you have to manage the property, you kind of getting married in this scenario and then if you want to exit out of it, it’s also a hassle you got to put on the market.
You got to wait to find a willing buyer. There’s going to be concessions and negotiations. It’s just too much if you have to get in and get out With private lending, it’s a very short term investment, but it has a very similar return as to rental property. If I compare my very first rental to my very first private money deal, I think the returns of the private money deal are actually more than my first rental. But I was looking for that where I can invest my money into four or five months. I may need that chunk of change in four or five months and then that’s where private lending came about. My first deal was, I dunno if you guys want to jump into that.

Ashley:
Yeah, yeah, please. I’m intrigued.

Shalom:
I dunno if you guys know this. She’s a BiggerPockets author, grace Guten. Yeah,

Ashley:
We know Grace.

Shalom:
And she called me up, she’s like, Shalom, I’m closing on a property in Tucson, Arizona. I need 300 grand tomorrow. You in or you out? I’m like, huh, I’m a 22-year-old kid, I don’t have 300 grand lying around. I’m like, okay, send me the details. I’ll take a look at it and give me a day to figure something out and I’ll get back to you. So send me the deal and the deal penciled really well. She was buying the property at 275,000. She was putting in 60 into it, and the a RB was in the mid four hundreds, like four 20 to four 30 around there. And the deal made sense. She had a clear exit strategy of how she was going to refinance out of the deal and she was offering me an 11% interest for six months, but there was an option to pay off earlier without a penalty.
And the deal really, really made sense. I would have a first lien position on the property, I wouldn’t be giving a hundred percent financing, she would put 10% down for the construction costs and I would only give her the other half the construction costs. And so it was like, well this deal really makes sense financially. Now let me see how I can figure out the money. And I was actually at BP Con listening to Matt Faircloth keynote and he was telling us how to raise private money in this challenging kind of market and I copied his method without knowing it was what he taught because after he mentioned it, I went and I researched how many people own their house outright. And over 40% of people in the USA today don’t have a loan on their primary residence according to us census. I mean that is an astonishing amount.
So if 40% of people are like that, Ashley, Tony, we all know somebody probably in our lives whether we know it now or not, but we probably know somebody in our lives who has a house that’s paid off that has equity there and might be willing to invest it. For example, a lot of people follow a Dave Ramsey method of paying off debt as soon as possible and then throwing everything at your house. That’s a great pool of people in our country who could have equity to invest with you. And so my parents fell into that category. They came to America in the early nineties and they worked their butts off in order to create financial freedom for themselves. They partially is paying off their mortgage. My dad paid off our 30 year mortgage in 15 years and we had a property that had equity in it. So I approached my mom and I’m like, mom, I don’t have the full 300,000, I have 50 of it. Do you want to come in as a private money lender and give me the other two 50? And she’s like, pitch me the deal. And so I had some good experience in private equity pitching deals to MDs and directors and associates and whatnot. And so I laid it out in front of her and she’s like, this sounds like a no brainer. Let’s pull the trigger. And that was our very first private lending opportunity.

Ashley:
I love this story. I have to go back to the beginning as how did you get connected with Grace where you were in a position that she gave you the phone call to say you in or you out? How does someone do that type of networking to get connected with investors who are looking for lending?

Shalom:
Yeah, social media is very, very big. I mean you guys know it best and something I’m working on right now in order to get out there and more and more on social media. But I felt Grace for a long time. I don’t know how I found her, but I was into real estate and she was posting a lot about real estate and I was stalking her page 24 7 looking at her lips and I already know how many units she owns and what she does in Cedar Rapids and different kind of flips she does and whatever. And one day she was like, Hey, I’m looking for partners on this deal. She was going to do a 20 unit in Cedar Rapids and I’m like, Hey, I don’t have the money, but maybe if the opportunity is good, I could find the money. So I was like, okay, let’s get on a call and just talk about it. So I built up a story and I never say no to an opportunity ended up she never did the deal. It wasn’t for my appetite, but we got in contact and that is what now. She was able to reach out to me if she needed something and so we kept in touch and when she needed money, she knew who to call.

Tony:
Shalom, I think it’s an interesting story and I love how it all came together, but I think maybe one more nuanced part of this that you partnered with family on this first deal as well and we’ve had a lot of conversations. Ash and I even wrote a book on real estate partnerships about partnering to buy real estate, but I don’t know if we’ve ever had a discussion on partnering to lend for someone else to buy real estate with that money. So how did you and your parents structure this partnership with them bringing two 50, you bringing the other 50? What did that structure look like?

Shalom:
We were on the mortgage and on the promissory note and we owned a portion of that note proportion to a portion of the money we had in the deal. So my parents owned what would that be, a six six of the deal and I owned one six of the deal and we were on the note together, which meant we kind of had risk together and there I wasn’t guaranteeing them some kind of return. I showed them the deal and I said, these are the risks that could happen. Worst comes to worst, we foreclose a property that’s worth more than we have into it because they’ll be doing construction and the ARV is there or we go and we finish the business plan and then sell the property, right? There is a few exit strategies here, but on that first one, it was a true partnership. It was like we eat together or we starve together, but in one way we’re getting in and out of it together.

Ashley:
Today’s show, it’s sponsored by Base Lane. They say Real estate investing is passive, but let’s get real chasing rents, drowning in receipts and getting buried in spreadsheets feels anything but passive. If you’re tired of losing valuable hours on financial busy work, I’ve found a solution that will transform your business. It’s Base Lane, a trusted BP Pro partner Base Lane is an all-in-one platform that can help you automate the day-to-day. It automates your rent collection and uses AI powered bookkeeping to auto tag transactions for instant cashflow visibility and reporting. Plus they have tons of other features like recurring payments, multi-user access and free wires to save you more time and money, spend less managing your money and more time growing your portfolio. Ready to automate the busy work and get back to investing. Base Lane is giving BiggerPockets listeners an exclusive $100 bonus when you sign up at base lane.com/biggerpockets. Okay, so I want to know how you’ve structured this deal with Grace as far as the private money lending. So we have a rookie listener that maybe wants to go out and do a private money lending as their first deal. How did you structure the actual payback of that loan? Was it monthly payments of principal and interest? What did this look like and would you do it again?

Shalom:
For sure. I mean the way we did the deal was it was my very first deal, so Grace dictated a lot of the terms and in hindsight, I could have charged more if I wanted to, but I didn’t know what the market was. So it was an 11% interest annualized and she would be making monthly interest only payments throughout the period until she refinanced the property and then pay me back the lump sum. I gave her the money for the purchase of the property and then initial $30,000 in construction costs and then she would bring in the other 30,000 in construction costs to get the project finished to where it has to be. She agreed to send me monthly emails or biweekly emails on updates that are happening. So I knew when the new roof came on, when the landscaping was done, when the bathroom the kitchens were in and what kind of trouble she was having. Additionally, I knew when she was starting to refinance, it was before all the construction was done and she kept me on updated along the way. This allowed me to know what our money’s coming back. So our deal was for six months, but she really paid me off in four, so I knew my money was coming back earlier and I could probably plan to do something with that money when it comes back, whether invest into that loan or buy a property or go buy a Lamborghini. I don’t know.

Ashley:
We don’t recommend that. But one follow up I have to that is was there any kind of extension, did you know what would happen if six months came and maybe she couldn’t refinance or if it was somebody doing a flip the house in itself? Was there any kind of contingency or anything put into your contract or your agreement? The promissory note that stated what would happen if the six months came due and she couldn’t pay?

Shalom:
This was two years ago, so I can’t tell you exactly. I’m pretty sure we had something in there. If we go past six months as a 1% extension fee or half percent extension fee, all these things are negotiable and for those out there that want to land private money, I really recommend it and I stand by it because I’m still doing it today. So kind of goes to question would I do it again? Absolutely, I still do it today and all these things negotiable. So the interest rate is negotiable. Your origination fee if you want to charge one is negotiable. Extension and prepayment penalties are negotiable. Everything that it is your deal, it’s your money, so you should be comfortable with the terms that you’re putting out there for borrowers to use and work with.

Tony:
Now shalom, this first private money lending deal sounds like it went pretty well, but have you ever had a situation where you lent money to someone and it didn’t go according to plan? I think the worst case scenario is is you’ve got to take a property back. But I guess did they all go smoothly or have you had any situations where maybe the operator didn’t execute the way that you would hope they would?

Shalom:
For sure. I mean this one went really well because of the quality of the borrower. I’d want to say Grace is amazing what she does. She has a lot of experience and there’s a lot on the line for her to lose. I don’t think she would just run away with my money if she had the opportunity, but there was one time when I got a little bit naive and kind of went on a deal and it did kind of go wrong. So someone came to me, they were an experienced investor as well, but their credit wasn’t as good. That’s where they couldn’t go to typical hard. My lender, they came to me, Hey Sloan, we want financing on these two properties that they’re buying in south New Jersey. It’s my backyard. So I kind of know it pretty well and I said, Hey listen, I’ll finance these properties for you.
Here are the points I want to charge. Here’s interest rate and here are my terms. They agreed to it. We signed off on it for the first three months. Everything was great. They were doing renovations, they were making payments and then payments just stopped. I called them up and I’m like, Hey, what’s going on? He’s like, I’m going through this happened and I’m a little bit of a softie, so I’m like, okay, I’ll give you a little bit of slack, won’t do anything. But two months went by, no payments, three months went by, no payments. I’m like, okay, now we have to act and do something. Me and him agreed that, Hey, you don’t want two foreclosures on your properties. It was two separate loans on two deals. I don’t want to pay 30, 40 grand to a lawyer to get these properties from you.
So if you want to just hand me back the properties and I canceled the mortgages, then we can kind of do a cash for keys. But there was no key. Just give me the properties and walk away and I’ll figure out what to do these properties afterwards. What saved me was I didn’t give him all the money. So I had some equity in these properties and they were in good rental markets, so I didn’t have enough equity to go on the foreclosure auction, sell them and walk away with either my principal or some profit, but they did, they were almost done. So I finished the construction, I put them up as rentals and now they’re my rental portfolio and they cashflow pretty well. The cashflowing thing, like 200, 300 bucks a unit and there was some other stuff in there with some stop work orders and construction delays, but that’s a story for a different day.

Ashley:
I think that’s a really interesting exit strategy. As a money lender, you usually think like, okay, I’m going to have to take back the property and then I’m going to have to sell it, put it up for auction, do whatever through the whole foreclosure process, but you actually finished the deals and rented them and you made it work for you. So I think anyone that’s maybe scared of that happening, here’s another aspect you could look at when you’re underwriting a deal to lend on is, okay, worst case scenario, could I use this as a rental too? And on the piece how you said you didn’t give them all the money. Were you doing draws with them for the rehab?

Shalom:
That’s right. Yeah. So for the rehab they would need a complete, we did it in separate phases. So I guess phase one was demo, phase two was flooring. Phase three was some plumbing and electrical kitchen. As these things were done, we would release the money for those things. So they would say, okay, materials cost me five grand, labor costs me three grand. Okay, so give us an invoice for that and we would see release $8,000 in a wire and we also to confirm these things were done. So whenever we have larger things that require permit, say electrical and plumbing, an inspector will come out there in order to view that these things are actually done and to code. And if it’s something cosmetic doesn’t really require a permit, a simple picture or a few detailed pictures, send them over to me and then, okay, I see there’s new vinyl there I I’ll release the draw.

Tony:
Shalom. Based on what you learned from this deal going sideways, what are you doing differently now as you are looking at borrowers and projects to lend for

Shalom:
Fair question. Yeah, I’m looking at the borrowers as a whole and the deal as a whole in order to say, okay, worse comes to worse, do I want to own this property or what’s my exit strategy out of it if I have to foreclose on it, right, there’s an option of selling it as a non-performing loan because there’s a lot of investors out there and they were a VP that buy these non-performing loans. That’s what they do. That’s their business model. Another thing is I could charge my default interest and take it to the sheriff’s auction and sell us a foreclosure or I could take it back, keep his rental. If I would foreclose on Grace’s property in Arizona, I probably would not have kept his rental on the other side of the country for me and to manage a rehab that far away, something I wasn’t comfortable with at the time, but a property in New Jersey where it’s maybe like a two hour drive from me, it’s easy.
I can go there with my brother, we can hang some drywall, we can do some paint, we can figure it out. It’s a lot easier for me to justify keeping that property as a rental. We pull credit for all of our borrowers now and we are more conservative with these deals, so we require borrowers to come with more equity as a down payment or bring us deals that are bought at a better basis. So if your A RV is, ideally we’re looking at 65% of loan to cost. So whether you buy it right or you’re really good with construction, you’re doing a lot of the work yourself and only buying materials, some kind of balance there in order to get some more equity out of the deal.

Ashley:
Now shalom, besides those two rentals that you got from somebody not paying you, do you have any other investment properties in your portfolio or is it purely the private money lending?

Shalom:
I do. I own three doors in New Jersey and I own six doors in Milwaukee. So we started buying, I want to say in two weeks we’ll be a year and in a year. Well, I accumulated nine doors total.

Ashley:
Congratulations.

Shalom:
Thank you. Thank you.

Ashley:
I guess we need to pivot there because we’ve touched a lot on the private money lending, but how did you end up in Milwaukee?

Shalom:
And so this kind of ties it all in together in November of 2020? Actually, no, a little before that. One of my long loyal clients who now became one of my friends, we were eating dinner together, we just closed the property and he’s like, Shalom, I’m going to stop doing business with you if you don’t own any rentals. I’m like, what? Are you crazy? He’s like, you got to diversify because as real estate investors, we have our, back then I was in my W2 job, so we have our W2 income, our active income. We also need diversify with rental income. I knew back then that I wouldn’t be financially free from just one or two duplexes, but it is diversifying my income. I’m getting money through appreciation. I’m getting some money through cashflow. I’m getting the money from my W2 and some loans. So if something were to unplug and my one source of income would just stop, I could still live from the other three or four sources of income I had.
And that kind of gave me an alarm like, Hey shalom, you need to buy a rental. Let’s start figuring out where and how. I live in New York City, so I’m not touching a duplex here for 1.1, $1.2 million. That just is not feasible for me. So New York City can’t do it. New Jersey doesn’t have the best landlord tenant laws, and that didn’t make me feel too comfortable. I mean, unless I was getting these properties, I kind of didn’t have a choice, but so I’m like, okay, for now, New Jersey is not going to work out. The prices are also higher there. The places where I was finding a lot of what I liked in a market was in the Midwest, think Kansas City, Chicago, Milwaukee, a lot of cities in Oklahoma and Texas. And so I did what I think on a few podcasts ago, Tony, you flew down somewhere to the Midwest to go look at a market.
So exactly what I did, I hopped on a plane, I went there, I got out of here like four o’clock in the morning. I flew to Milwaukee, I walked the area. I met with a couple agents, met with some property managers, and then I flew back the same day. I didn’t even book for a hotel. I came back at 11:00 PM but it really taught me a lot because now I knew more about Milwaukee, where the good areas, where are the bad areas and what I could do there. I looked at least 20 or 30 deals from different wholesalers and the MLS before one fell in my lap. I’m like, okay, this one makes sense. I’m buying it under market value. I have tenants who are paying market rent or slightly below market rent. There’s some value to add here. It’s nice three bed, one bath apartments.
Families live here and they lease for a long time. So I was really comfortable with it. After I bought the first one, I’m like, okay, this is not so hard. I thought it was going to be this big thing where you’re going to have people calling you 24 7 is like, someone broke my window, toilet is not flushing, or I’m getting this flooded or whatever, and I’m like, oh, this isn’t too bad. I could probably do another. And so my next deal I found was on the MLS and I used the DSCR and loan to buy that. So I put down 20% and it was great because my property manager who is managing my house, that first duplex said, Hey, one of my clients looking to sell, do you want to buy it? And I’m like, okay, let’s do it. He already knows the building, he already manages it. So it’s easy kind of transition. And yeah, those was my first two first two rental deals.

Tony:
Shalom, I think there’s something to be said about just hopping in a car or plane or whatever and just going to see and get a feel for it. Now obviously you can invest remotely and you’re proof of that. I’m proof of that. You can do it remotely. But the same reason I went to KC is because I just want to get a lay of the land and you can look at it on a map and I think get a decent sense of what the city looks like and how it feels. But when you’re actually there, you can really clearly identify like, okay, once I go through this underpass, the neighborhood changes a little bit. So on the map it all looks the same, but let me make sure that I’m north of this overpass. Let me make sure that I’m on the east side of the airport, not on the west side because it looks very different on both sides.
So for all of our Ricky’s that are listening, when I went to OKC, I did a very similar thing. I left super early on Monday morning, stayed Monday night and then left super late on Tuesday night. So I was only there for one night, but I got two full days, met with contractors, met with agents. I aimlessly drove around town. Literally I was just driving up and down random streets just to kind of see what the neighborhoods look like and it gave me so much more confidence to say, yeah, I actually am looking at the right place. So I love that approach. But as you went into this new market, shalom, what did your buy box look like? I think you mentioned a duplex. Are you focused on small multifamily and if so, why? How did you define what your buy box looked like?

Shalom:
Yeah, so right now I’m looking at one to four units and I’ll look at some small commercial, just putting my lender hat on as well. I know that small commercial is harder to finance, so it’s like I’m playing a seesaw there a little bit. I like the one to four unit space and I’m very particular about what I want to buy. For example, when I went there, I know that whenever you have a side yard or a really big front yard, people dumping garbage is a big problem. And if the city drives by and they see garbage in your front lawn, you’re getting a fine really quick. And those fines add up pretty fast too. So I said, okay, I want as minimal front yard as possible, maybe even no backyard. There’s street parking. So I don’t necessarily want a garage if I don’t have to have one.
And my first property meant all those boxes where I literally have zero front yard, zero backyard, there is no lawn to cut or barely any snow to shovel just that little bit of sidewalk in the very front in the house. And if I didn’t go there, I wouldn’t know that. I also figured out that I don’t want to be in these one or two zip codes. I found that out very quickly because I personally didn’t feel safe walking on the street in those zip codes. But on the outskirts of those zip codes, beyond where the houses are really nice and trading for 300 grand versus where the houses are trading for 60 grand, there is that little sliver in between where appreciation is maybe coming in the future, you can still get cashflow, still get quality properties for a good price. And it’s the best of both worlds in a way.

Tony:
Now we have to take a short break, but when we come back, we’re going to dive into some advice that Shalom has for other rookie investors looking to get started. And we’ll hear that right after a word from today’s show sponsors. Alright guys, welcome back. Now, Shalom, I want to get into some rapid fire questions that I have for you, but before we do that, I know you mentioned that you’ve almost raised a fund now for your private lending, and I think it is obviously a slightly more advanced strategy, but I do think that there are lessons to be learned in how you put this together. So what does it mean that you have a fund now for your lending? Who are the people that are inside of it and how do you structure it so that the people who are giving you the money, they get paid that you’re able to generate some revenue? What’s the structure of this fund look like?

Shalom:
Yeah, so with our fund, we have a preferred return for our investors beyond preferred return. The interest rate gets split between the general partner. I mean there’s no deal there. So being the general partner of the fund and the limited partner of the fund, then origination fees have their split. Any profits on selling any loans, they have their split. And right now all of our investors are friends and family. All my family came from the Soviet Union in the early nineties and they figured out a way to become successful and financial free, but they stopped working tomorrow. They don’t have any security. They’re all maybe doctors, nurses, lawyers, architects, but they don’t have anything else besides their job. So I feel like it was my job to go ahead and figure out, okay, how can we still keep our wealth? But if we don’t work tomorrow or someone gets sick or something happens, we still can eat the fruits of our labor. And so real estate is an easy answer for me there, but also diversifying into stocks and all that kind of stuff. But you have to say more about the fund. So that’s kind of how the fund works. You have a minimal return that we’re aiming to give investors, plus the rest is split between the GP and the LP in certain ratios based on what that activity is.

Tony:
Yeah, I love that concept, man, because as we talk to more and more people who are in the private lending space, it really does feel to me that it is maybe one of the best vehicles for passivity, but also outsized returns. So it just really got my head spinning on like, man, I feel like I should almost start a debt fund because worst case scenario, I can use that debt fund to fund my own deals. If there’s no pipeline, I can just fund my own deals with the money that I’m raising and the system that feeds itself. So let’s get into the rapid fire question. Shalom first one is, what’s the biggest lesson that you took away from your rookie deal?

Shalom:
Low leverage is really, really good on that first rookie deal, I bought it all cash. I mean, I was getting private money from my family, so the same money that paid off Grace, that’s what we used to buy that duplex, but I didn’t have a bank weighing over me. So my agreement with my mom was, once we refinanced this property, I’ll give you your money back plus the interest. And I didn’t have a bank weighing over me. So when three months in, one of the tenants didn’t pay rent and I had to do an eviction, I wasn’t sweating and be like, okay, how am I going to pay this lender back? And so a lot of people these days, they want to do a hundred percent financing deals, whether it’s a fix and flip or a rental, and I’m like, that sounds really scary for me.
I want to put down 20 or 30%. And my goal for my portfolio is to have about a 60% loan to value across all my properties. I mean, some will have higher loan to value, some will have less because of where they are in the payback period and how we bought the deal and all that kind of stuff. But my goal is I think 60% is a sweet spot. And when you compare this to what institutional prayers are doing, they’re not financing their deals at 90 or 85% loan to value. They’re pretty conservative on development deals and on value add deals, they’re closer to 50 or 60% loan to value. So if the guys who are doing hundreds of millions of dollars are borrowing less, I think I should follow in their footsteps because they know a thing or two. Right.

Ashley:
What’s one piece of advice you’d give a rookie that wants to get started as a private money lender?

Shalom:
I’d say do your research about the borrower and the deal. Make sure it’s something that worst case scenario, if you had to own your comfortable with it and if the deal went wrong, then you have a clear exit strategy. A good way to do that is educate yourself, learn what are non-performing loans, how does the foreclosure process looks like? What does a default interest rate and when can you charge it? In addition, I would have a lawyer do your loan docs because they put a lot of that stuff in that you wouldn’t think of. I would never think of, okay, Ashley, New York is a really bad foreclosure state, so if I’m doing a private money loan to you, I also want to have the right to your LLC. So if I have to foreclose on you, I could probably get rights to your LLC and reassign your LLC to myself pretty quickly and take control property that way versus taking you to the foreclosure court and doing it that way. So a lawyer would know that, but a typical person doing their first loan wouldn’t. So shell up to two grand and get a lawyer to do your loan docs

Tony:
Shalon. Last question. When evaluating a borrower or a deal as the lender, what is the most important thing to focus on?

Shalom:
That’s a tough one. I mean, we look at a lot of things. Look at experience, we look at credit, we look at the way that you communicate with me. If you send me stuff and you’re all over the place and all messed up when you send me docs, I can only imagine how you are on a construction site dealing with contractors and subs and paying invoice and all that kind of stuff. So if you communicate to me in email like, Hey, Shalom, here’s the docs you requested. Here’s LLC information, my credit information and the deal review and the appraisal and all that kind of stuff, all in one email by folders in Google Drive. I’m like, whoa, that’s pretty cool. They’re organized, they’re great. They communicate really well. When there’s a problem or something comes up in my review and I have a question about it and you’re kind of evasive about it, it makes me like, what are they hiding? So be honest and be organized because that’s a big thing that I can’t measure with a credit score or with your experience, but it does hint to me what kind of borrower you’ll be like for a second, third deal as we do it.

Ashley:
Well, shalom, thank you so much for joining us today. We really appreciate having you on the podcast, sharing your journey, sharing your experience. I think this might be the first time we’ve had a rookie on that was a private money lender for their first deal right out of the gate. So where can people reach out to you and find out more information?

Shalom:
Yeah, this is awesome. You can find me Instagram at Envy Investment GP. You can also find my website, envy investment grp.com, and if you want to call me or text me, feel free to do that. My number is 9 7 3 7 3 7 9 9 0 5.

Ashley:
I am Ashley. He’s Tony. And thank you guys so much for joining us for this episode of Real Estate Rookie, and we’ll see you on the next one.

The saying “what doesn’t kill you makes you stronger” applies doubly in real estate. Investors have proved themselves to be a hardy lot, not knuckling under against the headwinds of high interest rates, insurance costs, and house prices, forgoing short-term profits for long-term success, according to a new study.

The Q3 2025 Investor Sentiment Index released by RCN Capital and CJ Patrick Co reveals that most real estate investors retain a healthy dose of optimism about the future. Almost 50% believe that the housing sector will improve over the next six months.

“Market conditions for real estate investors continue to prove challenging, with stubbornly high financing rates, rising labor and materials costs, and soaring insurance premiums taking a toll on investor profit margins,” Jeffrey Tesch, CEO of RCN Capital, said in an RCN Capital press release.

That said, Rick Sharga, CEO of CJ Patrick Co., distilled the resilience of smaller investors—who comprise 90% of the residential investment market: “Compressed margins can be the difference between a comfortable lifestyle and financial distress.”

Pivoting From Flips to Ownership

To survive, the modern-day investor has pivoted from flipping to ownership, according to the study. While flipping homes makes for glamorous TV shows, rising costs have been a reality check for many investors who have chosen to ride the wave of unpredictability by holding on to their assets. 

The Investor Sentiment Index found that 44% of respondents now identify primarily as rental investors, a marked increase from previous years, followed by flippers at 38% and wholesalers at 17%. Over half of the surveyed investors reported shifting their main investment approach, preferring stable cash flow from assets that they could deploy later.

Higher Costs and Regulation

Rising costs have been identified as the main concern for investors, according to the study. Home prices continued to rise in 2025, reaching new heights and slowing home sales, making refinancing difficult for investors trapped in higher-interest loans and flippers hoping to find homebuyers who remained out of the market. 

Short-Term Rental Restrictions

Compounding the complexity of rising costs have been increased regulations by cities on short-term rentals, which have stripped landlords of an alternative outlet to conventional long-term rentals. It’s proven to be a contentious issue because landlords rely on the extra income to survive. At the same time, opponents of STRs claim they are depleting local housing stock. 

New Orleans recently overturned a decision that outlawed “whole house” vacation rentals by absentee homeowners. “The neighborhoods are split on this,” New Orleans city council member Freddie King said at a hearing where a law was passed allowing only one house per block to rent to short-term guests, a decision made by a lottery. 

“You might put me in a lotto and, just like that, I could lose my retirement income,” one woman told the city Council, adding that her financial survival depended on renting part of her house to vacation guests, which is more lucrative than having long-term tenants. “If I have to go back to long-term rental, I will have to sell my house.”

Insurance Costs

Rising insurance costs have been one of the biggest issues for landlords, particularly in rural areas and lower-income, vulnerable communities. “If it spreads further, it could threaten to end affordable housing development as we know it,” Frank Woodruff, the executive director of the Community Opportunity Alliance, a trade group representing nonprofit housing developers, told the New York Times.

Embracing Technology and Sustainability

With cash flow squeezed, using all available tools to eke out fine margins of profitability has been an essential feature of the modern-day small real estate investor. Increasingly, that means leveraging artificial intelligence (AI)-powered tools to help landlords and property managers streamline operations and identify opportunities more quickly. 

A survey by management platform Baselane found that half of property management professionals either currently use AI tools or plan to by the end of 2025, with rent collection being a particular area of interest. Here, AI can help to streamline payments, improve cash flow reliability, and lower the costs of doing business.

Showdigs.com reports that large management software companies like Yardi Resident Screening and TransUnion’s ResidentID use AI to screen tenants.

In addition, larger apartment buildings have increasingly been embracing green technology upgrades and eco certifications to appeal to prospective tenants. An Emerging Trends report by commercial brokerage JLL found that cost pressures, along with concerns about reliance on fossil fuels amid tariffs, were prompting landlords to push for more sustainable energy sources.

According to Showdigs, smart energy management systems can achieve 10% to 30% savings in energy costs, but require a significant upfront outlay in older buildings. 

Belt-Tightening Strategies for Smaller Investors in Turbulent Times

Run numbers conservatively

• Leave the fantastical repair and cash flow predictions for the wholesalers trying to sell you the deal. Run your numbers conservatively with worst-case scenarios in mind.
• Buffer in higher insurance costs. Old-school insurance numbers are old news. Get quotes before buying a deal to make sure your numbers still work—especially if you’re in a high-risk area. If the numbers don’t work, consider buying elsewhere.

Prioritize tenant retention and operational efficiency

• Strategize to maintain the tenants you have with longer leases, incentives for renewal, and staying in regular communication.
• Streamline maintenance routines and use tech tools like rent automation, mobile maintenance requests, and tenant portals. Continually examine expenses, and look for ways to improve them.
• Analyze your local market for rent growth, job creation, and property supply pipelines, and adjust accordingly. 
• Setting investment criteria such as net operating income (NOI), cash-on-cash return, capital expenditure reserves, cap rate targets, and expense buffers will help you continually adjust your numbers to meet your goals. Don’t go into this blind.

Consider green tech to lower costs

• For some reason, eco-friendly or green tech is often seen as “too trendy” for small investors to consider. However, simple adjustments such as solar-powered irrigation and lighting systems, energy-efficient HVAC systems, smart locks, mobile payment systems, and even artificial turf can help reduce expenses.

Final Thoughts

Being disciplined, data-driven, and adaptable are the keys to surviving in any business right now, and real estate is no exception. The great thing about real estate is that demand never wanes. If there is an attractive product, there will be someone interested in renting it. Making all the numbers work is where these components come into play. 

There is no one-size-fits-all solution for investors, as each has their own unique set of circumstances: a family member offering a low-interest loan with flexible terms, an institutional lender with defined criteria, or self-managing rather than outsourcing. If you can strategize how to survive the tough times, the good times will follow.

Is every asset class in a bubble? 

Whether you think so or not, the fears are all too plausible. Despite the longest government shutdown in history, reheating inflation, continuing tariff fears, a weakening labor market, and fraying geopolitical ties, the S&P 500 just recently notched a record high and remains close to it as I write this. The index has soared 19.6% over the last year. 

Big tech and artificial intelligence (AI) stocks look particularly bubblicious. Nvidia’s stock has skyrocketed 416% over the last two years, and the industry keeps announcing circular deals among the same few companies. 

Then there’s gold, up over 102% over the last two years, more than doubling its prior record. And that’s supposed to be the safe-haven asset. 

Even single-family home prices (averaging around $364K) continue hovering near record highs (~$366K) from earlier in the year. That comes in the face of a supply surge, longer days on market, and weakening income growth compared to inflation. 

As for cryptocurrencies, which run on pure speculation, the word “bubble” is never far from investors’ lips. 

Yet I can think of at least one asset class that isn’t in a bubble: multifamily real estate.

Multifamily’s Bubble Already Burst

There was a bubble in multifamily real estate in 2020-2022—and it burst. 

Over the two years from the second quarter of 2022 to the second quarter of 2024, the Fed’s Multi-Family Real Estate Apartment Price Index fell 25.2%. That’s not a correction; it’s a crash. No, worse than a crash: a bear market. 

When single-family home prices fell a similar amount in the Great Recession, people panicked. But the multifamily collapse barely made the news outside financial circles, because so few Americans own an interest in multifamily properties. 

Prices reached a bottom in the second quarter of 2024, and over the next year rose 5.5% (the most recent data available). Freddie Mac’s Apartment Investment Market Index shows 7.6% growth over the last year. 

(embed graph from: https://mf.freddiemac.com/aimi) 

Look at multifamily prices (the blue line) versus net operating incomes (the orange line), leading up to the Financial Crisis. They diverge far apart, then converge closer together after the correction. That’s the same pattern that is playing out right now. 

Multifamily prices and NOI haven’t been this close together since 2012, creating a bargain for investors. “We’re seeing a healthier equilibrium between income and valuations,” real estate investor Austin Glanzer of 717HomeBuyers told BiggerPockets. “For long-term investors, this looks like a rare asset where you’re buying after the bubble, not before it.”

Opportunities for Distressed Sales

Far too many operators overpaid in the bubble of 2020-2022, and bought with floating interest bridge loans. Those loans have been coming due, or driving cash flows underwater, and it’s forcing many operators to sell at a steep loss. 

As a real estate investor, you know the best bargains come from distressed sales. I don’t need to belabor the point. 

I will say that I have seen this firsthand in our co-investing club. We’ve invested in multifamily properties over the last six months, when the operator bought the property at a huge discount because it was in foreclosure. 

Why Multifamily Is Poised for a Rebound

Multifamily real estate has had a rough few years, while stocks, gold, crypto, and single-family homes kept soaring. 

That’s precisely why multifamily is poised for recovery. Developers have pulled back on building permits in multifamily. Redfin reports a 23% drop since the pandemic peak in apartment building permits over the last year. With less new supply hitting the market, rents will likely resume their upward march after stalling in much of the country over the last year. Concessions will likely ease, and NOIs will rise. 

People need a place to live, after all. And reduced new supply will help drive values higher. 

Options for Investing in Multifamily

You could buy an apartment complex by yourself, of course. But most of us don’t have $10 million just sitting around collecting dust. 

Alternatively, you can buy shares in REITs. On the plus side, you can buy shares with small amounts, and they’re liquid. But the problem with REITs is that they share too close a correlation with the stock market at large, which defeats the purpose of diversifying into real estate. 

You could also invest in multifamily real estate syndications, which come with their own pros and cons. The greatest downside: They come with a huge minimum investment ($50,000 to $100,000). 

If you invest by yourself, that is. Personally, I invest as a member of a co-investing club, where we meet on Zoom every month to vet a new passive real estate investment. We can each go in with $5,000 or more if we like that particular investment. Best of all, we get the benefit of each other’s expertise in vetting the risk together. 

Lastly, you can invest in private equity real estate funds. Most don’t allow non-accredited investors, however. 

Where Is Multifamily Headed?

The multifamily market is finally stabilizing after sharp swings during and after the pandemic. 

In the pandemic, eviction moratoriums effectively froze rents at artificially low levels. When moratoriums lifted, the rubber band released, and rents shot upward. They rose too far, too fast in many markets, even as construction of new apartment buildings flooded those same markets with supply. 

In the last 18 months, rents cooled and even dropped in many markets—a rare occurrence. Rents are now entering their winter rest period, poised for stronger growth in 2026. “Rent growth is normalizing after a post-pandemic whipsaw, expense pressures have begun to stabilize, and construction starts have slowed to pre-pandemic levels,” real estate investor Oren Sofrin of Eagle Cash Buyers told BiggerPockets. 

Personally, I don’t time the market. I practice dollar-cost averaging with my real estate investments: investing $5,000 a month, every month, through the co-investing club. 

But when people ask my opinion on the multifamily market right now, I actually think it’s one of the few asset classes that looks like a bargain. Sofrin agrees: “From a risk-adjusted standpoint, multifamily may be one of the few corners of real estate where future appreciation potential exceeds embedded downside risk.”

This article is presented by RentRedi.

When I first started managing my rental properties, maintenance requests would throw off my entire week. A tenant would call, text, or email about something being broken, and I would drop everything and scramble to find the right vendor, follow up for updates, and track receipts for bookkeeping.

This scramble was not sustainable, and I realized I needed a better system if I was going to continue self-managing my rental properties.

Creating a standard operating procedure (SOP) for handling maintenance requests is one of the easiest ways to streamline your property management and take the guesswork out of emergencies. An SOP is simply a step-by-step document that outlines how a specific process should be done. The SOP is a repeatable checklist that anyone on your team (or even a virtual assistant) can follow to keep things running smoothly—and keep you out of the scramble mindset.

Without a clear maintenance SOP, small issues can spiral into big problems. Requests can get lost in your inbox, vendors might forget to send invoices, and repairs could drag on longer than they should. 

This can be a problem, not only for you and your schedule, but for your tenants as well. Tenants might feel like they are being ignored due to maintenance delays. This could lead to more complaints and potentially higher turnover. 

For you and your finances, a lack of SOP can create problems. It becomes harder to track expenses, forecast budgets, or prove repair history for insurance or tax purposes without clear documentation in place. The result is a lot of unnecessary stress and inefficiency that could be avoided with a simple, repeatable process.

Why You Need an SOP for Maintenance

1. Consistency

When every request follows the same process, nothing slips through the cracks. You’ll know exactly where things stand with each repair, whether it’s a leaky faucet or a broken furnace.

2. Time savings

An SOP eliminates repetitive decision-making. You won’t waste time figuring out what to do next, because you’ve already mapped out your process for any request. This becomes especially valuable when you start adding more units or hiring help.

3. Better tenant experience

Tenants notice when you respond quickly and keep them updated. A clear maintenance system makes you look professional, builds trust, and encourages lease renewals.

The Step-by-Step Maintenance SOP 

RentRedi makes the tenant maintenance request process easy because everything can be handled directly inside the app, from the moment a tenant reports an issue to closing it out after repairs. Use this as a template or guideline to create your own SOP for your rental properties. 

1. Request submission by tenant

Everything starts when your tenant submits a maintenance request through the RentRedi app.

Tenant actions:

1. Opens the RentRedi app and selects Maintenance Request
2. Uploads photos or videos of the issue
3. Describes the problem (location, details, urgency)
4. Submits the request

Automatic system actions:

1. The request appears in your Maintenance Dashboard in RentRedi.
2. You receive an instant notification via email or app push.

This system eliminates the back-and-forth communication that often happens over text or email, and keeps everything documented in one place. 

2. Review and initial triage

As soon as the request comes in, review it carefully to decide how urgent it is and what kind of repair it needs. Having the tenant send photos and provide more detail as an option in their portal gives you so much more to work with in order to diagnose the issue and know who to call. 

My maintenance person always wants to know what tools and materials he needs to bring. Having all this information helps cut down the back-and-forth questions.

Steps:

1. Navigate to Maintenance > New Requests and open the submission.
2. Review the tenant’s notes and attachments.
3. Assign a priority level:
   • Emergency: Leak, no heat, broken exterior door lock (immediate response)
   • High: Affects habitability, but not an emergency (within 24 hours)
   • Routine: Minor issues (within three to five business days)
4. Add internal notes (for example, “Tenant reports leak near water heater. Photo shows minor drip.”)

Documenting maintenance requests the right way ensures that emergencies are handled fast, while less urgent tasks don’t get lost in the shuffle. 

3. Assigning a vendor or maintenance tech

Once you’ve reviewed the request, it’s time to send it to the right person. RentRedi gives you options for either assigning your own vendor or using their integrated 24/7 service.

Steps:

1. Click Assign Vendor, and select from your saved vendor list.
2. Additionally, you can leverage RentRedi’s full-service maintenance program to source vendors and repairs.
3. Add access details (for example, “Enter via garage code” or “Tenant home after 5 p.m.”).
4. Confirm the vendor receives the request and any attachments.
5. Message the tenant using the Maintenance Chat to acknowledge receipt and share the next steps, e.g., “Thanks for reporting this, Sarah. We’ve reviewed your request and have a vendor scheduled for tomorrow afternoon.”

4. Track progress

Now that the request is assigned, your job is to make sure it stays on track.

Steps:

1. Vendors can mark jobs as In Progress, Awaiting Parts, or Completed.
2. From the Maintenance Dashboard, filter by In Progress to view all open jobs.
3. Follow up if there’s no update after 48 hours for high-priority issues.
4. Use in-app chat to send progress updates to the tenant.

This keeps everyone informed and avoids unnecessary phone calls.

5. Completion and verification

When the work is finished, verify that the problem is actually resolved before closing it out.

Steps:

1. Vendor marks the request as Completed.
2. Vendor uploads before and after photos, and any invoices or receipts.
3. Review the images and confirm completion.
4. Update notes (for example, “Leak repaired by ABC Plumbing, replaced valve on 10/21/25.”)
5. Tenant receives a notification to confirm satisfaction or reopen the request if needed.

6. Recordkeeping and expense management

Good recordkeeping protects you during tax season and helps you track property performance. Keeping clean, accurate records of your maintenance expenses is just as important as getting the work done. Without organized bookkeeping, you can easily lose track of repair costs, overpay vendors, or miss valuable tax deductions. 

Proper tracking helps you see patterns, like which properties are costing the most to maintain or which systems need replacement soon, and it gives you a clear picture of your portfolio’s performance. It can also protect you during tax season or audits, since you’ll have documentation for every expense tied to a specific property.

Steps:

1. Attach invoices or receipts directly to the request.
2. Assign an expense category (for example, Plumbing, HVAC, Electrical).
3. Verify the cost appears in Properties > Expenses.
4. Export data for your accounting software.

Keeping these expenses organized in RentRedi saves hours of bookkeeping work later. 

7. Close and archive

Once everything checks out, close the request and move it into your completed file. 

Steps:

1. Mark the request Closed.
2. Move it to Completed Requests for historical tracking.
3. Review any maintenance analytics to get average response times, recurring issues, and cost trends.

This data helps you catch repeat problems before they turn into major repairs.

8. Follow-up and prevention

Finally, use what you’ve learned from past requests to plan preventative maintenance.

Steps:

1. Schedule annual or seasonal inspections.
2. Add recurring reminders in RentRedi’s calendar tool.
3. Keep your preferred vendor list updated for quick assignments.

Final Thoughts

Preventative work is almost always cheaper than emergency repairs, and having it built into your SOP ensures it never gets overlooked. A $75 HVAC filter change can prevent a $5,000 system replacement. Regular gutter cleanings can stop roof leaks and foundation issues before they start.

Beyond saving money, proactive upkeep protects your property value and keeps tenants happier, because problems are solved before they even notice them. When you build preventative tasks into your SOP, you protect your investment and create a smoother, more predictable operation.

If you’ve ever felt overwhelmed managing maintenance across multiple units, this process changes everything. Building an SOP forces you to think through every step once, so you don’t have to reinvent the wheel every time something breaks.

Whether you’re managing one property or 50, RentRedi’s maintenance tools give you the structure to respond faster, stay organized, and keep your tenants happy.

Ashley:
What if your very first offer gets rejected, not because of price, but because you insulted the seller.

Tony:
Today we’re breaking down three questions every Ricky investor needs to hear from partnerships to low ball offers, to avoiding classic beginner mistakes.

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

Tony:
And I’m Tony j Robinson. And with that, let’s get into today’s first question. Okay, so our first question today comes from Jackie in the BiggerPockets forms. Jackie says, I’m new to real estate investing. I currently have one long-term rental and I’ve been wanting to get into short-term rentals. I have a friend who is looking to move from her rental home to her first home to purchase and I wondered if we could buy a small multifamily home with her living in one unit and then short-term rent. The other units we have just started talking about this and she’s very interested in doing it so far. Also, we both have W twos, so we could split the workload and both potentially benefit from the tax advantages and income. We would have a lot to talk about and a lot to learn and research to do before embarking on this.
But I’m looking forward to the process. My question is, if we buy this together, how should it be structured? I’m presuming the partnership should be in some form of LLC since she would be living in one unit. Could we get a mortgage for a primary residence with the structure? Could we both qualify as materially participating? As long as we both put in the hours? Alright, so a lot of questions here, right? So there’s questions on how should it be structured, what are the limitations if the friend is living in this as a primary residence and then material participation. So I guess let’s talk about the structure first. And actually maybe you can start right, because you and your sister did something similar where it was her primary residence, but you guys both bought the deal together. How did you structure that with hey, primary residence plus joint real estate venture?

Ashley:
Yeah, and there actually is a very big difference between buying with a friend and buying with a family member. So especially if it’s going to be the primary residence. And the way this worked for me and my sister is, and I think it’s along the lines of how Jackie wants us to work with her friend, is that we bought the property together, it would be my sister’s primary residence and then rent out the other unit. My sister was going to live there, so she went and got an FHA mortgage on the property. It was only her going to be on the mortgage because she was the only person that was going to be living there. Me and her both went on the deed. My contribution was the down payment and my sister would be living there paying the additional amount in the mortgage. The benefit to her was she didn’t have a down payment.
The benefit to me was I was getting into a house for three and a half percent down and I didn’t have to come up with 20% down to actually buy this house and I was getting 50% equity. The difference here is if your friend is using an FHA loan is that they have to show where the funds came from for the down payment and I was able to gift my sister the down payment money. So I had to write a letter saying that at no time my sister has to pay me back that $14,000, which is true, she doesn’t have to. And so I was able to gift her that money and then she was able to go ahead and get the loan with gifting funds. It has to be a close family member. I can’t remember specifically, but like a sibling, a parent, like maybe an aunt and uncle or grandparent.
I can’t remember the rules exactly, but you couldn’t get the money gifted to you from a friend. So that’s where I think the complication would come into play as to when she went to get this loan for her primary residence, they would look at where all the funds coming from and so would your friend be okay with providing all of the capital for this deal? And then still putting your name on the deed of the property too and giving you equity in it. I think that’s one hurdle you would have to overcome is that it’s not like you both can bring 50 50 of the capital that you need to purchase the property because as their primary residence, they’re going to want to see where that money is coming from to purchase the property. If that’s it. I guess I just want to clarify that FHA loan, because I don’t know, is it conventional loan too that you would have to

Tony:
Make a great point Ash about it. Be an FHA and I’ve never done FHA before, but I believe, and obviously guys go talk to a lender, go talk to multiple lenders. Actually, I think that’s the advice here. First is Jackie, you and your friend should go shop around and talk to multiple lenders, explain what it is you’re trying to accomplish. You guys want to buy a small multifamily, let her live in one unit. You guys both kind of contribute financially towards the purchase, but is her primary residence and let them guide you on what the best loan product is because maybe it’s not an FHA loan for the reasons that Ashley mentioned, but I believe, and again, connect with your lender. I believe if the money has been in your account long enough, if it’s seasoned long enough, then they’re not as concerned about where the money came from.
Now I could be wrong, definitely go double check this, but I feel like when we were buying our primary residence, I feel like I remember hearing that at one point, but say you give her your a 50% today and you guys say, Hey, our budget is $50,000, so you give her 20 5K, it sits in her account and say it’s been a year. I think if the money’s been in there that long, I’m not sure if they’re going back to checks here. I think there’s a seasoning period like hey, if it’s been in there long enough that we’re not as concerned, but go talk to lenders. So I think that would be the first piece of advice is go shop it around,

Ashley:
Wire me 20 5K and in a year I’ll buy us out.

Tony:
We’ll be able to get an answer to that question.

Ashley:
I’m already seeing red flags of this because you’ll need to have something very concrete in writing besides just giving your friend money and say, let’s wait a year or two. Yeah, that side of things too.

Tony:
Totally agree with that as well. Right, and I think that gets into the structure, how you guys put this together. What is the agreement state? So usually if you’re going to buy a primary residence, it’s not going to be able to be purchased an LLC or an LLC is a business entity for business use and your primary residence is exactly that. It’s personal use. So again, lender can check me here if I’m wrong, but I doubt you would be able to buy a primary residence under any circumstances and have it deeded to an LLC.

Ashley:
Just on that, no. Real quick is what you could do is just buy it in the LLC and still live in the unit. You would just have to get LLC financing, which is usually on the commercial side of financing and you’re not getting the lower interest rate. Usually not the 30 year fixed unless you are doing A-D-S-E-R loan. But A-D-S-E-R loan usually requires it to be investment property only and you actually cannot live in the property where there is some kind of commercial lending or conventional loans where you could buy it in your LLC and live in the property technically if you wanted to, but you’re not going to get as good financing at all.

Tony:
So we’re seeing a lot of then that’s for this, right? But I think it’s because there is a lot of nuance to this question, but I think again, going back to the structure of the partnership, I would still make sure that even if it’s not necessarily owned in an LLC that you guys still have some sort of contractual agreement between the two of you about what this partnership looks like and 50 50, obviously that’s the easiest thing to do, but think about all of the other responsibilities to go into this. She’s going to be living there. Is she also going to be the property manager? If so, does 50 50 still make sense, right? Is one person bringing all of the capital, right? Are you bringing all the capital and she’s just getting the debt in her name? Maybe there’s a different structure that makes sense. So just look at what everyone’s bringing to the table and think about everything from the acquisition to the closing process to the management. Think about all those different pieces and divvy up who’s doing what, and then make sure that your partnership aligns with those responsibilities.

Ashley:
And I think too, one thing that me and my sister didn’t talk about is what happens when my sister moves out of the property? So when you rent the property out, is it then the cashflow is split 50 50? Is your friend that lived in the unit, is she getting all of that cashflow because she took care of the property and lived there and it’s her primary? So I think thinking down the road too as to what happens when she moves out of the property, what if your friend has trashed the place and it needs this big costly turnover before you can even rent it out? Is that the responsibility of both of you to bring capital to make those repairs and things like that? So I think thinking down the road too as to how to structure it, but you can go to biggerpockets.com/lender finder to get yourself connected with a lender, especially an investor friendly lender, even though those would be a primary residence, since it would be an investment for you, you can find a lender that would be able to tell you different loan options that are available in that market for you.
Okay, we’re going to take a quick break, but coming up, what happens when you submit a low ball offer, which I’ve done plenty of times, let’s just say not everyone takes it well. We’ll break it down right after this quick word from our show sponsor. Okay, welcome back. Our next question comes from Henry in the BP forums. I wonder if this question is from Henry Washington, one of our favorite BiggerPockets host here. So I am a real estate investor and a licensed realtor. I don’t know if Henry is a licensed realtor, so it might be a different Henry. I have clients who are interested in making lowball offers on various listings. They aim to have the seller cover the buyer’s agent commission as part of their strategy, their approach resemble, their approach resembles the bur method. For example, we have a three bedroom, two bathroom home and fair condition requiring less than 20 K in cosmetic repairs that has been on the market for over one year.
The price reduction has been minimal and the current listing price is 300 K. My clients want to submit an offer of 230 K. This is the Texas market. As a sellers or buyer’s agent, how would you respond to this situation? Okay, so this is coming from the real estate agent who has clients that want to actually submit this low ball offer. So to recap, it needs 20 K in repairs. The price is currently at 300 K. There have been a couple of reduction to get to that 300 k and they want to spend an offer of 230 K and it’s been on the market for over one year. I 100% low ball, low ball, low ball offer. If I had a property sitting on the market for a year and I’m getting close to that point, it’s under contract, not quite a year yet, we haven’t closed yet.
I would take a significant reduction to get rid of it. And of course it really depends on the seller’s motivation. The first thing that I do when I am looking at a property that’s been sitting is I use prop stream and I’ll go into stream and I will look at on most properties that have financing, they’ll tell you when a loan was taken out of on the property and then they’ll also tell you an estimated balance due. So I think this estimated balance is determined by if they made every single payment on time after 10 years, this is what it would be based on the mortgage they originally took out. And then it’ll show if there’s any other HELOCs or anything like that on the property. And I love to look at this to see if maybe there is the opportunity to get a price reduction because say on this three K property, I see they only owe $50,000 on the property, but if I go in and I see it’s estimated they owe 290,000, like okay, there’s probably way less chance of them taking a low ball offer.
But also I try to look at too if there’s an opportunity for seller financing if they don’t owe on the property or they owe very, very little where I could cover that with the down payment to pay off the property. So an additional option is doing the seller financing where maybe you can get closer to the price they actually want by offering seller financing. The last thing here is I’ll point out is that I don’t think that you should be afraid of submitting low ball offers. I think that is one of the biggest complaints from investors is that they don’t want an agent who won’t submit the low ball offers that they want an agent who is going to be okay with doing that because it’s uncomfortable in the first place. But I think that you should go ahead and submit the low ball offer.
First of all, I think this is a perfect example of when you should submit a low ball offer when it’s been sitting on the market for over a year to see what you can get. But yeah, I think as an agent, if you want to work with investors, you have to get comfortable with submitting these low ball offers and what’s the worst that will happen? They will say no. And my agent always does this, does a verbal offer first so you’re not wasting time drawing up a contract. Things like that, especially what are the chances that it’s been sitting on the market for a year and all of a sudden two investors submit their offers at the same time and now it’s a rush to see who gets in and gets the better offer. Most likely not happen. You can take your time, you can do a verbal offer and if they say yes, actually we would do that, then you can go ahead and submit the full offer, the full contract.

Tony:
And Asha, I think context matters here as well. If we were having this discussion when interest rates were 2.5%, then yeah, low ball offers aren’t going to get you anywhere in most markets, right? Because there’s just too much buyer interest. They have their pick of the litter for what offer they want to accept today. Very few buyers. And I think the competition isn’t nearly close to what it was two or three years ago when rates were a lot lower. So I think we have shifted toward a buyer’s market where buyers have more leverage in negotiations today than the sellers do because the sellers just simply don’t have as many people submitting offers. And what that means is that you don’t have to come 10 K over asking with no contingencies and giving up your firstborn child to get a deal accepted. Now you can say like, Hey, there actually are some issues with this house and I don’t think your price is a reasonable or fair expectation or representation of the value of this property and here’s my offer that’s significantly below you’re asking for. So I think the context of where we are at in the real estate cycle is an important thing to consider as well,

Ashley:
You know what? That actually gave me a really great prank to do on my kids this next house that I’m trying to buy. If I get it under contract, they’re going to be excited about it. I’m going to tell them I’m going to read them rumple still skin and I’m going to say, but I had to give one of you up and this is what’s going to happen. You’re going to go live with Rumpel still skin

Tony:
And that’s like the PTS that makes your kids hate real estate investing. Like my mom, mom stole me away for a good deal

Ashley:
If you guys haven’t seen it. Or a real recently came out of me at BP Con, I guess by the time to say is not so recent, but Turbo Tenant interviewed me at BP Con and they were asking me different questions and then one was, who was your favorite child? And they wanted me to tee it up as turbo tenant and then it pans to my kids that were there just shaking their head at me. That Turbo tenant was my favorite and not them. So they’re used to it by now.

Tony:
I think the last thing I’d add to you is just there are ways to maybe make your offer more competitive aside from just pricing. I think first, feel free to justify your offer. If they’re asking significantly more than where that deal makes sense, then walk them through your math. Say you’re asking for 500 K, but this kitchen and bathroom hasn’t been renovated since the eighties. There’s mold, the roof needs to be repaired and the house next door that was fully renovated sold for four 80. So there’s a disconnect here, Mr. And Mrs. Seller, here’s the scope of work that I need to do to be able to bring this house up to 2025 standards. Here’s what it’s going to cost me to do that. And yeah, I’m an investor, so I’d like to make some level of profit. So here’s the justification behind my figures.
And then there are ways you can kind of sweeten the offer. Maybe you close faster, tell them they don’t have to worry, but you’re not going to ask for any repairs during the closing process. There’s no contingencies around financing, whatever it may be. But those are the ways that you can justify your low ball offer to make you feel even more confident as you go to submit it. Alright, Hey guys, we’re going to take a quick break before our last question, but while we’re gone, be sure to subscribe to the Real Estate Rookie YouTube channel and you guys can find us at realestate Rookie and we’ll be back with more right after this. Alright, let’s jump back into our final question. This one comes from Grant. Grant says, I’ve heard people saying that they’ve got their first seven properties in like 11 months, some even crazier.
I currently have five properties, but I’ve used all of my money to purchase these properties at 25% down and now I’m renting them out. I would like to have 30 rentals. I have the deals, I just don’t have the capital to move on all of them at once. I know there’s private money lending that can fund some of these new construction deals, but I don’t want to sell them for a profit either. I want to keep them as rentals. Are there lenders that would let me pay them like a traditional mortgage over that long period of time? What do you guys think I can do to get to three properties per month? So first Grant, congratulations to you said you’ve got properties, you’re better than 99% of the people living in the United States right now. But I think let’s break down some of what you’re talking about. First, you’ve got this goal of 30 rentals and I think my first question to you is why? What is it about 30 that makes you believe that’s the right number for you? Is it because 30 gets you to a certain amount of cashflow? Is it because 30 gets you to a certain amount of equity? Is it just 30? Sounded like a nice neat round number? Are you like Ashley, where you want to get 30 before 30? What? I

Ashley:
Was waiting for you to say that.

Tony:
So what is it, right? What’s driving that? Because, and Ash and I, we’ve talked about this a lot as we’ve grown both of our portfolios, but scaling for the sake of scaling isn’t always the right option. And sometimes 10 rental properties, they’re just like punch above their weight class could be better than 30 mediocre properties. So I think the first question is why is it that 30 is the right number for you and do you actually need to get to 30 or is there some other number lower than 30 where if you could just produce more cashflow, you could still achieve the same goal? The second thing that I’d say is I think you’ve hit the nail on the head when it comes to private money, but you don’t necessarily need the private money for long-term debt. It sounds like you are looking to do maybe new construction or some combination of new construction in burrs.
And that is actually a great scenario for using private money. So the way that it would work is, say you’ve got a deal you’re trying to go take down and between your land acquisition and your construction, it’s going to cost you 300 K, but those will appraise for 400 when they’re done. You could go out, raise a 300 k fund, all of your land acquisition and your construction, say it takes you 12 months to do that. At the end of the 12 months, you now have a property that’s worth 400 K that costs you 300 to build. You go out, you refinance that, you get, call it, I don’t know, 80% of the appraised value, 80% of $400,000 is $320,000, right? So you have three 20, you only owe 300, you can pay them off with their interest and now you own this property free and clear or not free and clear, but without any cash out of pocket.
So that is a very repeatable process to build your portfolio using other people’s capital and then still paying them back every six to 12 to 18 months. So they’re getting their principle and their interest back. So if you have the ability to raise private capital and you’ve got the skillset to do new construction or burrs, that is probably the approach that I would take. It sounds like you’ve got the deals, you’ve got the capital, you just got to marry those two things together and structure it in a way that allows you to pay them back quickly.

Ashley:
Yeah, I think the thing that would stand out to me the most when you first read this question was I was thinking about paying off the properties or paying down the properties. I’d be interested to see how the numbers would compare as to taking that cashflow and taking your savings or whatever you build up over time to invest into another deal is if you were to pay off one of those properties, how would that change your cashflow compared to investing into a new deal like three years ago when you were getting low interest rates? I definitely wouldn’t have recommended this. So I guess it depends too as to what the interest rate is on your properties that if you’re two 3%, then it doesn’t make sense to pay off the property. But that’d be my only recommendation is to looking in that in addition to what Tony mentioned too. Well, thank you guys so much for joining us today. For this rookie reply. I’m Ashley. He’s Tony, and we’ll see you guys on the next episode.

The realities of a housing market correction are setting in. This could be the turning point for real estate that investors (and homebuyers) have been waiting for. Are you ready?

We’re back with our November housing market update, giving you the latest data on home prices, housing inventory, days on market, affordability, and where (and what) are the best opportunities for investors.

Sellers are growing increasingly desperate as the buyer’s market shifts further toward the investor’s side. And, with the seasonally slow winter months coming up, this could be the perfect moment to strike a deal.

There’s even better news to come. New affordability measurements are showing what most Americans thought impossible: an improvement in housing affordability. Could this set us on a trend where buying a home (at least temporarily) becomes affordable, and makes deals more profitable for investors? Dave lays it all out in today’s show!

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Dave:
President Trump has floated the idea of a 50 year mortgage. This could reduce monthly mortgage payments by hundreds of dollars per month for the average homeowner or investor, but at the same time, it would nearly double the amount of interest you pay over the lifetime of the loan. So would you take on a 50 year mortgage today? I’m gonna help you understand everything you need to know about this proposed new loan product and give you my take on whether the 50 year mortgage could make sense for real estate investors. Hey everyone. Welcome to On the Market. I’m Dave Meyer. Thank you all so much for being here today. This past weekend on November 9th, president Trump posted on social media his support for a 50 year mortgage. The idea here is that a longer amortization period will decrease monthly payments, ease debt to income requirements, and thereby help more Americans get into the housing market.
This is not the first time a longer amortized mortgage has been floated. People have been talking about 40 year mortgages for a while, but it does seem that by vocalizing his support, president Trump is getting more serious. And Bill Pulte, who is the director of the FHFA, which oversees mortgage giants, Fannie Mae and Freddie Mac, he has actually said that those agencies are working on it. So as of now, the loads aren’t available, but it is already sparking some pretty heated debate online about whether this is a good idea in the first place. And as you can probably tell, what happens here will certainly have big impacts on the housing market, and it could impact overall affordability. It can impact buyer demand, cashflow potential, and more. So today we’re gonna talk about everything we know so far and what the potential implications are. We’ll talk about the pros and cons, what the supporters say, what the detractors say, and I’ll give you all my personal opinion on the topic as well.
Let’s get into it. First up a little background, what is a 50 year mortgage and why is this a big departure from where we have been? First thing we all need to know and recognize is that although in the United States, the 30 year fixed rate mortgage is the most common one, there are tons of different formats for mortgages across the world. And in fact, the US housing market is very unique and pretty special in this regard because it has the 30 year fixed rate mortgage. And in a lot of ways, our housing market has sort of been built on the back of this very unique loan product. I know for Americans it does sound really normal because in the US it is, but in almost every other country in the world, the average mortgage is adjustable rate debt. They get a mortgage selecting for a couple of years, then it adjusts with interest rates every couple of years, which can make your mortgage payments lower upfront.
But it introduces a lot more uncertainty for buyers. That’s how most countries do it. But after World War II in 1948, actually, the United States was looking for ways to make home ownership more affordable and to boost the housing market. And they authorized the first 30 year fixed mortgage. It was specifically for new construction in the beginning, back in 1948. Then a couple years later in 1954, they authorized it for existing homes. And since then, it’s basically been the mortgage that almost everyone uses. As of right now, bank rate estimates that 70% of outstanding mortgages as of today are 30 year fixed and 92% are fixed rate in general. So some of them might be 15 or 20 year mortgages, but 92% of mortgages are fixed rate. Which side note is one of the reasons I believe that residential housing in the United States is such a good thing to invest in and why the market is unlikely to crash is because this fixed rate debt provides a lot of stability to the housing market that other industries just straight up don’t have.
So I think most people would agree that so far the 30 year fixed rate mortgage has worked pretty well in the United States. So the question that becomes why change it? Why mess with something that’s been working? Well, the answer comes down to affordability of course, and I’m a broken record, I talk about this on every show, but affordability is the challenge in the housing market and it’s what President Trump is trying to address with this proposal. The US housing market is near 40 year lows for affordability. Home sales are super slow. They’re at about 4 million annualized, which is like 30% below normal and with more rate stinks stubbornly high by recent standards. Despite fed rate cuts, there is no real clear path to better affordability, at least in the short term. Now, I’ve said on the show many times that I think affordability has to come back for us to have a housing market, and I do believe it will, but as of right now, just assuming this 50 year mortgage doesn’t come just for this one next point, affordability will come back most likely in the great stall.
The thing that I’ve been talking about a little bit, which is slowing housing price, maybe negative housing prices in some areas, meanwhile, increasing wages, modestly declining mortgage rates, those three things combined could get us back to affordability. But that’s gonna take time. That’s not gonna happen in the next year. It might not even happen in the next two or three years. It will take time on the current trajectory that we’re in. So President Trump, in proposing a 50 year mortgage is looking for a way to improve affordability sooner to make housing more affordable and give the housing market a bit of energy that it’s been missing for about three years now. So that’s the idea, but the question is will it work? Is this a good idea for homeowners? Is it a good idea for investors? Is it even allowed? Let’s talk about what this could actually do, and I’m gonna walk you through an example just using real numbers so you can see what the potential a 50 year mortgage has.
We’re gonna use an example using the median home price in the us. That’s $430,000 as of today. So we’re gonna start with that. We’re gonna assume pretty standard vanilla home purchase, 20% down and a 6.5% mortgage rate. If you were to go out and buy that today using the standard 30 year fixed rate mortgage, your monthly payment would be $2,175. I’m gonna do a little bit of rounding, but it’s about 2175. So that’s what most people look at is the monthly payment, which is 2175. But as investors, we need to look at other things that are going on in this loan because as you probably know, real estate investors don’t just make money on cashflow, which would benefit. Cashflow would get better if you had a lower monthly payment. But there’s an other old category of return that you need to consider, which is amortization, basically paying back your loan using income that you generate through rent that is known as loan pay down.
I’m gonna call it amortization. That’s sort of the technical term for it. And amortization actually provides a real return on your investment in year one of this loan. This example that I’m giving you, again, 430 K purchase, 20% down 6.5 mortgage rate, 30 year fixed. You would pay down using income from rent $3,850 of principal in that first year giving yourself an ROI of above 4%. Now, of course, 4% isn’t some incredible return, but it provides a really solid floor to your investment, right? Because even if your cash flow is 5%, you combine those three things together, you’re getting 9%. That’s without any of the tax benefits, that’s without any appreciation. So this is a meaningful part of the overall return profile that you were looking for as a real estate investor. The other thing to mention is that your benefit that you get from amortization increases over time.
This is a little bit technical, but basically the way that every mortgage works every 30 year fixed rate mortgage is, is that even though your monthly payment doesn’t change from month one to month two to month 360, it’s the same monthly payment. The amount of that payment that goes to principle, which is what you’re paying down, and the amount that goes to interest, which is profit for the bank, changes over time, and I’m sure you’re not surprised to hear this, but the amount that you pay to interest profit to the bank is very heavily front loaded, meaning that your first payment is gonna be heavily interest and you don’t pay off that much. But each subsequent payment that you make, you are paying off more and more and more. So when you get to year two, year five, year 10, year 20, your amortization benefit actually goes up.
So as an example, using this loan, yeah, it’s 4.4% your ROI on that year one, but by year 10, that goes up to 8%. That’s pretty good. By year 2025, it’s above 20% and it ends close to 30% with this mortgage. You are getting a solid floor in amortization the whole way, and it just gets better over time. That is super valuable. Over the lifetime of this loan, as you’re paying these 2175 payments, you will pay a total of $439,000 in interest, which is extremely similar to the price of the house. Remember, price of the house is four 30. So just rounding this, you’re basically saying that using this loan that I’m using as an example, you’re paying the house twice, you’re paying four 30 for it, and then you’re paying $439,000 in interest, which is a ton of interest when you look at it that way, but spread out over 30 years.
That’s kind of what our housing market is based off and what most people are comfortable with. So that’s a 30 year option. What about the 50 year option? Well, if you look at it with the same mortgage rate, which I should say is probably not going to happen. If a 50 year mortgage does come about, the mortgage rate is going to be higher than that of a 30 year note. There’s a lot of reasons for that. But it’s basically at higher risk for the bank to guarantee your mortgage rate for 50 years. And so they’re gonna charge you more in terms of interest rate for that increased risk that they are taking up. You notice this already right now, for a 15 year fixed rate mortgage, it’s about 50 to 75 basis points lower than a 30 year. And so we can assume that if you know your 30 year is six and a half, your 50 year would be seven, seven and a quarter, something like that.
But for the purposes of this example, ’cause we don’t know how much more it is, I’m just gonna use the same interest rate that drops your monthly payment from 2175 to $1,940, or in other words, $235 per month, about a 10% decrease in your monthly payment or 10% savings. How you wanna look at it, that’s not bad. It’s gonna make your cash flow better, it’s gonna make your cash on cash return look better. And there’s definitely something to that. That is the primary benefit of this 50 year option. But we have to look at the trade-offs here too, because obviously it’s not all upside for investors. When you look at the 50 year option, the principle that you pay down, the benefit you get for paying down your mortgage is just $934. Remember, compare that to the 30 year option. It was 38 50. So it’s basically only a quarter of the benefit that you get for amortization, or if you wanna look at it in the return on investment perspective.
Remember I said 30 years, 4.4%, your amortization, ROI drops to just 1.1% on a 50 year mortgage. And this means it takes you longer to build equity. It drops the floor of your return for your investment relatively low, which is a significant trade off. In a way, you are sort of trading amortization for cashflow, which is an okay decision for some people, but you have to recognize that this is a significant trade off. But the real kicker here too, on top of just amortization, is the total amount of interest paid. If you are accruing interest for 50 years, the total interest that you will pay over those 50 years on a $430,000 house is $819,000. Meaning that if you actually held onto this property for 15 years, which is a big if, and we’re gonna talk about that in just a second, you would pay a total of $1.24 million for a $430 house.
You were essentially paying for this property three times, two times in just interest, one time for the price of the house as opposed to paying two x for the 30 year mortgage. So that is a very significant difference. Now, I know that a lot of people are watching this and listening to this and thinking, well no and hold onto their property for 50 years. And that’s true, and that’s why for some people this might make sense if it does come to be ’cause it will improve your cash flow. But I do wanna call out that you will build equity at a lower rate no matter how long you own this property, because as I just talked about, the amortization benefit really declines. It goes to about a quarter of what it would normally be. So that equity that you normally build in a 30 year mortgage at a four, five, 6% clip, you are gonna be building that at a one two, 3% clip, which really matters over time and will matter regardless if you hold onto this property for two years, five years, or 10 years.
And if some people are saying, oh, I just do it upfront and then I’ll refinance. Well, that’s true, you could do that, but your amortization schedule restarts when you refinance, which means you go back to paying max interest on that first payment again and less principle. And you have to sort of start that curve all over again. So hopefully this helps. As an example of what a 50 year mortgage could do, it lowers the average payment by $235 per month, but also significantly increases the total amount of interest paid by the borrower. That’s the trade-off at hand. So the question now becomes, is this a good idea in general, is this a good idea to introduce for the United States? But also is it a good idea for real estate investors specifically? We’re gonna get into that, but we do have to take a quick break. We’ll be right back.
Welcome back to On the Market. I’m Dave Meyer talking all about the 50 year mortgage that President Trump proposed just a couple of days ago. Before the break, we talked about what the trade-offs are in terms of the math and underwriting deals. Now I wanna turn our attention to whether or not this is a good idea in general for the United States, the housing market, and specifically for real estate investors. Now, let’s just talk about pros and cons because there are both. There is no right answer here. There are trade offs. The pros of a 50 year mortgage. People who are supportive of this idea point out that a 50 year mortgage would increase housing affordability in the short term, and that is absolutely true. We just talked about that it would be a roughly 10% reduction in the monthly payment since there are a lot of people on the sidelines or potentially people, you know, it’s just sort of on the fringe of whether they want to get into the housing market or not.
This could be the boost that they need. This could increase demand and give the housing market a bin of juice that it’s been missing for the last couple of years. It is hard to say and quantify how much, $200 in savings on the medium price home would increase demand, but I do think it would at least increase some demand. Anytime you see affordability, improved demand should increase other things being equal, and I think we would see that happen. And what happens when demand goes up? Well, prices go up as well. And so depending on who you are, you might see that as a benefit or a negative. Like if you already own property, if you’re an existing investor, if you’re a real estate agent, if you’re a mortgage broker, you’d probably wanna see these things happen, right? You wanna see some activity back into the housing market, you’d like to see home prices go up.
So that’s a benefit there. The other benefit is it’s still a fixed rate mortgage, which I always love. It’s a predictable payment schedule for the borrower, which is great. And although we don’t have the specifics yet, I would assume that the terms of a 50 year would be similar to the terms of a 30 year for most homeowners, assuming you could still prepaid a mortgage without penalty, you could refi into a different product at any time. So this could just be a tool to add flexibility to the market. It’s another potential option for home buyers. So those are the pros. What about the comments? Well, we already talked about one of ’em. That is that there is just much higher total interest, right? You would be paying way more to the bank over the lifetime of your loan and you would build up equity much slower from a math perspective, just on an individual deal basis, that is guaranteed on a 50 year mortgage.
The second thing, again, depending on who you are and how you view these things, the price impact could be negative because adding that new demand, making housing more affordable by adding a 50 year mortgage could push up prices and in the short term affordability would get better. But you gotta think about what’s gonna happen a couple of years from now when all the people who are sort of on the fringe and are gonna be boosted into the market from that $200 benefit. What happens when they push the prices of homes back up and then all of a sudden prices are unaffordable again? Is this actually better with the affordability bump even less? I think that’s a super important question and a potential downside to this proposal is that it doesn’t actually fix the problem. It doesn’t fix affordability in the long run. It’s just kind of kicking the can down the road.
The other thing that I mentioned earlier that I just wanna reiterate is that on a 50 year mortgage, your rates will be higher. In my example, I use six and a half for both. But my guess is that if six and a half was the normal for a 30 year fixed, we’d see mortgage rates on a 50 above seven. And so you’ll not just be paying an accruing interest for 20 years longer, you’ll be accruing that at a higher rate. Another reason that your total interest and your amortization are gonna be worse than if you use a shorter term loan. Now, those are just roughly the pros and cons. I’ll say that experts, people who talk in this field, I’m just giving you a rough benchmark, I think most of them are not in favor of this idea. There are some prominent people who I respect who are in favor of this idea, but I wanna just read something that Logan Mo wrote.
He’s a frequent guest on this podcast. He writes for Housing Wire. He’s one of the best analysts in the game. I read everything he writes and he wrote, I quote, I understand that we have housing affordability challenges in America, but subsidizing more demand from 30 to 50 year mortgages is not the policy we wanna take. Now. Housing has to balance itself out through slowing home price growth and wage increasing as it has for many decades to add another subsidization to the market, just prevents that healing process from occurring, which also prevents less equity build out as well. So I am not a fan of any increasing in the amortization. The 30 year fix is perfectly fine as is and quote, that is a perfect summary of how I feel about this idea, although I think is an interesting idea. I do not believe this is actually going to provide the long-term fix that we need for the housing market or affordability.
And there have been plenty of ideas, this being one of many that are short-term fixes to the housing market problems that we have. But I like Logan, think that this is at best a temporary bandaid and it will actually slow down the real correction that needs to happen in the housing market. To me, the great stall that I’ve been describing on the show for a while is the better option. I personally would prefer for the market to be flat or even decline for a couple of years modestly, I’m not saying it crashed, but decline for a couple of years so that prices become more affordable while wages rise, while mortgage rates come down a bit, all while hopefully there is some government action to actually increase supply in the housing market as well. To me, this is the sustainable way that the housing market gets better in a more permanent sense than just putting a bandaid on it and trying to make affordability better.
In the short run. If we just introduce a 50 year mortgage, that will help in the short run. It will bring a new demand, it will push up prices though, and those homeowners will just be paying more and more to the bank and will still have a long-term affordability problem. So I’m not saying that it wouldn’t work in the short term. I’m not saying that people wouldn’t use it. I do think people would use it. I’m just saying I think that the better long-term affordability path is through stall or slightly declining housing crisis, which is already starting to happen. We’ve talked about this, but last four or five months, we’re already seeing the great stall materialize. The prices are stagnating, they’re starting to come down. They’re down in real terms. Mortgage rates have come down modestly, real wages are growing. That means four or five months in a row, housing affordability has improved.
It’s just going to be slow. Now, I do wanna acknowledge that if they introduce a 50 year mortgage, that it could bring some life into the housing market, which we do really need. I get that. I feel that, but I think it would be temporary, which is why I am not into this idea so much. It’s a bandaid and delays the long term fix. If this was some bandaid that could hold things together while the long-term issue was worked out, I would be into that. But I think this would actually actively slow down the long-term housing improvements just to bring forward some demand and sales and then we’d be back in the same place a couple years from now. All right, everyone, we gotta take a quick break to hear from our sponsors, but we’ll be back with more on the 50 year mortgage right after this.
Welcome back to On The Market. I’m Dave Meyer. Let’s dive back into our conversation about 50 year mortgages. That’s my general take, but I wanted to answer if they do get introduced, would I personally use them? My answer to that is no, not at this stage of my investing career. $200 a month in cashflow is just not worth it to me to lose amortization essentially and pay double the interest. I would rather go out and find a better deal that works at a 30 year fixed rate mortgage. That’s a more reasonable timeframe that I can wrap my head around like I am 38 years old right now. I can go buy properties that the 30 year fixed and reasonably hold onto them and have them paid off in my retirement. I actually recently, in the last couple of weeks, I’ve been looking at using 15 year notes because I hope to be retired in about 15 years and I’d like to pay that off.
So I am more interested in sacrificing short-term cash flow so that I can pay less total interest, and by the time I really need my cash flow when I’m actually retired, I won’t have any debt at all. That’s currently how I think about it. Now, if I were in a totally different phase of my investing career, I would consider it, right? I, I don’t know if I would do it, but I can imagine a world where I would consider it. Like if I was 55 years old or 60 years old and I wanted to buy new properties and I don’t really care about the long-term interests, I don’t care. I just wanna maximize cashflow. All I care about at that point in my life is cashflow. I might do it, I might think about it, I’m not sure. But I do think that there is an argument to be made that for investors who are almost entirely cashflow focused, that this would actually be good.
Now, what we know from President Trump and Bill Tate is very little. We do not know if they implement a 50 year mortgage, if it would even be offered to investors. We don’t know, like this might just be a primary homeowner thing, but I just wanted to share with you some of my thoughts about this topic. But before we go, I just also want to talk a little bit about just benchmarking. Will it happen? Obviously we don’t know, but I just wanted to call out that as of right now, the rules that dictate a lot of mortgage lending in the United States do not allow it. Under the Consumer Financial Protection Bureau’s ability to repay qualified mortgage rule, a qualified mortgage loans term cannot exceed 30 years. That’s the current rule. A 50 year loan still could exist, but it would be non-qualifying. That means there would be fewer legal protections.
It would be harder and costlier to get, or they could just change those rules, which might happen Now, right now, if you look at the FHA, you might know that there are 40 year modifications allowed, but not origination. So basically, you can’t apply for an FHA loan with a 40 year modification. But since all these banks have these new tools, now these lenders have tools to mitigate foreclosures and delinquencies. They can recast your mortgage essentially into a 40 year modification. That’s possible right now, but you can’t originate at 30 years. This is true in the VA too. It’s 30 years as well. And the same with the GSE. So Fannie and Freddie, they won’t buy 50 year terms. So those are non-conforming loans. So the bottom line here is that like a, a big sweeping change to get 50 year mortgages cheap would require regulatory changes to the CFPB, to Consumer Financial Protection Bureau to amend those qualified mortgage terms.
Then you need FHFA to change Fannie and Freddie guides, that kind of stuff. That is all possible. Actually, Congress isn’t required. They could choose to try and legislate these things, but it would not require Congress to change these things. They’re more rule changes within government agencies. So I think there’s a reasonable chance this happens. Obviously, it’s just been a preliminary conversation, but it does seem like there is a administrative pass for this to happen, should President Trump want to pursue it. So overall, just in conclusion, I do think this is something we gotta watch because if it happens, we could see demand into the market that could help the housing market in the short term. But my guess is that that would only last for a couple of years, and I think it could be concentrated mostly on lower price homes. I just don’t really see a scenario where people who can afford a 30 year mortgage choose to go with the 50 year mortgage, just a $200 in savings or $400 in savings.
It’s just not enough for how much interest you’re paying over time. The trade-offs just seem tilted in the wrong direction to me, and so I think maybe people who have no other option, we’ll use this as an option, but it won’t be that broadly adopted. That said, I still think it’ll bring demand and provide some transaction benefit in the housing market. But again, regardless if this gets adopted or not, the big ugly affordability challenge we have right now in the US housing market is gonna come back. Unless supply is added and prices moderate. That’s the only thing that’s really going to work long term. That’s my take. Obviously, there’s no right answers here. People feel strongly about both sides. There are reasonable arguments on both sides of this equation. So I’m curious what you think. Let us know what you think about the prospects of a 50 year mortgage in the comments below if you’re watching on YouTube or in the comments if you’re listening on Spotify. Thank you all so much for listening to this episode of On the Market. I’m Dave Meyer. I’ll see you next time.

If real estate investing is all about cash flow, President Donald Trump’s proposed 50-year mortgage touts itself as being a winner for homeowners and landlords. The reality, however, is a little more complicated.

The affordability crisis currently gripping the U.S. housing market has been exacerbated by stubbornly high interest rates, insurance costs, and high home prices. A 50-year mortgage would lower the payments compared to the current standard 30-year mortgage, making affording a home easier. However, with payments spread out over a longer period, the interest paid on the loan would be much higher.

A crucial area where a 50-year mortgage would not help is with the down payment, which is a pressing issue for potential homeowners. A 20% down payment doesn’t change, regardless of loan length. 

Despite this, Federal Housing Finance Agency Director Bill Pulte referred to the plan as “a complete game-changer.”

“We are laser-focused on ensuring the American Dream for YOUNG PEOPLE, and that can only happen on the economic level of home buying. A 50-year mortgage is simply a potential weapon in a WIDE arsenal of solutions that we are developing right now,” Pulte wrote in a post on X Sunday morning.

FHA Loans: How Small Landlords Can Benefit

Clearly, the 50-year mortgage is primarily targeted to owner-occupants, enabling them to get a foothold on the housing ladder. Although the White House has not explicitly ruled out investor loans, those have not been highlighted or seem to be a priority.

Investors, however, could benefit from 50-year FHA loans for two-to-four-family owner-occupied houses. The attractive aspect of an FHA loan is that it circumvents the usual 20% down payment criteria by allowing homeowners and owner/investors to qualify with as little as a 3.5% down payment, as long as one unit is owner-occupied. Add a lower monthly payment into the mix, and they could be a fruitful combination for small multifamily owner-occupants.

The real issue with a 50-year mortgage, however, concerns the interest rate. If the rate is similar to a 30-year mortgage, the question homeowners would need to ask themselves is: How much am I really saving every month, versus the interest I would have to pay over 20 extra years of payments?

In 2023, HUD amended its usual 30-year policy for loan modifications, allowing them to be recast into 40-year loans for struggling borrowers. However, those loans were designed to avoid foreclosure rather than to originate new loans, and they are the exception—prevailing FHA rules mandate 30-year loans.  

How Investors Could Get Creative With a 50-Year Mortgage

Investors who do not plan to house hack a two-to-four-unit home could still potentially benefit from a 50-year mortgage on their primary residence by lowering their overall household expenditures and freeing up some cash to apply to their rental properties, either for repairs, to pay down debt, or for portfolio expansion, thus increasing cash flow. This is a helpful strategy if they don’t plan to stay in their personal residence for too long.

Things get even more interesting if a personal residence or a second home is also used as a short-term rental. Applying a 50-year mortgage to this increases cash flow, which can then be applied solely to the principal rather than partially, as with an amortized payment. However, all these scenarios only make sense over a short-term period, not a longer term where the interest payments stack up.

Hurdles to a 50-Year Loan

To offer new 50-year FHA financing, Congress and regulators would need to rewrite core statutes—no simple feat, given Dodd-Frank Act limitations post-2008 crisis. There are significant regulations that limit maximum amortization periods, and these would have to be changed before a 50-year mortgage product becomes mainstream.

The Dissenters

A former stalwart Trump acolyte, Rep. Marjorie Taylor Greene, R-Ga., has come out as one of the new mortgage proposal’s chief critics, writing a post on X stating that the plan for lengthier mortgage terms “ultimately reward the banks, mortgage lenders, and home builders while people pay far more in interest over time and die before they ever pay off their home.” 

Although this logic is clearly aimed at owner-occupants rather than investors, it does address one of the chief goals of long-term investing: being debt-free. It’s an opinion echoed by experts.

“Borrowers might be able to pay less monthly principal and interest, since the loan would be spread out over half a century,” explained Kate Wood, NerdWallet lending expert, to CBS News. “But the total interest paid over the life of the loan would be staggering, since even with a low rate, you’re looking at 50 years’ worth of interest.”

Ultimately, a 50-year mortgage may prove self-defeating if it does not coincide with greater housing supply. Boosting affordability could result in higher buyer demand, further pushing house prices higher. Joel Berner, senior economist at Realtor.com, told CBS News, “This is not the best way to solve housing affordability.”

50-Year Mortgages on Steroids Are Already Available for Investors

Real estate investors already have an arsenal of loan products available to them if they choose to go the nontraditional route. Interest-only loans are 50-year mortgages on steroids. While stepping outside the traditional mortgage box could result in higher interest rates and qualifying criteria, when bundled with a construction loan that converts into a permanent interest-only payment mortgage, these are great options for BRRRR-type investors because there is no refinance component to the equation, thereby decreasing closing costs. It’s also worth noting that a 40-year nonqualified loan already exists and is available from several well-known lenders.

Final Thoughts

It takes a certain type of personality to want to be a real estate investor because, even when things are going comparatively well, it’s a scrappy, bare-knuckle brawl type of business. Dealing with tenants, the vagaries of the economy, housing inspectors, combative lenders, and ongoing repairs is not for the faint of heart. 

The only insulation investors have against hostile headwinds, which never seem to abate, is being debt-free. That should be the ultimate long-term goal, unless increasing equity and selling at a profit is the game plan. No one wants to enter their later years worrying about tenants, repairs, and mortgage payments. 

In addition, passing highly leveraged buildings on to your kids is not a good idea if your offspring are not built for this business. So, with that in mind, the phalanx of loan products aimed at lowering monthly payments is only a temporary panacea, prolonging the ultimate goal, which is either selling at a profit or paying off the debt.

Keep these goals in mind, use profits to pay down debt, keep your living expenses in check, have some liquidity in your bank account, and choose a loan product—whether a 30-, 40-year, interest-only, or 50-year mortgage, if they eventually become available—that serves as a means to an end rather than delaying that end.

As if gauging the current real estate investment landscape weren’t tough enough, with fluctuating interest rates, tariffs, and economic uncertainty, redistricting in Texas and California has added another twist to an evolving—and some would say confusing—scenario.

What Is Redistricting, and What Does It Do?

The redistricting issue began in the summer, when the Republican-led legislature announced plans to redraw congressional seats in the middle of the decade. The intention was clear: to send more Republicans to the House of Representatives in Washington. By carving up districts, Republicans hope to maintain full control of Congress after the 2026 election.

California has responded by redrawing its own districts to boost Democratic representation by five seats, thereby canceling out the Republican move. Now, other states have jumped onto the redistricting bandwagon and plan moves of their own, including:

• Alabama
• Florida
• Illinois
• Indiana
• Kansas
• Louisiana
• Maryland
• Missouri
• Nebraska
• New York
• North Carolina
• Ohio
• Texas
• Utah
• Virginia
• Wisconsin

Is Redistricting the Right Thing to Do?

There’s a lot of contention about redistricting. The phrase Democrats commonly use to justify Proposition 50 is “fight fire with fire.”

“There’s this war going on all over the United States. Who can out-cheat the other one?” former Republican Gov. Arnold Schwarzenegger told CNN’s Jake Tapper in October. “Texas started it. They did something terribly wrong. And then all of a sudden, California says, ‘Well, then we have to do something terribly wrong.’ And then now, other states are jumping in.”

Texas Senate Bills 15 and 840

Investors in Texas also have to consider newly signed real estate legislation—Senate Bills 15 and 840, which targets municipal zoning regulations to enable more flexible housing development in the state’s largest cities with populations exceeding 150,000 and counties of at least 300,000. This, unlike redistricting, is not speculative.

The bills are designed to enable residential development without the red tape imposed by zoning restrictions, allowing construction on smaller lots and for commercial buildings to be easily converted to residential use to curb the housing crisis in metro areas. Targeted cities include Austin, Houston, and Dallas-Fort Worth.

Texas: Transportation and Industrial Expansion 

Redistricted areas are expected to remain politically stable and attract ongoing federal and state investment, making them solid places to invest in real estate. Specifically, the suburban and exurban markets around Austin, Dallas-Fort Worth, and San Antonio could be poised for growth as funds for transportation, utilities, and industrial expansion are expected to boost land values and rents. 

However, jumping the gun and throwing dollars into real estate areas targeted for redirecting could be premature. Civil rights groups are challenging the efforts, and legal delays seem inevitable. 

California: Tenant Protections, Green Investments

California voters approved Proposition 50 in the Nov. 4 elections, temporarily redrawing the state’s congressional map. For real estate, this means political influence over redistricted areas, accelerated public spending on sustainable development, more substantial support for tenant protections, and likely, a modest bounce in property values.

The stakes are high in California, as they aim to dilute Republican power by merging rural, more Republican-leaning parts of far Northern California with the more liberal areas closer to San Francisco. It means that contentious housing policies will prevail in previously Republican areas.

Specifically, the Inland Empire district under the purview of Rep. Ken Calvert (R-Corona), the longest-serving member of California’s Republican delegation, would be eliminated under Prop 50. Instead, a new Democratic-leaning seat would be created in Los Angeles County.

“I don’t want Newsom to have control,” said Rebecca Fleshman, a 63-year-old retired medical assistant from Southern California who voted against the measure, told CNBC. “I don’t want the state to be blue. I want it to be red.” 

Home Values Could Be At Stake

The passing of Prop 50 would apply to the 2026, 2028, and 2030 elections, after which the 2030 U.S. Census would return to conventional and independent means of having lot lines drawn. Before that, however, other GOP seats in Greater Sacramento, the San Joaquin Valley and areas near San Diego could be diluted.

“Redrawing district maps can change which communities feel well-represented, what public investments they expect, and how a neighborhood even feels,” Jessica Vance, a San Diego real estate agent, told Realtor.com.

Realtor.com senior economist Jake Krimmel said:

“Usually, a discussion of home values and maps centers on school districts or municipal boundaries. And this is for good reason: Things like good schools, safer streets, well-maintained parks and public spaces, and lower property taxes can all increase home values. Families are willing to pay more to enjoy these local public goods and services, and typically you have to live within certain catchment areas (e.g., school districts or city boundaries) to do so.”

An Approach to Investing Along Redistricting Lines

For investors, the keyword in all this is “caution.” Until all legal arguments against redistricting are resolved, knowing how much to spend and where to spend it is up in the air. 

What does seem inevitable is that the debate is far from over, with other states preparing to enter the fray and government investment possibly shifting to areas that have been redistricted. Should areas be redistricted, investors should pay specific attention to:

School boundaries 

• Top-tier schools drive house prices and demand for residents.
• Changes can happen fast and surprise house flippers in the middle of a project.

Community resources

• A lack of government funding can result in neglected infrastructure.
• Poorly maintained public areas (parks, libraries)
• Poor safety (lack of public lighting, policing)

Taxes

• Better neighborhoods, including those that have recently been districted, usually have higher tax rates and municipal fees. This is important for landlords, as it affects cash flow. Flippers will also need to price accordingly.

Zoning

• While zoning is not usually directly affected by redistricting, it can shift demographic profiles, school districts, and political priorities, which in turn can lead to zoning changes.

For example, affluent, high-tax neighborhoods with good school districts tend to be zoned for single-family housing, while less attractive school districts tend to allow more multifamily housing. Clearly, for investors looking to scale and buy small multifamily units, or flippers looking to earn more profit from a single-family flip, these are important considerations.  

Final Thoughts

What’s often lost in the conjecture about redistricting is that politicians are now trying to pick their voters rather than voters choosing their politicians. The potential changes afoot are massive. According to The University of Richmond Spatial Analysis Laboratory, the number of residents assigned to a new congressional district due to these changes in Texas and California alone will number 20 million, or 6% of the nation’s population. When other states choose to do likewise, the numbers will increase even more. 

There will obviously be many of these residents who won’t be happy about the changes and will want to leave. There will also be legal challenges thrown into the mix before that happens. 

For real estate investors, the best policy is to wait until the dust settles. Trying to get ahead of the game and buy based on speculation is a risky move. In the meantime, old-school metrics for cash flow and flip profits should prevail.