This article is presented by NREIG.

Most real estate investors insure their properties based on what they think the home is worth. After all, if the market says your rental is worth $320,000, shouldn’t your insurance policy match that number?

Unfortunately, market value and rebuild value have almost nothing to do with each other. One reflects what a buyer might pay. The other reflects what it would cost to reconstruct your property after a total loss. When those numbers don’t match your insurance coverage—and they usually don’t—you’re either exposed to major out-of-pocket costs or wasting money on bloated premiums.

This misunderstanding is so widespread that investor-focused insurance partners like NREIG see it constantly when reviewing new clients’ portfolios. Most investors are underinsured because no one ever explained how these values actually work.

Here’s a clear breakdown of why market value and rebuild value differ, what insurers really look at when setting your coverage amount, and how to make sure your rental is properly protected. The goal is to help you avoid one of the most expensive, preventable mistakes investors make.

Market Value Explained

When investors talk about what a property is “worth,” they’re almost always referring to market value. It’s the number that shows up on Zillow, in your appraisal report, or in neighborhood comps. Market value only tells you what a buyer is willing to pay, not what it would cost to rebuild the structure. 

Market value fluctuates constantly because it’s tied to dynamic, often emotional forces. A few of the biggest drivers include:

• Location: Proximity to good schools, jobs, amenities, and low-crime neighborhoods boosts your market price—even if the structure itself is nothing special.
• Supply and demand: Hot markets can send prices soaring. When demand slows, prices slide, even though construction costs may not change.
• Comparable sales: What similar homes have sold for recently helps determine today’s price, even if their materials or construction costs differ from yours.
• Property size and features: Upgraded kitchens, finished basements, and added square footage raise market value, but they don’t necessarily raise rebuild cost in proportion.
• Land value: Market value includes the land, which doesn’t burn down, blow away, or get rebuilt.

Market value vs. assessed and appraised value

This is another common point of confusion:

• Assessed value is for taxes.
• Appraised value is for lenders.
• Market value is what a buyer will pay today.

These numbers rarely match each other, and none of them determine the correct insurance coverage amount.

Why market value is usually higher than rebuild value

In most cases, demand for the neighborhood, scarcity of homes, or land appreciation push the market value higher than the cost of construction. But in some areas, especially where labor or material costs are high, the opposite can happen.

Either way, market value isn’t the number you insure.

Rebuild Value Explained

If market value is about what a buyer will pay, rebuild value is about what a contractor will charge. And those numbers often live in completely different universes.

Rebuild value represents the full cost to reconstruct your property from the ground up after a total loss, including labor, materials, debris removal, and compliance with today’s building codes.

Reconstruction isn’t as simple as multiplying your square footage by a quick estimate. Carriers factor in highly specific, hyperlocal variables, including:

• Demolition and debris removal: Before you can rebuild, you must clear what’s left. After fires, storms, or structural collapse, demolition alone can run tens of thousands of dollars.
• Labor and material costs: Unlike mass-produced new builds, reconstruction is often a one-off project. Custom labor, material shortages, and local contractor rates push costs up.
• Inflation: Lumber, roofing, drywall, and electrical components have all seen dramatic pricing swings over the past few years. Insurers track these shifts constantly.
• Code upgrades: Even if your property was grandfathered in under older codes, a rebuild must follow current standards. That often means adding cost for electrical, plumbing, insulation, or structural improvements.
• Catastrophe surge pricing: After major storms, wildfires, or tornadoes, labor and material costs spike because everyone is rebuilding at once.

Rebuild value doesn’t include land, dirt, or the lot itself. None of this is factored into rebuild value, because land doesn’t get rebuilt.

This is why insuring a property for its market value almost always leads to mismatched coverage.

When rebuild value is higher than market value

While market value is usually higher, certain markets flip the script, especially in:

• Rural areas with low demand but high construction costs
• Older neighborhoods require extensive code upgrades
• Regions with significant labor shortages

In these cases, a property might sell for $180,000 but cost $250,000 to rebuild, leaving massively underinsured investors shocked after a total loss.

When insurers determine how much coverage your rental property needs, they ask: “If this home burned to the ground tomorrow, what would it cost us to rebuild it?”

That is why carriers base coverage on rebuild value, not market value. Your policy is designed to restore the physical structure, not reimburse you for the neighborhood, land, or the market premiums buyers are willing to pay.

The risks of getting the coverage amount wrong

When your insured value doesn’t match the true rebuild cost, you face two major problems:

1. Underinsuring: If your coverage is too low, you’re responsible for the difference during a total loss. Investors are often stunned when a $50,000 gap becomes their problem—not the carrier’s.

2. Overinsuring: If you insure for too much, you’re paying higher premiums for coverage you can never use. Remember, insurance will not typically pay more than the rebuild cost.

Insurers use reconstruction cost estimators that factor in:

• Local labor rates
• Material pricing down to the component level
• Square footage and property layout
• Construction type and quality
• Roofing and siding materials
• Regional cost multipliers

This data is updated frequently, especially in volatile material markets.

Why accuracy matters at claim time

When a major loss hits, the policy amount becomes the limit that determines how quickly and completely your property can be rebuilt. If the coverage is correct, your carrier handles the reconstruction without major financial strain on you. If it’s wrong, you’re writing large checks.

How Investors Can Maintain Proper Coverage

Understanding market value versus rebuild value is the first step. The second, and the one most investors overlook, is making sure your insurance coverage stays accurate over time.

Properties change, materials age, renovations add value, and labor and material costs shift. That means your policy needs regular attention if you want it to perform the way you expect during a claim.

Here are the essential practices every investor should build into their annual rhythm.

Review your policy every year

Insurance isn’t a “set it and forget it” expense. A quick annual review helps ensure:

• Your coverage amount still matches current rebuild costs.
• Inflation hasn’t pushed construction pricing beyond your limits.
• Any recent claims, improvements, or occupancy changes are reflected.

A 15-minute check-in each year can prevent massive coverage gaps.

Report renovations, upgrades, and additions

Upgrades like a new roof, updated plumbing, finishing a basement, or converting a garage directly affect rebuild value. If you don’t report them:

• You may be underinsured.
• You risk a reduced payout.
• In some cases, claims might be partially denied because the policy doesn’t match current conditions.

Insurers need accurate details to calculate accurate coverage.

Verify construction details for accuracy

Rebuild calculations are only as good as the data behind them. Common investor mistakes include:

• Wrong square footage on file
• Incorrect construction type (e.g., frame vs. masonry)
• Outdated roof age
• Missing upgrades that reduce risk (like electrical or plumbing replacements)

A quick review of your declarations page can help ensure everything matches reality.

Consider inflation guard or extended replacement cost

These policy features automatically increase your coverage annually to keep pace with rising construction costs, especially valuable in times of volatile material pricing.

Even with these features, though, it’s important to verify the base rebuild calculation is correct.

Where Most Policies Fall Short (and How NREIG Fixes It)

Most investors juggle acquisitions, turnovers, leasing, maintenance, bookkeeping, and financing. Insurance renewals feel like just another task—until a claim happens. Being proactive now is far easier (and much cheaper) than trying to fix coverage gaps after a loss.

A reality most investors learn too late is that many insurance policies are built on incomplete or outdated property details. That’s where gaps appear, which are exactly what cause denied claims, delayed rebuilds, and large out-of-pocket expenses.

Investor portfolios are especially vulnerable because properties vary widely in age, construction type, condition, and renovation history. Most traditional insurers aren’t built to track these nuances, and they certainly aren’t designed to manage rapid changes across multiple rentals.

When investors come to NREIG for a policy review, the same issues consistently show up:

• Incorrect rebuild valuations: Policies are often based on old estimates or generic cost calculators that don’t reflect the property’s actual materials or systems.
• Missed upgrades: New roofs, replaced HVAC systems, updated electrical panels, or finished basements never make it into the carrier’s file, leaving the home underinsured.
• Missing ordinance or law coverage: If a rebuild triggers required code upgrades, some policies don’t cover the added cost.
• Outdated details: Incorrect square footage, wrong construction type, or unlisted features can throw the entire valuation off.

Traditional insurers typically aren’t equipped to catch these details proactively—but investor-focused insurers are. NREIG works exclusively with real estate investors, which means their entire process is designed to eliminate the coverage gaps that cause problems for landlords.

Here’s what makes the difference:

• Accurate, investor-focused underwriting: Their team evaluates rebuild value using detailed property characteristics, not generic templates.
• Portfolio-level consistency: Whether you own one rental or 40, NREIG standardizes your coverage so you aren’t juggling mismatched deductibles, endorsements, or valuation methods.
• Proactive guidance: NREIG flags missing updates, valuation discrepancies, and potential coverage gaps before they become claim-time surprises.
• Coverage designed for investors: From rebuild alignment to loss-of-rents protection to code-upgrade coverage, policies reflect actual investor risk, not assumptions.

Most investors don’t have the time (or desire) to micromanage insurance details. But without accurate rebuild values and investor-specific protections, your portfolio is exposed. NREIG fills that gap by making sure your coverage reflects reality, and stays that way as your properties evolve.

Make Sure Your Coverage Matches Reality

If there’s one takeaway here, it’s that your insurance policy is only as good as the rebuild value behind it. If that number is wrong, everything built on top of it—your premiums, coverage limits, claim expectations—falls apart.

Too many investors only discover the gap after a fire, storm, or major loss. By then, the missing tens of thousands come directly out of their pocket.

You don’t have to take that risk. NREIG specializes in helping real estate investors verify rebuild values, identify coverage gaps, and align policies with the way rental properties actually operate. Whether you own a single-family rental or a multistate portfolio, their team can help you:

• Validate the accuracy of your current rebuild valuations.
• Identify underinsured or overinsured properties.
• Standardize deductibles, endorsements, and protections.
• Ensure code upgrades, loss-of-rents, and liability coverage match your strategy.

Your next step is simple: Get a quick coverage review from NREIG. It’s fast, investor-friendly, and often uncovers issues that would otherwise stay hidden until a claim. 

You’ve worked too hard to build your portfolio to let an avoidable insurance mistake jeopardize it. Protect your investments with coverage that’s aligned to real-world rebuild costs, not guesswork.

This article is presented by TurboTenant.

Every December, I would hit a point where I would look at my rental business and think, it’s time for a reset. The paperwork would start to pile up, tenant questions came in at all hours, and I could feel myself relying on pure memory instead of solid systems. 

If any of that sounds familiar, you’re not alone. Most landlords reach the end of the year realizing they have been putting out fires instead of building an organized business that runs smoothly.

But the start of a new year gives you a clean slate. It is the perfect time to get your rentals in order, tighten up your processes, and create a business that feels manageable rather than chaotic. Whether you own one unit or a small portfolio, a little intentional organization now can save you a lot of stress throughout 2026.

This guide will walk you through simple steps that make a big difference in your rental portfolio. We will talk about how to document everything throughout the year rather than having a year-end scramble, and how automation can help lighten your workload.

By the time you finish reading, you will have a roadmap that helps you run your rental business with confidence all year long. Most importantly, I’ll show you how to do it without spending hundreds of dollars a month or hiring employees. 

Ready for that fresh start? Let’s dive in.

Save Time and Automate Everything You Can

Most landlords discover very quickly that manual management does not scale. It is not sustainable to handle every reminder, message, invoice, and task by hand. 

Automation can be a great tool, but some landlords avoid it because they feel it will replace the personal connection with their tenants. However, it helps to remove the repetitive work in your daily operations so you can focus on decisions that actually move your business forward. 

Today, there is software to streamline property management. You just need to know how to implement it effectively. 

Stop making rent collection personal

Rent collection tends to be the most stressful for landlords, especially when you are still handling it through reminders, texts, or in-person payments. When rent becomes a personal interaction, you start absorbing the emotions that come with it. You may feel guilty sending reminders or frustrated when someone pays late. Even if you try to keep it professional, the dynamic can shift in a way that affects the entire landlord-tenant relationship.

Automation fixes that. When tenants receive automatic reminders and submit payments through an online portal, everything is clear and predictable. There is no confusion about due dates, back-and-forth messages, or the need for you to follow up. A system like TurboTenant handles the rent collection process, providing structure for your tenants and peace of mind for you.

The automation and software also creates a clean paper trail that becomes incredibly valuable if you ever need to enforce your lease or review payment history. This removes the need to dig through old messages or try to remember conversations you’ve had with your tenants. Everything is recorded and easy to access.

Streamline your maintenance management

Maintenance requests are another huge source of frustration for landlords. The repairs themselves aren’t the issue—it’s the messy process behind maintenance requests and repairs. If you’ve had requests come through texts, phone calls, photos, or random emails, you know how hard it can be to keep track of what needs to be done and what’s already been handled.

A streamlined system gives tenants a clear place to submit requests, and a clear process for you to manage them. You can see every request, track its status, document communication (with both the tenant and repair person), and upload photos or invoices. This removes guesswork and stops things from slipping through the cracks.

An automated system can also help with tenant satisfaction. When tenants can see their request is logged and being taken care of, they feel heard. They trust that you are on top of things. This can result in fewer emergency calls and misunderstandings, and more predictable maintenance planning on your end.

Log all incoming and outgoing business transactions

Your rental is not just a piece of property. It is a business, and it should be treated as such. Businesses rely on accurate financial records. 

Unfortunately, this is where a lot of landlords fall behind. They start out with good intentions, saving receipts in a folder or making notes in a spreadsheet, but life gets busy, and bookkeeping gets pushed aside.

When your finances are unclear, it becomes incredibly difficult to make good decisions. You cannot analyze your performance, forecast expenses, or prepare for tax season without solid, accurate numbers.

By automating your rental accounting, you create a real-time view of your business. Every expense and payment is logged automatically, which means you always know your cash flow, profit, and how your property is performing. This level of visibility helps you plan ahead, reduce surprises, and treat your rentals like the business they are.

Prepare to Scale Your Business the Right Way

If 2025 felt busy, unpredictable, or overwhelming, you’re not alone. Lots of landlords got stuck in the cycle of responding instead of planning, with poor operations and messy bookkeeping. 

Scaling successfully in 2026 starts with building a foundation strong enough to support growth. Even if you’re scaling a small portfolio, you need to think like a business by implementing systems that help you stay organized, make smart decisions, and free up your time.

Create a standard operating procedure (SOP)

An SOP is simply a written guide for how your rental business works. It spells out what you do, how you do it, and when it needs to happen. It includes everything from how you screen tenants and handle maintenance requests to how rent is collected.

Having processes in writing does two important things. First, it keeps you consistent. You do not have to reinvent your workflow every time a tenant needs something or a new lead comes in. 

Second, it sets you up to delegate tasks in the future. When you bring in help—whether a virtual assistant, handyman, or property manager—they can follow the exact steps you already use.

Your SOP becomes the instruction manual for your business. It removes guesswork, reduces mistakes, and ensures every property is managed the same way.

Use free tools to find and analyze deals

One of the quickest ways to level up as an investor is to analyze more deals. The more deals you run numbers on, the sharper your instincts become. You start to spot patterns, recognize red flags, and make decisions with confidence.

Free deal calculators take the heavy lifting out of math. Instead of building spreadsheets or trying to calculate returns by hand, you can plug in the numbers and get instant clarity on potential cash flow, operating expenses, and estimated performance. This saves time and helps you stay consistent in your approach to scaling.

These tools also help you compare properties quickly. When you know your buy box and can analyze deals efficiently, you stop wasting time on properties outside your goals and focus on the ones that actually move your portfolio forward.

Delegate whenever possible

Growth requires letting go of some tasks. Many landlords try to do everything themselves in the beginning, but that becomes impossible once you start scaling. Delegation is your next step when your business scales beyond your available time.

Start by handing off tasks that drain your energy or fall outside your strengths. Maybe that’s bookkeeping, tenant communication, or coordinating maintenance requests. When you delegate repetitive or time-consuming tasks, you open up space to focus on strategy and acquisition.

Your SOP plays a major role here because it allows you to bring someone on and hand them a clear, step-by-step guide. They can follow the process exactly as you wrote it. This keeps your business running smoothly—even when you are not directly involved in every detail.

Getting your rental business organized for 2026 does not have to be complicated. It’s really about building a strong foundation. When you document everything, automate the repetitive tasks, and build systems around your operations, you give yourself the freedom to grow without feeling overwhelmed.

Final Thoughts

If you want all these pieces in one place, this is the moment to invest in a property management software that supports your goals. TurboTenant can help you screen tenants, collect rent online, manage maintenance requests, track your finances, and stay organized without juggling multiple platforms.

Start the new year with systems that make your life easier. Your future self will thank you when 2026 feels smoother, simpler, and far more manageable.

Dave:
The Fed cut rates again yesterday. They also at the same time announced a new measure that they typically reserve for more emergency style crises that seems to be somehow flying under the radar. But today we’re gonna unpack it, all of it. We’re gonna talk about the Fed’s announcement, some of the details behind the scenes that gives us clues about what might happen next year, the announcement of this new tactic meant to stabilize the economy. And on top of all the Fed news, we’ll also share the most recent housing market data that gives us some clues as to what markets will thrive and which will struggle in 2026.
Hey, everyone. Welcome to On The Market. I’m Dave Meyer, housing market analyst, real estate investor, head of real estate investing here at BiggerPockets. Today on the show, we’re gonna dig into three pretty big news stories. First, we gotta talk about the Fed. We all know they cut rates, but there was more to this meeting that meets the eye. And even though mortgage rates did not really fall based on the cuts, there are some clues in the most recent announcements from the Fed that help us understand the broader state of the economy and the housing market, including some big news no one really seems interested in talking about, but I’m definitely interested in talking about it, so we’re gonna get into that. Then we have other housing market news for you. It’s the last time we’re doing this before the end of the year. We’re gonna talk about some inventory trends and some housing affordability news that think’s gonna really shed light on some investing conditions heading into 2026.
So let’s do this thing. First up, we’re talking about the rate cuts because, of course, we are. The Federal Reserve cut rates for the third consecutive meeting, basically doing what was largely expected of them. If you asked any economist, real estate investor, trader on Wall Street, everyone knew there was going to be a 25 basis points cut, which is exactly what happened. The federal funds rate now sits between target range of three and a half to 3.75%. And this is part of a trend. Yes, they’ve done it the last three consecutive meetings, but if actually you look back over the course of the last 15 months, they’ve actually brought rates down a considerable amount. 1.75% in just the last 15 months alone. And I know that might not feel like a lot, especially if you’re particularly interested in mortgage rates coming down. But I just wanna call out that if you look at this in a historical perspective, seeing rates fall that much over this short of a period of time is a lot.
It’s probably because they overtightened. I think we could all probably say that now, but they’re doing basically what they need to do to hopefully bring it back towards a more balanced monetary policy. Now, that part, like I said, is not news. But some of the behind the scenes stuff that got announced yesterday, I think is news and is worth talking about because it does give us hints about where the Fed might be going, where other types of monetary policy things that might more directly impact mortgage rates are going to go. And there’s just all sorts of things we need to unpack. So the first thing I think that you need to know is that this was the most dissent in a Fed vote that we’ve had for a while. I know a lot of people think that Jerome Powell is a dictator or he just decides what monetary policy is gonna be.
That is not how it works. There are 12 Federal Reserve governors and they vote on the direction of monetary policy. For a long time, five, six, seven years, basically since the beginning of COVID, maybe even below below that, the Fed governors have basically voted in a block. Like maybe there’s someone who disagrees, maybe there’s two people who disagrees, but this vote is the first time in more than six years that there were three Fed officials who voted against the Cut. Now that’s not crazy. It’s not like a split decision. Nine people still voted for it, three against it, but it shows to me that the Fed itself does not know where mortgage rates are going. There is increasing uncertainty about what they’re supposed to do. And, you know, people say the Fed should do this, Fed should do that. The Fed is not one thing, it’s 12 different people, and those 12 people are increasingly disagreeing about what they should do.
And I’ll talk about, more about what that means in just a minute, but I thought the interesting thing about the dissent, the three people who voted against this, is they all weren’t doing it for the same reason. Two people said that they didn’t think that the cut was warranted at all. They’re probably people who are more worried about inflation than the labor market. Remember, the Fed has this dual mandate. Their job is to balance inflation and the economy overall, kind of the labor market, and they’re in a tough spot right now. I don’t think anyone could say that they’re in an easy position right now and these decisions are easy. Some people are gonna think inflation’s a bigger concern. Some people are gonna think labor market is a bigger concern. Two of the voters believed that actually inflation’s a bigger concern than the labor market and they shouldn’t cut rates at all.
One of the voters though actually said that they’re very concerned about the labor market, not really concerned about the inflation, and so there should have been a bigger cut. So clearly the broad agreement that the Fed has had amongst its members over the last couple of years is starting to break down. But not crazy. Like I said, nine of the 12 voters felt that an, like a measured step was appropriate, that helping out the labor market, signaling to the market that they’re going to lower rates was appropriate. Even though there are still risks of inflation, they felt that this was the right thing to do. That was the majority view. Now, the Fed does release something called the summary of economic projections. I love looking at this. This is my favorite part of any Fed meeting. They basically pull the 12 voters and say, “Where do you think GDP is going?
Are we going to recession? Where do you think the unemployment rate’s going? Where do you think the federal funds rate should go over the next couple of years?” And this, obviously, they don’t know, but maybe they know a little bit better than us. I think based on their track record the last couple of years, I don’t know if they could realistically argue they know much better than us, but they are at least informed economists, people who look at this stuff all the time. So it’s kind of helpful to know where they think things are going, because you can sort of back into some of the monetary policy based on that. What they are showing is that they think that inflation is going to peak in early 2026. So they think that because of tariffs, because of some of the immigration policy, inflation has picked back up this year.
Again, nothing crazy. You know, it was heading down to the low twos, now it’s in the low threes. It’s above the Fed’s target, nothing close to where we were in 21, 2022, but it’s up. It’s been up. We haven’t gotten data for the last, like, three months, so we don’t really know what’s happening over the last couple of months, but it has been up. But the Fed sees that as short term. Those are famous last words. They called, uh, inflation transitory 21 and 22. That wasn’t right. That was just straight up wrong. But I think there’s reason to believe that this might be a more muted case of inflation. I am hoping so, because I’ve seen some other arguments that inflation might remain sticky, not go crazy, but like it, instead of going up to five or six or 7%, it might just, like, be really hard to get it back below three.
And I think there are reasonable arguments there, but the Fed doesn’t think that’s gonna happen. Largely, they believe that inflation is gonna go down next year from about 2.8%. I’m using PCE inflation, not CPI, if any of you nerds care. Um, but then it will go down to about 2.5, then to about two, and then they think they’ll actually get to the Fed’s target closer to 2028. They are also forecasting no recession. They’re saying they’re expecting real GDP, inflation adjusted GDP to grow. About two-ish percent for the next four years, that’s about average. Average GDP growth is two to 3%, so they’re saying nothing crazy there. And as a result of that, because they don’t think there’s gonna be a recession, and they don’t think inflation’s going to be crazy, but it’s going to be sort of mild around the board, they’re saying that they’re only expecting one interest rate cut next year.
Isn’t that crazy? That’s, that is less than I was expecting. I thought they would say more. They are saying, you know, we’re gonna end 2025, median federal funds rate, 3.6%. Next year, for the whole year, they’re saying the average is gonna be 3.4%. So that’s 125 basis point cut. The year after that, in 2027, they’re saying 3.1%. So as of right now, their path that they are projecting is just two more cuts for a total of 50 basis points over the next two years. Now, these are not promises. These are just forecasts, but the Fed is very honest that they change their opinions with every data print. Every time they get inflation data or GDP data or unemployment data, they change their minds, but I just wanted to call out, because I think it’s important that people know that we’ve gone from this period where everyone was expecting the Fed to be continuously cutting rates to a point where they’re saying like, “Hold the brakes.
We don’t know what we’re gonna do, and our most likely path is not a lot of rate cuts.” So that’s something to keep in mind. Now, of course, you might be sitting there, and I would not blame you for sitting there and saying, “Why do I even care about this because it doesn’t even impact mortgage rates?” And that is true, right? People for years have been saying, “The Fed’s gonna cut rates, mortgage rates are gonna come down.” I have on this show for, I think years now been saying that that’s not really how this works, and hopefully we have enough evidence now that everyone understands that the Fed does not control mortgage rates. We just saw them yesterday cut rates 25 basis points. Mortgage rates went down by like 0.05%, a tiny little bit, and they’re actually up from where they were in September when the federal funds rate was higher.
So hopefully we all understand now that the federal funds rate controls shorter term interest rates. This is not 10-year treasuries, which is what we care about with mortgage rate. It is not 30-year fixed rate mortgages. What it could help with is short-term borrowing costs. So it’s what people call the short end of the curve. It can help support asset prices and equities, like if you’re looking at the stock market, it could help bolster the stock market. It could sure up the financial system. It could even potentially help the labor market. But are these cuts helping mortgage rates in the first place? No. So I’m telling you this because, yes, people might be discouraged when they hear this news that the Fed’s not gonna cut rates much more, but hopefully you see now that that is not what matters when it comes to mortgage rates. We’re still sitting at 6.3%.
In order for mortgage rates, residential mortgage rates to actually come down, we need one of two things to happen. There are other ways things can happen, but one or two major things typically can bring mortgage rates down from where we are today. We either need inflation to go down, ideally below 2%, which I think will probably take a while, or we need to go into a significant recession where people take their money out of the stock market and they put them into bonds. Those are the ways that this happens. Right now, it does not feel like either of those are imminent, right? There’s risks of a recession for sure, but like, are we, you know, in the next month or two gonna go into a deep recession? Doesn’t seem that likely. The data doesn’t support that. Inflation’s been going up for four or five months, and I think even if it turns the corner in early 26, the way the Fed expects, it’s probably a slow road down from there.
And so until this log jam of uncertainty works itself out with inflation and recession, we’re not getting a lot of movement in mortgage rates. That’s why I’ve said next year, I think the range is gonna be between five and a half and six and a half percent, and my guess for an average is somewhere around 6.1, 6.2% for next year. I don’t think it’s gonna go down that much. Now, if you’re in commercial real estate, this could help because commercial loans are based on shorter term loans, right? You have a three-year arm, a five-year arm. Like I said, what the Fed does more directly impacts those shorter term types of loans. And so this could help HELOCs. It could help any loans that are tied to SOFR. Uh, it could help commercial loans. So that is good. For the coal commercial real estate industry, which needs a win, this could help, but again, temporary expectations because rates are not expected to come down much more than they are today.
If there’s a big recession, that could change, but as of right now, people are expecting monetary policy to remain somewhat stable. Now, that’s the big news. That’s sort of what’s being covered everywhere in terms of the Fed news. But I just wanna call out something else happened yesterday with the Fed that not a lot of people are talking about. I wanna talk about it because I think it’s super interesting and it could be a stepping stone to actual real mortgage rate relief. We’re gonna talk about that, but first we gotta take a quick break. We’ll be right back.
Welcome back to On the Market. I’m Dave Meyer. Before the break, we talked about sort of the headline Federal Reserve news, but what I wanna turn our attention to now is something else that happened with the Federal Reserve yesterday, because the big news is always what they’re going to do with the federal funds rate. As we said, they cut it 25 basis points, but yesterday, they did something else. They pulled out another tool of their little bag of tricks, and they announced that they would begin buying treasuries in January. Specifically, they’re going to be buying short-term treasuries. These are short-term loans. In a program they call reserve management purchases. So although this might sound like quantitative easing where the Fed has gone out and bought long-dated US treasuries or went out and bought mortgage-backed securities, they’re saying that this is different, at least for now.
They are saying that because they are just buying short-term treasuries, it is not quantitative easing. Their goal in this reserve management purchases is to basically … It’s kind of like a technical move to ensure the smooth functioning of the financial system. They are trying to be proactive to address potential strains in short-term funding markets, and that they can ensure … Their goal is basically to ensure that that federal funds rate, the one we were just talking about, that the range is to be between 3.5 and 3.75, they basically need to put liquidity into the system to make sure that the costs that banks pay to borrow money overnight from the Fed, that’s what the federal funds rate is, stays between 3.5 and 3.75%. If they didn’t make these purchases, if they didn’t inject liquidity into the system, their concern is that even though they lowered the target, in reality, because there wasn’t enough money, there wasn’t enough liquidity, that banks would be paying more than their intention, and that could basically negate the entire point of the interest rate cuts in the first place.
Now, I know this is, like, real minutiae. This is, like, literally the plumbing of the financial system, but this stuff matters. I think a lot of people have learned over the last couple of decades that the stuff that you usually don’t see going on in the financial system often carries big, considerable impacts on the rest of the economy, and for normal people like you and me who normally have nothing to do with this. Now, again, the official view here is saying that they are just doing this technical thing. They’re trying to ease liquidity pressure, and they don’t want any stress in the money markets, making sure that the wheels of the financial system keep turning. Of course, there are more skeptical views out there, most notably, you know, if you guys know who Michael Burry is of the big short fame, he’s been saying that, “I don’t know if this is really as innocuous as it seems.” He’s basically pointing out that it’s just another piece of evidence that the economy is more dependent on the Fed than ever, that they need the Fed to essentially be micromanaging the economy in order for it to stay afloat.
Because what they’re saying about this stress in the market is that if they didn’t do this, if they didn’t start buying these treasuries, and it’s a lot, it’s $40 billion of treasury, so it’s not an insignificant amount of money. If they didn’t do this, then rates would go up, and that could negatively impact the stock market. It could negatively impact short-term interest rates. Now, I tend to take them at their word for now, that they are just trying to make sure that the policies are working in the way that they do. But the reason that I am bringing this up is because I have said before on this show that I think that there is a chance, I don’t know if it’s the most probable chance, but that there is a chance that the Fed will start buying long-dated treasuries or mortgage-backed securities again. They have not said that they are going to do that.
They have said that they are not going to do that. But as housing affordability becomes more and more in focus, and if there is more stress in the financial system, if the economy starts to falter, if we start to see the labor market really start to deteriorate, which, by the way, the Fed yesterday said that they thought government jobs numbers are being overestimated by 60,000 per month, so maybe the labor market isn’t as good as they are saying that it is. If all these things happen, the Fed, the President, everyone, the Treasury, might start looking for ways to improve housing affordability. They stimulate the economy in new ways that don’t have to do with just lowering the federal funds rate, and buying mortgage-backed securities and buying long data treasuries might be on the table. This is one step closer to that. I don’t think we’re close to it, don’t get me wrong, but to me, the fact that they no longer are doing quantitative tiding, and they are starting to add to their balance sheet, this is a big shift in policy.
They’ve been selling things off their balance sheet for years, now they’re adding to it again. So it just sort of paves the way for more ways to add to their balance sheet in the terms of long-dated treasuries and mortgage-backed securities, and the reason I’m telling you that is because that would really bring down mortgage rates. That is not like the federal funds rate where it’s like, “Oh, this kind of has this indirect long tail way of impacting mortgage rates.” If the Fed starts buying long-dated treasuries or mortgage-backed securities, you will see mortgage rates come down. That could be the thing that drives it down below 6%. That could drive it down to the low fives. If they go crazy, which I doubt they will, it could go into the fours. So that is the thing to watch for when you see these Fed meetings. It’s a long explanation, but I really do think it’s important here because to me, this is kind of the X factor for 2026.
I’m not saying it’s likely to happen, but I think there is a chance that it happens, and it’s something you’re gonna wanna know about if it happens, because if this does ultimately bear out, it’s gonna change the housing market very fundamentally. Demand is gonna go up. We’ll probably see supply increases, home sales volume is going to go up. Some people think this could really send us into crazy appreciation. I don’t necessarily think that, but this would be a major shift, and they are taking a step towards it. So this is something we are going to keep an eye on, on, on the market for the next year, or indefinitely, and I wanted to give you this explanation of what’s going on here so that when we talk about it, you have the context to understand why this really, really matters for the housing market. And I would say definitely more than what’s going on with the federal funds rate.
This is the real news we need to watch for from the Fed, yes or no, are they gonna start quantitative easing again? I don’t think it’s yet like a fifty fifty chance. It’s not that probable, but that probability in my mind just went up yesterday. That’s what we got for the Fed News. Hopefully you guys understand that there’s a lot going on here. Even though mortgage rates didn’t move that much, there’s a lot going on behind the scenes that tells us that we could be in store for more changes in 2026. We are gonna take one more quick break, but when we come back, we’re gonna talk about some new inventory and housing affordability data that we have that gives us some indications about which markets are going to be hot and which ones might struggle in 2026. We’ll be right back.
Welcome back to On the Market. I’m Dave Meyer. We’ve talked about the Fed. We’ve talked about them adding to their balance sheet, increasing, in my opinion, the possibility, although still remote, that we’ll see quantitative easing in 2026. Now we’re gonna turn our attention to some housing market data, specifically inventory and affordability data that gives us a look at what markets might do well next year and which ones might see the biggest corrections. Now, as you know, I believe that inventory is the story of 2025. It’ll probably be the story of 2026 unless there’s quantitative easing. That, that’s the story of 2026. But for right now, inventory is still the story. It is up a healthy amount this year. It depends on who you ask, but if you are looking at realtor.com, they’re saying it’s up about 14% year over year, which sounds like a lot, and it is a significant increase over where it was last year.
Last year, this time, we’re at about 950,000 active listings. Now we’re at about 1,070. So it’s gone up about 1120,000 in the last year, and that’s important. And I think you see this a lot in the news that inventory is skyrocket. You see a lot of the housing bros or crash bros say that this is a sign that the housing market is going to crash because inventory is going up and up and up. But I think there’s a couple things odd here. There’s something called the base effect, which is when you compare to an artificially low last year, the growth in one year looks really high. And as we know, during the pandemic, inventory was artificially low. And so seeing it grow from year to year is not surprising. That is exactly what you would expect. It’s actually what you should want. That is a sign of a healthier housing market that we are getting closer to pre-pandemic levels.
Now, that’s what I wanna focus in here on because I think the measure that we should be looking at is not what happened year over year, but is what is going on in inventory compared to pre-pandemic levels because the last four or five years have not been normal. It’s hard to say like, oh, compared to 2022, inventory’s doing this and that has these huge implications because those were super weird years. But by comparing to pre-pandemic levels, we have a comparison at least to the last known, quote-unquote, normal housing market. So let’s talk about that and talk about some of these geographical differences because they’re kind of crazy. Overall, national inventory is still down below pre-pandemic level. So if you see those sensationalist headlines, remember this. Overall inventory, homes for sale in the US, still below where they were in 2019 by about 70,000 properties. 70,000 is not that much, right?
It is getting pretty close. So I think that’s good and is probably why we are seeing the signs that the housing market is getting a bit more healthier. The balance between buyers and sellers is getting better. Inventory is restored to normal levels. Days on market are starting to get back to normal levels. It’s largely because this inventory is starting to normalize. So overall, I don’t see this as a panic. This is not a reason to panic. But if you actually break this down by individual markets, you’ll see there probably are some states that are seeing conditions that are likely to lead to significant declines in prices. And by significant, I don’t mean like crash. I mean like four, 5%. Like to me that’s significant, it’s not a crash, that’s a deep correction, right? And then there are other states that are still well below pre-pandemic level.
I’m guessing if you listen to the show, you could probably guess what those regions are, but I want to dig into this a little bit. I’ll even throw up a map on there for anyone who’s watching this on YouTube right now. Yellow is sort of places that are below. Pre-pandemic levels, blue are places that are above. And everything in yellow, most of the places in yellow that are deep yellow are all in the Northeast and the Midwest. So the state right now with the lowest inventory compared to pre-pandemic levels is Illinois. 57%. That is a lot. 57% below pre-pandemic levels, even here in 2025, almost 2026, that’s a lot. New Jersey, negative 55%. New York, negative 40. Alaska, actually, that’s outside the Northeast. But Alaska minus 40. You actually see North Dakota as an outlier there, minus 40. A lot of the Midwest as well, Wisconsin, Minnesota, Michigan, Ohio, Pennsylvania, Vermont, all of them still below pre-pandemic levels.
Now on the other end of the spectrum, you see a lot of markets, I would say, are mostly in the Sunbelt and in the West. So the state with the most inventory above pre-pandemic levels is Arizona with 39%. That’s also a lot. Like, uh, there was normal healthy levels of inventory in 2019. Now you’re 40% above that. That’s a lot in Arizona. In Texas, it’s 34%, Tennessee is 37%. Florida, which is sort of one of the epicenters of a crash right now, is 23%, not as crazy as these other ones, but that’s still up. You also see Colorado, Washington, Nevada, all up there as well. Now, the reason this matters is that any market where inventory is significantly above pre-pandemic levels, I think is at risk of price declines. Arizona is at risk of price declines. Texas, Tennessee, Colorado, Washington State, Utah. These are places that I think we will see downward pressure on prices in the next year.
This is just how it works. When there is an increase of inventory, there is going to be downward pressure on pricing. And I want to remind people that inventory does not mean the number of properties that get listed for sale. That is called new listings. Inventory is a measure of how many properties are for sale at a given point in time. And it sounds like the same thing, but it is an important difference because inventory, unlike new listings, actually measures both supply and demand, because inventory can only go up if there is an imbalance between supply and demand, because even if there’s more new listings in a market and there is a proportionate increase in demand of people who wanna buy those new listings, inventory won’t go up because those properties will sell quickly and will keep inventory low. That’s why inventory is such an important story.
It’s such an important metric in our industry because if it goes up, it shows an imbalance in supply and demand, and that’s what we’re seeing in those markets. On the other end of the spectrum, places like New Jersey and Connecticut and Illinois are probably gonna see upward pressure on pricing next year, right? If you have far fewer homes for sale, if demand even stays even close to what it’s been over the last couple of years, you’re probably gonna see prices continue to increase in those markets. And that’s why I was saying that this data that we have is an indicator of which markets will perform well next year and which will struggle. Now, I’m not saying that means where you should invest or not, but I do think it means where you should change your tactics because you’re gonna wanna be careful in states that are gonna have downward pressure like Arizona or Tennessee or Texas or Florida.
And you’re probably not gonna have as much negotiating leverage or ability to buy deep in New Jersey or Illinois or in the Northeast. That’s just how it works. We’re in two totally different markets. The conditions of buying in Arizona and the conditions of buying in Illinois are completely different right now. They couldn’t be more different. And so you, as an investor or someone who works in this industry need to understand what’s going on there and make your strategy accordingly. Now, obviously, state level data doesn’t tell the whole story. Individual metros matter the most. And so I’ll just give out a couple of things here for you to know. Florida does still continue to see some of the most significant decreases. Punta Gorda, 83% above pre-pandemic levels, that’s crazy. But then you see markets in Florida that are strong, right? You still see, like, Miami doesn’t have crazy inventory growth.
Orlando doesn’t have crazy inventory growth, but the, it’s very polarized. So you see some of the most dramatic changes there. Austin, up 54%, Memphis, up 58%. Denver up 49%. San Antonio, 42. Phoenix is up there as well. So those are the markets that are seeing the most significant declines, and those are sort of like big markets. There’s obviously still small markets that are experiencing these as well. Again, the regional patterns hold. If you’re looking at cities that are seeing the strongest markets, Hartford, Connecticut, minus 71%, Rochester, New York, minus 52, Cleveland minus 43, Chicago minus 55. These are markets, individual markets that are going to stay strong. Now, I do wanna talk about affordability too in addition to inventory, but I just wanna call out one other thing here. In the data that we’ve seen, I think that inventory growth is going to moderate. You know, in certain areas, it’s going to keep going up, but there’s a new stat that new listings, that stat that shows how many people list their property for sale, that went down year over year as of the last reading, according to Redfin.
Do you hear that? Crash bros, everyone hear that? It is not this spiraling crisis right now. There’s actually less people listing their property for sale this year than there was at the same time last year. That is already adjusted for seasonality that doesn’t just mean because it’s in December. This is this December, lower than last December, because would be sellers are pulling back. This is what you would expect to happen, and I just wanted to call that out because it means we are likely in a correction and less likely to be in a crash. Last thing I wanna get into today was just about affordability because I think the two things, like I said, inventory’s gonna dictate which markets do well, but as you probably know, my thesis about the whole housing market is that affordability is the key. And that markets that are affordable, generally speaking, are gonna perform the best and are gonna hold up the best during this correction.
Now, of course, there are going to be exceptions to that rule, but I think generally speaking, that is true. Look at this example. Compare Pittsburgh, which is the most affordable housing market in the country, not because it has the cheapest homes, but because when you compare home prices to incomes, it’s the best ratio. Pittsburgh. 54% of houses in Pittsburgh are considered quote unquote affordable to the average people who live there. More than half. That’s pretty good. Compare that to San Francisco. Just as an example, only 7% of homes are considered affordable. Even in that market where salaries are massive, only 7% of homes are considered affordable. And San Francisco is not even the lowest. Miami, Miami, Florida, 0.4% of homes are considered affordable. So basically none. No homes are affordable. And this isn’t just in the expensive places that you think of like San Francisco or Miami.
If you look at Dallas and Houston, big metros, huge economies, good markets, but, you know, relatively less expensive than some of these coastal cities, they still have under 15% of homes considered affordable. When you zoom out, you see that out of the 34 largest US metros, about a dozen of them, only about 12, a third of them, roughly, have more than 30% of listings that are affordable. That means that two-thirds, less than one-third of properties are affordable. That’s not a great sign for the housing market, in my opinion. Nationally, over 75% of homes are considered unaffordable. And I found this particular status kind of depressing. The average American household to be able to afford a home needs a raise of $33,000 per year to be able to afford a median priced home. Now, take that into account because the median income in the US is $83,000.
So you need roughly a 40% raise to be able to afford the median price home. This is why housing is unaffordable and why I think that the fact that we’re in a correction makes sense. People just can’t afford it. And until that affordability improves, the housing market is gonna continue to be slow. Now, I am hopeful that we’ll see home prices on a national level sort of stagnate, wages go up, mortgage rates come down a little bit and improve that, but I do think it’s going to take time. And the reason that this matters is, again, if we’re trying to understand how markets are gonna perform and how to adjust your strategy, I personally have a hard time imagining prices will go up in places where prices aren’t affordable. Now, there are gonna be outliers, like I said, San Francisco, New York City. Those places have just enormous … They sort of defy gravity, those places because their, their salaries are so high, there’s such job creation engines, there’s so much excitement about AI in San Francisco right now, for example.
Like those places might defy gravity. But average places that are unaffordable, like I mentioned Houston and Dallas, you see actually New Orleans being unaffordable to the average price person. Places like Lincoln, Nebraska have very low affordability places. Of course, these places have jobs, they have economies, but not the kind where people make insane money and are willing to pay up for access to those economies and for the amenities of those cities. So I think those places are gonna have flat or declining prices because they need, those cities need more affordable housing. And so I do believe that prices are gonna come down in markets like that, and that’s something that you should take into account. Now, I’m not saying that that means you can’t invest there. I think there’s gonna be good deals in those kinds of markets, but I do just think that you should be looking at these things.
Looking at inventory numbers, looking at affordability relatively in your market is gonna tell you a lot about price direction and it’s gonna tell you a lot about volatility. Markets that are more affordable, in my opinion, are gonna be less volatile, they’re gonna have less risk. And that’s why for my rental portfolio, that’s where I’m focusing, right? Markets in the Midwest, I feel pretty good about them. They still could see declines. I’m underwriting for that. I understand that, but I think there’ll be much more modest declines and they’ll probably recover more quickly because they’re more affordable. That has been my thesis about the housing market for years. I have so far been correct about that. And I’d recommend you at least look at this. It doesn’t need to be your be all, end all metric that you look at, but between inventory and affordability, you’re gonna learn a lot about the direction of the market you’re considering investing in going into next year.
You can find a lot of this data on realtor.com, on Redfin. It’s all for free. So do yourself a favor, go and check out this data for yourself. All right, that’s what we got for you all today here on On the Market. Thank you all so much for listening. I’m Dave Meyer. I’ll see you next time.

Home prices reached an all-time high in early 2025, only to dip, recover, and return to almost exactly where they started. 

Nationwide, Zillow forecasts home prices will rise a modest 1.2% in 2026. But all real estate is, of course, local, and national trends conceal huge discrepancies in local markets. 

So which cities does Zillow forecast to see the largest gains and losses in 2026? What trends underlie those movements? And how am I investing to capitalize on these trends?

Top 10 Cities for Projected Gains

Looking at the latest 12-month home price projections from Zillow, the actual top 10 are micro-markets that tell us little about larger trends. Pulling out the top 10 “significant size” cities, however, some trends do start to emerge:

1. Atlantic City, NJ: 5.3%
2. Knoxville, TN: 4.3%
3. Green Bay, WI: 4.1%
4. New Haven, CT: 4%
5. Hartford, CT: 3.9%
6. Manchester, NH: 3.8%
7. Appleton, WI: 3.7%
8. Erie, PA: 3.1%
9. South Bend, IN: 2.9%
10. Lexington, KY: 2.8%

Most of those cities feel decidedly “unsexy,” located in either the Rust Belt or the old and mellow Northeast. 

Wisconsin native and real estate investor Austin Glanzer of 717HomeBuyers told BiggerPockets that it makes perfect sense. “Cities like Appleton and Green Bay combine steady job demand with relative affordability, which is exactly what’s driving price growth in secondary Midwest markets,” he added. “Buyers who are priced out of primary metros are still able to find attainable housing here, creating durable demand rather than speculative growth.”

Top 10 Cities for Projected Losses

On the other end of the spectrum, Zillow projects these cities to see the largest losses:

1. New Orleans, LA: -4.7%
2. Shreveport, LA: -4.3%
3. Fairbanks, AK: -3.2%
4. Austin, TX: -2.6%
5. Corpus Christi, TX: -2.4%
6. San Francisco, CA: -2.2%
7. Denver, CO: -1.3%
8. Cheyenne, WY: -1.1%
9. Sacramento, CA: -1%
10. Colorado Springs, CO: -1%

That list looks decidedly different from the first, largely located in the Sun Belt or once-rarified West. Many of those cities saw skyrocketing growth in the not-too-distant past. 

“Many of these cities experienced massive run-ups during the pandemic boom and remote-work migration peak,” notes investor Pavel Khaykin of Pavel Buys Houses, in a conversation with BiggerPockets. “We are witnessing a correction driven by factors like elevated inventory levels, high mortgage rates dampening demand, affordability constraints, and high property taxes.”

Trends Playing Out in 2026

The cities projected for stronger-than-average price growth in 2026 share several things in common. “In Midwestern cities like Green Bay and Erie, supply remains tight, and employment is stable, but prices are still accessible compared to national averages,” explains Lesley Hurst, owner of Penn Charter Abstract, to BiggerPockets. “Markets like these tend to outperform during uncertain cycles because they’re driven by end-user demand, not investors chasing appreciation.”

Home prices in these cities remain closely tied to local incomes and fundamentals, unlike markets that got out ahead of their skis, like, say, San Francisco, Austin, and Denver. 

Most lending industry analysts expect mortgage rates to stay above 6% in 2026. Zillow certainly does, and Redfin agrees, forecasting 6.3% average rates for the 30-year. So, don’t expect interest rates to move the needle on home prices. 

What will help lift home prices is the lack of new housing supply. Zillow notes that 2026 looks like it will have the fewest housing starts since before the pandemic. 

Don’t expect fireworks in most real estate markets in 2026. “It’s a rebalancing after a period of unsustainable growth,” adds Khaykin. 

Even so, the shift toward a buyers’ market in single-family homes and a balanced multifamily market offers plenty of opportunities for investors. 

How I’m Investing in Real Estate in 2026

I plan to continue investing similarly to my investment strategy in 2025, as I see the same trends driving the market. 

Stable, high-income multifamily

I will continue to invest in real estate every month as a small-dollar investor through a co-investing club. We meet on a Zoom call every month, vet a new investment together, and any member can invest with $5,000 or more. 

We’ve seen success with Midwestern multifamily properties with strong, predictable cash flow over the last two years. These typically pay 8% to 10% in distributions, and we plan to continue investing in these. In many cases, the operator plans to refinance them within three to four years, to return our investment capital even as we keep our ownership interest and continue collecting cash flow.  

We also like property tax abatement investments. The operator partners with the local municipality to set aside some or all of the units for affordable housing, in exchange for a partial or full property tax abatement. These come with some recession protection, as the affordable units generally have a wait list and 100% occupancy, and demand only goes up when times are tight. 

I wrote recently about how multifamily is one of the few asset classes that is clearly not in a bubble, because it already went through its bubble three years ago. It’s hard to say the same for stocks, gold, and many other kinds of investments right now. 

Land

We’ve also had great experiences with land investments. The short turnaround for land flips allows operators to shift their buy pricing down quickly when prices dip. 

As for recession risk, we plan to invest again with an operator we like who installs manufactured homes on land parcels and sells them to first-time homebuyers for half the local median price. Even in a recession, there will always be demand for half-priced homes. 

Conservative industrial seller-leaseback

Finally, we’ve had success with conservative industrial seller-leaseback investments. These work best when the single industrial tenant has a long history of success, and could be replaced with another tenant paying higher rent per square foot if they default. 

For example, we invested in one not long ago where the tenant had an order backlog over three years long. Their clients include the U.S. Navy. They’re not going anywhere. 

Other diverse real estate investments

Over the years, I’ve invested in dozens of states and cities, with dozens of operators, in virtually every asset class. 

What I Look For

I don’t have a crystal ball, and I don’t know what the next hot asset class will be, or the next hot market. I gave up the prediction game a long time ago. 

Today, I keep an open mind and simply look for asymmetric returns. I look for experienced, established operators who have invested through several market cycles, and deals that have some kind of extra downside risk protection. 

You can sit on the sidelines and watch your money lose value to inflation. Or you can join a co-investing club to assess risk alongside a community of other investors, and invest smaller amounts. I choose the latter.

This article is presented by TurboTenant.

I started my career as an accountant and lasted about six months before I knew I was not made to sit at a desk all day. 

I then took on a more active role as a property manager and was given the task of managing a 40-unit apartment complex. The worst part was that I knew nothing about property management. I was thrown into the office with little guidance—that is, if you consider a stack of boxes left from the last property manager guidance. 

There was a drawer full of keys. Some were labeled, but most were not. There were boxes full of receipts and one-page lease agreements. A hand-drawn spreadsheet was taped to the desk, with unit numbers along the rows and months along the columns, and a red checkmark for the months that were paid for each unit.

From my brief six-month stint as an accountant, I knew this was not proper bookkeeping. Nothing about this system was efficient, and there was no way I would be able to survive this lack of organization.

What Worked for Me

Since that first dip into property management, lots of things have changed. I’ve tried and tested several different processes to keep things organized and efficient. It took me at least two full years of trying out different methods and acquiring my own properties to really solidify a good bookkeeping system.

After several years of self-managing my properties, I decided to outsource to a property management company. After lots of trial and error, I learned that I could better manage my properties myself with the help of property management software (and I had the added benefit of keeping more money in my pocket by returning to self-management).

A big part of my success in finding the methods that work best for me was finding the right property management software. I never wanted to go back to manually collecting rent, let alone the other manual tasks that required both my time and energy. 

Having a portal where your tenants can pay rent is the first step. You want a system that is easy for your tenants to access and where they can set up automatic payments. 

TurboTenant for the Win

Having a system in place for rent collection through a software like TurboTenant completely eliminates the classic excuse of “I forgot to pay rent.” After setting up a rent collection system, you want to make sure the funds go into your bank account. Since TurboTenant is online, gone are the days of running to the bank to deposit checks. 

After a tenant has paid rent, you need to have accurate bookkeeping to show they paid. This ensures you have documentation about their payment history, which will be important for your tenant if they move into another rental. 

Most landlords look at rental history, and paying regularly and on time is a huge green flag. Some states even require that landlords provide tenants with a receipt of their rental payment. TurboTenant makes this easy, as it documents tenant payment history in real time, and the payment will show up directly in your dashboard and on your tenants’ portal.

After you have everything documented, you need to include this for your own bookkeeping purposes and track money coming in and out for specific properties. TurboTenant also has functionality that fully integrates with your bookkeeping system, which makes this a full-service property management software. You have a one-stop shop for all rent bookkeeping tasks.

Final Thoughts

It took me years of trial and error to find the right system. I wanted to self-manage my properties, but I didn’t want to commit to more work. 

Setting up automations for rent collection has made my life easier and rent collection way more convenient for both my tenants and me. Who wants to write a check, buy a stamp, and mail out a rent check every month? More importantly, who wants to keep track of all of those checks and make monthly runs to the bank to deposit them?

If you need help getting started or taking control of your rent collection and want to be more efficient with your methods, start with software that already has systems and processes built in for you. TurboTenant will save you so much time and make you a better, more organized landlord.

Dave:
How do you talk to a real estate agent? You’re supposed to be on the same team and a good agent can be the key to finding profitable investment properties and growing your portfolio, but sometimes it can feel like they’re not giving you the time of day. If you’ve ever experienced this, and a lot of investors have stay tuned today, we’re breaking down how to build relationships with agents that will get you access to the properties you need. Hey everyone. I’m Dave Meyer, rental property investor, head of real estate investing at BiggerPockets, and today we’ve got Henry Washington on the show. Henry, what’s going on man?

Henry:
What’s good, man? Glad to be here. I love answering form questions.

Dave:
We tease that we’re going to be talking about agents at the top of the show, but we’re also going to share our opinions on a somewhat controversial big city in the Midwest about whether we would invest there. Weigh the pros and cons of maxing out your leverage and financing, talking about controlling costs during a period of inflation and much more. Henry, you ready to do this? Come on, let’s do it. We got good ones today. I’m excited. This first one, the title of this first question is just so funny. It’s comes from a Samuel OV who says, why do agents not want to talk to me? The question says, I’ve been making some phone calls to agents and I’d say only one fifth or one out of five actually stay on the line to talk while the rest. It seems things are going well until I mentioned that I’m an investor. Why I thought investors and agents work together. Why are they hanging up on me like I’m a salesman? Samuel, this is a great question and I love the way you wrote it. For some reason, this is so funny. Why do you think this is happening, Henry?

Henry:
All right, you licensed agents listening to the show. I get, I mean, I know the hate comments are coming, but I don’t know. Sometimes agents just suck, and here’s what I mean by that. People get their license a lot of the times because they think that selling real estate is not super challenging, and I think a lot of the times they start to realize that it’s another version of entrepreneurship, it’s a sales and marketing business. You got to go drum up your own business. It’s hard to be a successful agent,

Dave:
A lot of competition and

Henry:
There’s a lot of competition, and so I think he’s probably getting hung up on because maybe some people don’t know how to service investors. And then at the same time, there are a lot of people who say their investors or want to be investors and aren’t ready to pull the trigger or are not quite sure what to do. And so agents may spend a lot of time analyzing and sending investors deals and then the investors ghost them or don’t put in offers and they may feel like I do a lot of work for not a lot of results. So I think it’s a little bit of both. Some just aren’t good and that creates a problem. They don’t answer their text, phone calls, emails, and don’t know how to work with investors, and some investors aren’t good and don’t follow up on what they said they were going to do, which is put in offers so that the agent can make some money.

Dave:
I think what you said first that a lot of agents suck is true, and I want to call out that. I think I’ve heard that phrase more from agents from actual real estate agents. Yes, exactly. Than from other investors or from homeowners. I see it. Some of my good friends are real estate agents, and you see they get hung up on too. The other agents hang up on each other too. It’s there’s no baseline of professionalism it seems like for agents, which is annoying, but also an opportunity for good agents to really distinguish themselves. So I would say Samuel, number one, maybe you’re calling the wrong agents. If you are just looking up regular home buyer agents, they might not want to work with investors for whatever reason. Maybe they just know they’re not qualified to answer the questions that you have as an investor.
Maybe they’re too busy, maybe they think you’re a tire kicker and they’re not interested. So I would focus on finding investor friendly agents. We have tools on BiggerPockets to do that. You can also do that through networking like meetup groups. You can usually find good agents through those types of things. So that’s number one. The second thing is because I call a lot of agents looking to invest out of state, I think the real important thing is to try and set expectations upfront for what you’re trying to do as an investor. Sometimes I’ll say, Hey, listen, I’m still in market research mode. I’m not going to pull the trigger on a deal in the next three weeks or four weeks, so don’t send me your hot deals right now. And I think that just setting of expectations builds a little trust that I am serious, I will buy a property, but here’s where I am with my process. I show them that I do have a process that I’m thinking about their time so that they’re not wasting their time. And that type of expectation setting I think usually works really well. Now, if they hang up on you right away, you don’t have an opportunity to even get that out. But I do just generally think that’s how you can approach a conversation with an

Henry:
Agent and just when you’re speaking with anyone, it doesn’t have to be agents, but any service provider, the best way to get them to do what you want is to speak to them in the what’s in it for them, right? People need to know how this relationship is going to benefit me. That’s what they truly want to know, whether they’re going to come right out and say it in the initial conversation or not. So obviously we know agents want to get paid for the effort that they put in, especially if they’re a good agent. Because a good agent is game changing. Like a good agent is one of the best people on your team. It’s just sometimes hard to weed through the nonsense to find the good ones. So when you speak to them, the what’s in it for them is closing transactions. So if you can say, yes, I’m an investor, I have done X amount of deals, or I’m an investor, I plan on doing
X amount of deals. You understanding your goals, where you’re trying to go so that they know the size of the prize. If you plan on buying one property over the next 12 months, just be upfront with them. They may not be the person for you, but they may be able to recommend somebody who wants that business. But if you plan on doing 10 deals over the next 12 months or you’ve done 10 deals in the past, those are things that the agent needs to understand so they can go, okay, this guy’s serious. This person knows what they want to do and I know what’s in it for me.

Dave:
Yep. I think that’s a perfect way to think about it. I know as the person who’s spending money, you often want to be courted for the federal world, but you have to think about it both ways. You need to look for the mutually beneficial relationship and absolutely should, but it does take some time. There is a very big variance between good agents and bad agents and take your time until you find someone, and if you do this, even if they talk to you and you don’t feel like they’re really giving you their full attention, don’t accept that. Just keep going until you find someone who will, because there is someone in every market who knows how to work with investors and is willing to give you the time that you need as an investor and just that’s your job as the investors is to not stop until you find that person.

Henry:
Pro tip, call a title company and ask them who the investor friendly agents are. They see ’em all day every day. They’ll probably give you three, four names off bat.

Dave:
Alright, well that was question one. Thank you Samuel. Hopefully you can get some more agents on the phone after this. Alright, so question number two. Oh, this is good for us. Henry is Chicago worth investing in? We were both there this summer on the Cashflow Roadshow. The question here comes from Maddie Shanahan and Maddie says, I’m looking at the property laws, the laws favoring tenants and the current state of the economy, and I’m second guessing if Chicago is still a smart area to invest, I’d prefer to stay in Illinois because it’s my home state, but I’m willing to look elsewhere too if it means I can get to quicker cashflow. Henry got any thoughts on this?

Henry:
Well, she said she wants to get to quicker cashflow, but everything she mentioned that might be a problem had nothing to do with cashflow. So

Dave:
Well, taxes I guess if the taxes are high, the property taxes are kind of high in Chicago. But I was actually talking to an agent, an investor friendly agent in Chicago the other day about deals, and he was telling me that multifamily actually proportionally isn’t taxed as high as single family in Chicago because they want to incentivize more multifamily development specifically in Chicago. And so property taxes are not as big of an issue if you’re buying at least two units as it is buying single families.
But here’s what I’ll say because I’ve looked into Chicago, I personally think Chicago is like a sleeper city for real estate investing. It’s the third biggest city in the country. It has a remarkably big diversified and dynamic economy. You can’t fake a city like Chicago. Are there challenges? Yes, there are challenges in every city, especially big cities where parts are expensive or there are areas that you wouldn’t want to invest in, but Chicago being massive has neighborhoods for everyone. That’s kind of what I like about it and I like about big cities. If you want a cashflow area, you can absolutely find a cashflow area. If you want to find appreciation area, you can absolutely find it. The other thing I love about Chicago in particular is the housing stock is great. If you like two to four unit buildings, there’s a ton of them that doesn’t exist in other places, maybe in other places in Illinois.
I’m not as familiar with other places in Illinois. I think there are areas like Springfield, Illinois that have a lot of cashflow but are probably less likely to appreciate there’s less certain demand. I know there’s places like Peoria that got hot for a minute, but I am guessing that’s not going to continue. Personally, I know that people have bet against big cities over the last couple of years, New York, San Francisco, Chicago, they’re all coming back, they’re all doing well. Chicago has had some of the strongest rent growth and strongest appreciation for the last couple of years, and most of all, it is still affordable. It is the most affordable large city in the us, which I love. Absolutely. So for me, I literally was talking to an agent about buying deals in Chicago, so I clearly am giving it away, but I think Chicago is a great market to invest in.

Henry:
Yeah, man, if you name five big cities, they’re all unaffordable except for Chicago, so it’s an amazing place to invest. Yes, there are challenges with landlords and tenants, but you will find that in a lot of places there are tons of successful landlords in Chicago. So I would say getting into a local R group and understanding what the successful investors are doing to set themselves up for success as a landlord in Chicago is all you would need to do to get some level of comfort with those risks that you’re thinking about. But oftentimes when I hear questions like this, people don’t think about what they give up if they move to a market that they don’t understand as well. So maybe you’ll find a market that has better landlord tenant laws and maybe even gets you a little bit more cashflow, but what you’ll give up in terms of understanding Illinois and understanding Chicago and the neighborhoods and the relationships that you may already have built with real estate agents or contractors, you give up all that and you have to go build it again. And so yeah, you may be able to get more cashflow, but are you going to be able to actually realize that cashflow if you are operating less efficiently because you don’t have the same

Dave:
Superpowers? Yeah, I would also just say is cashflow the right goal depending on where you are in your market. I personally love these hybrid markets that will probably appreciate and will have some cashflow and that is definitely available in Chicago. The one other thing I want to add about multifamily in general, because Maddie did, I didn’t read the full question, it was kind of long, but she did also talk a little about wanting multifamily is that big cities like Chicago make it hard to build, which is pros and cons, but you don’t have the risk of supply growth that you have in a lot of big cities like Houston, right? Chicago’s third biggest city, Houston’s the fourth biggest city. Houston has huge supply growth. That doesn’t mean you can’t invest there, but it’s just another variable that you have to think about. One good thing about Chicago is that you don’t have that risk that you’re going to turn around next week and there’s going to be 10,000 units under construction.
That’s just not going to happen in a city as dense with as strict zoning regulations as Chicago. So I think that provides a little bit of safety, a little bit of a basement, a floor for your investment, which personally I really like. Alright, those are our first two questions, but we got plenty more questions from the BiggerPockets community to answer right after this quick break. Stick with us. Running your real estate business doesn’t have to feel like juggling five different tools. With simply you can pull motivated seller lists. You can skip trace them instantly for free and reach out with calls or texts all from one streamlined platform and the real magic AI agents that answer inbound calls, they follow up with prospects and even grade your conversations so you know where you stand. That means less time on busy work and more time closing deals. Start your free trial and lock in 50% off your first month at res simply.com/biggerpockets. That’s R-E-S-I-M-P-L i.com/biggerpockets.
Welcome back to the BiggerPockets podcast. Henry and I are answering questions from the BP community forums. Our next question comes from Jordan in Chattanooga. Jordan asked, my wife and I purchased a duplex in March and moved into one of the units after living here for a month. We noticed that another duplex down the street that’s abandoned and trashed, we’ve reached out to the property owners, but I need some help before making an offer on the home. We used up most of our DTI, that’s debt to income ratio on our current property. So what would be the best way to make this happen? It will definitely cashflow about $300 a month. Just a couple other provisions here, we can’t move because we’re only six months into our owner occupied mortgage and the homeowners still have a mortgage, so seller financing wouldn’t work. Should we pull out a HELOC and try to buy it as an investment property? Should we use a HELOC as a down payment? Should we use A-D-S-C-R or private hard money? Any other recommendations? Henry, I’m going to toss this to you, but just want to say, a lot of times we get these questions and it depends, but you told us a lot of information about yourself and your personal situation, so I do think we can actually answer this one. Henry, take a stab at it.

Henry:
Well, I think there are several ways to attack this if you’re going to live in it, then obviously I know you said you’ve got about six months left, but that’s a ton of time so you could contract it and then close on

Dave:
It. That’s true

Henry:
After about six months

Dave:
Doesn’t seem like the seller’s in a rush,

Henry:
Right?

Dave:
Right.

Henry:
So you can just put it under contract with a six month close and then close on it the day you are able to, and then you can use the conventional for sure, which would limit your down payment to what, 5%. So
That’s one option. Option number two is you could buy it with a commercial loan from a small bank. So you could go to any local community bank there and get a loan for the purchase and the renovation. They’ll want 85% of the purchase and they’ll give you a hundred percent of the rehab. So you’ll need a 15 ish percent down payment in order to get into it. Now the caveat with that is it’s going to put you on a three or five year adjustable rate. So if I were, once you move into it, if you decide to move into it, you can refinance it onto a conventional loan and then that’ll put you on a 30 year fixed and then you can pay off the adjustable rate mortgage once you move into it, but that’ll get you in with only a 15% down payment. The other cool thing about that type of loan product is you can borrow the down payment.
So if you bought this with a conventional loan or A-D-S-C-R loan, borrowing the down payment is going to be a little more challenging. So if you wanted to use funds that weren’t yours, in other words like borrowing from a private money lender or something, it might be a little more challenging, but with a loan from a commercial bank, then you could borrow that down payment. So that is a lot of leverage, but just giving you options here of what you could do to limit your cash and then also if you do the loan from the small bank, they’re going to care less about your DTI and more about the value of the asset. So DTI is not going to be a big issue in that scenario either. A third option is to take out some of the line of credit to use it as your down payment. If you were to buy it traditionally, and I would double check, did you get pre-approved to find out if a lender would lend to you? Given your current DTI position? Don’t just make an

Dave:
Assumption

Henry:
That’s true that you don’t have enough DTI for a bank to give you a loan. Go ask, start with the lender you already have their relationship with and see what they would say.

Dave:
Yeah, I think that’s all great advice. The one option I will add is A-D-S-C-R loan. I think that could work really well and Jordan had also asked about a heloc, which I would maybe do a combo. If this were me, I would maybe buy it with A-D-S-C-R and then use the HELOC to renovate because we didn’t talk about that, but he said the property was abandoned and trashed, so assuming you’re going to need to get some financing, you might be able to pay for that out of pocket. I have no idea, but assuming you need to do it, I would just get the DSCR for the purchase and then use the HELOC for the expense and then pay that off pretty quickly just using income from the property and then keep the DSCR for or if you move into a refinance that into conventional. Alright, next up is a question from Kevin who asked us, is leveraging 100% with a VA loan a bad idea? I’m weighing out my options for using my VA loan for the first time. I’m very aware of the risk that comes with leveraging 100% and I’d like to get your opinion on mitigating that risk if it should even be an option. The plan is to house hack a duplex to lower my monthly expense and save to grow my portfolio. I don’t plan on purchasing a property that I can’t comfortably cover while it’s vacant. What are your thoughts?

Henry:
Yeah, I think it’s leveraging a hundred percent with the VA loan a bad idea. The answer to that is it depends because it’s going to depend on your personal financial situation. If you’re doing a hundred percent VA loan because you don’t have any money to operate a property, then yeah, it’s a bad idea because there’s still expenses, things that are going to come up that you need cash for, and so investing when you have no money is a problem because things end up costing money. Now, if you’ve got some savings and you can operate the property, then using a hundred percent leverage is way less risky. Think about it from this perspective. If I get into a property, I don’t put any money down and let’s say that that property doesn’t appreciate and I sell it in a year, you’re probably going to lose money, but that money that you lose is essentially just a down payment.
You would’ve had to pay if you would’ve put 20 to 25% down on the backend. The benefit is if you borrow a hundred percent and you buy a property in appreciating area, chances are that property is going to appreciate. Chances are you are going to add value to that property and then you have an opportunity to get out of that property if those things worked in your favor, so you could end up in a position where you maybe pay a little bit of money if you have to get out or you don’t pay anything because of the appreciation and the value you’ve added. So you can spend the money on the front side, you can spend the money on the backside. My biggest caveat when buying a hundred percent leveraged is if you don’t have any money and that’s why you’re using a hundred percent leverage, you’re probably putting yourself into a bad position.

Dave:
I completely agree. People look at a hundred percent leverage, which just for everyone what this means is taking out a mortgage for a hundred percent of the purchase price, you’re putting 0% down. I know people get a little up in arms about this, but the risk in that is not really that your mortgage goes underwater. The risk is that you cannot pay your mortgage and it goes underwater. It’s when those two things happen at the same time that there is a lot of risk because if you bought a property with a hundred percent leverage, if your property value went down 2% next to you, you’d be underwater and know it would happen absolutely nothing as long as you’re still paying your mortgage. The problem is if that happens and then you can’t pay your mortgage, that’s when trouble really starts. This is basically what happened in 2008.
This happened at scale that sort of caused the whole market to collapse, and so I think Henry’s advice about how sure are that you can pay that mortgage even if there’s vacancy. He said, I don’t plan on purchasing a property that can’t comfortably cover while it’s vacant. What are your thoughts? So then I think it’s probably okay, as long as you are budgeting, really understand that there are going to be expenses that you might have vacancies, and I think particularly in this market, I’m going to put on my Henry hat and say, you got to buy below market comps because in a lot of markets I personally believe we’re going to see one or 2%, maybe 3% price declines in the next year or so. So you got to buy below market comps to make sure even if that happens, you’re not going underwater. Like I said, if it goes underwater and you’re paying a mortgage, not the end of the world, but you might as well not have that situation by just buying really well and you have the opportunity to negotiate to be patient right now to buy deep, and so I would just really focus on finding that and then I think you could do it.
The other option if you are worried about going underwater is just put 5% down. It sounds like you have some capital. If you’re saying that you can cover a vacant property, I would do that. The other last thing I’ll say is I like this plan just because it is a house hack within duplex. I probably wouldn’t give the same advice if it was a single family home that you were just living in. If you were just a homeowner, I wouldn’t say that, but because it’s a house hacker, you’re going to get that additional income. I do think that provides an extra layer of protection.

Henry:
What seasoned investors use 100% leverage for is the scale to keep their cash in their pocket so that they can capitalize on opportunities that may come that require the cash versus if you can get into a deal that doesn’t require the cash that you’re buying at a discount that you know can monetize anyway and that you know have cash reserves to cover, you’re limiting your risk and keeping your cash in your pocket by leveraging a hundred percent. Whereas a lot of people here, a hundred percent financing and think, I don’t have a ton of money, so I’m going to do that. That can get you into a tough spot financially. So it’s a tool in the tool belt meant to be used in the right situation.

Dave:
Yep, absolutely. I was talking to someone at BP Conn about it. There’s a young guy who was about to get out of the Navy and was asking me, with house hacking with a VA loan. I was like, that might be the best single way to get into real estate. If you’ve got access to a VA

Henry:
Loan

Dave:
And you’re going to house hack, it’s such a good way to do it.

Henry:
Yeah, get into real estate for free.

Dave:
Yeah, it’s an amazing opportunity that our service people deserve and have earned, and you should absolutely leverage that. All right, we got to take another quick break, but we’ll be back with more community questions right after this. The Cashflow Roadshow is back. BiggerPockets is coming to Texas, January 13th to 17th, 2026. Me, Henry Washington and Garrett Brown will be hosting real estate investor meetups in Houston and Austin and Dallas along with a couple other special guests. And we’re also going to have a live small group workshop to answer your exact investing questions and help you plan your 2026 roadmap. Me, Henry and Garrett are going to be there giving you input directly on your strategy for 2026. It’s going to be great. Get all the details and reserve your tickets now at biggerpockets.com/texas. Hope to see you there.
Welcome back to the BiggerPockets podcast. Henry and I are answering questions from the BiggerPockets community. I should mention, if you want your questions answered, post them on the BiggerPockets forum and we might pick them. And you’ll also get expert advice from literally thousands of investors who are there answering questions every single day for free. So you should definitely check that out. Our question now comes from Kelly Schroeder who asks, how do you keep renovation costs under control when prices spike? Henry, this has your name all over it. The question is, I’ve been hearing from a lot of investors lately about how renovation costs keep sneaking up, whether it’s materials, labor, or even permit days for those actively flipping, this can turn a solid deal into a stressful one fast. I’m curious, what are your go-to strategies to keep rehab costs predictable and profits steady? Do you lock in materials early, build relationships with consistent contractors or budget a certain percentage buffer? I’d just say yes to all three. We’d love to hear how you’re adapting, especially with so many market shifts happening this quarter. I mean, I think Kelly kind of knows the answer, right? Right. He put, do you lock in materials early if you can. I think that’s kind of hard.

Henry:
That requires volume.

Dave:
Yeah. Yeah. So I think that’s hard and also creates its own risk. Like what if you don’t use it, then you are just holding inventory. Build relationships with consistent contractors for sure. Absolutely. Or budget a certain percentage buffer. I would always do that regardless of inflation. So I think those are good tactics and I have some other tactics to share, as I’m sure Henry does too. But I think the other thing here is being realistic and accepting that there’s only so much you can do about this. You cannot change macroeconomics. That’s literally why it’s called macroeconomics. It is bigger than you. And so there’s just things about the labor market. There are things about tariffs and supply chains and AI that are not in your control, and those are things that you need to handle in your underwriting. It is less in your controlling the cost, it’s finding the deals that can accommodate the costs, and I think that is really the most important shift to have instead of being like, how do I get that toilet cheaper? You might, and if you can, good for you, but I wouldn’t count on

Henry:
It. Absolutely. You nailed it 100%. That is exactly where I was going to go. Yes, the things he suggested are things you should think about, but the most important thing is to be aware of the environment and the economics, which it sounds like you are listening to shows like this one, listening to shows like on the market so you can understand what’s going on so that you can update your underwriting. Because what he said in there was that if the costs creep up on you, then a profitable deal turn into a non-profitable deal pretty quickly. Well, to me that says you didn’t underwrite the deal with enough room for you to make a mistake, which means if you know that costs are increasing, you need to increase your renovation budget and timeline, and that means you need to decrease what you’re willing to pay for a property in this environment, and that’s what’s going to save you, so that if and when things do run over, you’re still going to end up profitable because you bought such a great deal.

Dave:
Yep, exactly. And then

Henry:
Yes, I do a little bit of a buffer in my rehab cost so that I have a little more room in the event that I needed. The contractor relationships is the huge piece right now. I have a contractor who bids labor and materials for me and they bid them fairly well, and so that helps me keep the cost down because that contractor has his superpowers at getting whatever materials that the prices he can get them at. Now, as we do more projects, if I start to see that slide up, I can either change my underwriting to offer less or I can try to go find materials cheaper myself. It gives me some options, but I have to be monitoring what these things cost so that I can make game time decisions. But at the end of the day, it’s being aware and adjusting your underwriting. There’s tons of little secrets. I get a lot of my stuff on Amazon, which I can get fairly inexpensively. The finishes, Amazon beats the big box and Home Depot stuff in pricing all the time and buy a lot. And so a lot of the times we’re not buying finishes from Lowe’s or Home Depot. We’re getting ’em from Amazon and we’re saving 10, 15, 20, sometimes 30 and 40% on prices.

Dave:
I mean, shopping around, just going to local stores, seeing what’s leftover, those kinds of things work, but I think Henry nailed it too. It’s just like you could do these things, but I also think you have to just accept too that your contractors’ costs are going up too. So if their bids are coming in a little higher, well, materials are more. If they’re bidding, labor and materials, labor is going up, construction labor is costing more. So these are just things that we have to accept, and in these sort of transitionary markets that we’re in right now, it’s a little bit harder, but eventually this is going to have to get baked into the price, and sellers might be resistant to that now, but that’s just how this works on a broad scale is eventually the costs get baked into the value of the properties that we’re buying.
And that might not be good news to every seller out there, but that’s just how it works. So I think you’re asking a good question and thinking about this ahead of time, but trying to figure this out before you buy something is going to be way easier than trying to figure out how to save costs once you’re already in it. Alright, well, this is a lot of fun. Thank you for joining us here, Henry, and thank you all so much for these questions. These were really good questions. Keep ’em coming. Keep asking these questions, not just for the podcast, but on the BiggerPockets forums there are people answering questions, helping each other succeed. That is what the BiggerPockets community is all about. That’s what we want to see all of you doing on the forums. And we might just pick one of your questions for our next q and a episode of the BiggerPockets podcast. Thanks again, Henry.

Henry:
Thank you for having me,

Dave:
And thank you all so much for listening. We’ll see you next time.

Ashley:
Most real estate rookies say the same thing I’d invest if I had the money. Well, today’s Gus Cody Berman isn’t here to talk about real estate. He’s here to teach you how to make the money you need to invest with zero startup capital, zero audience, and zero experience.

Tony:
That’s right. Cody is a digital income expert who used principles and digital products, and we’ll explain what those are in a minute. To build a business that now makes over $15,000 per month. And in this episode, he’s giving a true masterclass in starting and scaling your first digital product cycle.

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

Tony:
And I’m Tony j Robinson. And with that, let’s give you a big warm welcome to Cody. Cody, we appreciate you brother. Thanks for coming on and joining us today.

Cody:
Yeah, I am very excited to be here and to dive into all things digital products and real estate and all that good stuff.

Ashley:
Cody, before we even get into your system, let’s start with the basics. What even is a digital product?

Cody:
So a digital product is exactly how it sounds. It is a product that is digital, but to give people some tangible examples, think spreadsheets, trackers, planners, templates, guides, invitations, labels, wall art, the possibilities are truly endless. There are thousands of digital products out there. I’m going to try to keep some real estate specific examples today. I think there might be some digital products that people are sitting on in your audience that they might be using for themselves and they could easily then templatize that, put it out on a platform like Etsy and make some money with it.

Ashley:
I actually have, I don’t have that Etsy store running anymore, but I did have an Etsy store for a little bit where I had a tenant handbook that you could download and every once in a while someone would buy it for a dollar 99. And I was like, oh, that was exciting.

Tony:
So you’re an expert, Ashley, you also had the business, Ashley, where you were selling hand knitted something or rather, right? What was that?

Ashley:
Oh yeah, but that was a lot more money I made off that than digital products, but that was me running a sweat shop out of my basement sewing baby clothes and selling them on Etsy. Very profitable, but a lot of sweat work there.

Tony:
Yeah. So I guess on that note, Cody, let me ask, right, because when I think about Etsy, I usually do think about physical products. My wife, she’s big on throwing parties and a lot of times she’ll get physical things from Etsy. Do you think that, or I guess maybe even between the two, physical and digital, why do you feel the digital is a better option for a platform like Etsy than a physical product?

Cody:
So digital has slowly been creeping up. Right now it’s about 15% of overall Etsy sales. So 85% still is physical, but for me as a former physical product seller, digital is so much easier. It is cheaper, there’s less headaches. You don’t have to be dealing with chipping inventory, packaging, all that fun stuff. Ashley, as a former physical product seller yourself, you could probably have the same feelings. I sold physical products. I had a disc golf manufacturing company, and it was just a nightmare compared to the digital stuff. And we’ll get into the nuts and bolts of creating a digital product, listing it and selling it, but it is just light years easier, Tony, than selling the physical stuff.

Tony:
I totally understand the simplicity in getting started and the scalability from it as well. Cody, as we record this in the fall of 2025, artificial intelligence is getting smarter leaps and bounds day by day. Do you think that as those tools get better, is there maybe less of a need for the digital products on a place like Etsy?

Cody:
It’s a good question. Etsy actually has quite the anti AI stance. So they do not want people coming onto their platforms. They’re like, they don’t want what happened to Google to happen to them where all these bots come in and they just have these algorithmic posts that they’re making and all of a sudden everyone’s not ranking. Etsy is very human first and they’re very handmade first. That’s kind of their whole thing. That’s the whole thing behind Etsy is like buy from handmade sellers. So I am concerned in the long term about the impacts that it might have on Etsy, but in the short term, my shop has still been going really, really well. AI hasn’t had too big of an impact. There are ways that I’m using ai, we can definitely talk about that today. But just in general, the average person doesn’t know how to go and create all these different types of things using ai.
Maybe the 1% people who are listening might be like, well, why would I buy that thing on Etsy that’s so easy for me to make? But some random person who’s just getting interested in real estate doesn’t know how to create this. Let’s use an Airbnb income tracker that’s just so far out of their wheelhouse. They don’t even know to go to chat GPT to ask for help to build this Airbnb income tracking spreadsheet. So I think for the average person, the 99%, some of the stuff is just so far out of their realm of imagination that the people who do take advantage of AI and use AI to their advantage, those people are going to come out on top.

Ashley:
I feel like too, even me as a user, there’s some things like a party invitation. We see those all over Etsy as to download a party invitation. I would 100% pay the 9 99 to download the template of that party invitation, then go into Canva or chat GPT and try to design one by using the correct AI prompts and getting it to what I want. I still as a user would rather pay that than try and figure it out myself to get it how I wanted it to.

Tony:
So it really sounds like Cody comes down to convenience, right? Convenience and skillset, right? There’s still a large subset of folks who don’t have the skillset to Ashley’s point, to either jump into a place like Canva, design it themselves, or go to a chat GBT and build these tool themselves and you’re bridging that gap for all of those folks.

Cody:
That is exactly right. Yeah, I mean, like I said, some people could go to Canva or chat GPT and make it work. But even myself, I’m with you, Ashley. I actually just bought an invitation the other day that I could have easily made, I’m literally a digital product seller and expert, and I’m paying these other people to create the design. I just don’t want to go through the rigmarole of going back and forth with some kind of an LMS or just fiddling on Canva and figuring it out. I’d much rather just pay a couple bucks to a seller who worked really hard on this design to have a really good looking design. So yeah, it’s convenience. Tony.

Ashley:
Now Cody, when you started, you didn’t have graphic design experience, correct. And you also didn’t have a huge social media following. So why did you think this was going to work?

Cody:
I had pretty much zero following and also zero graphic design experience. So I learned pretty much everything through the school of hard knocks. This is going way back to 2018, so seven years ago. But I didn’t think this is the side hustle that’s going to work for me. I was a side hustle guy back then. I was doing, at one point I had over 20 different income streams and I’ve since paired that down because I was just very distracted. But this was just one of many that I was trying, I was doing blogging, freelancing, I was managing affiliate sites, I was doing email marketing, I was running ads, I was doing all these random things and digital products was just one that stuck for a multitude of reasons. But one, it was so passive and I’ll kind of tell you my origin story and what I had one week that changed my life and got me really interested in digital products. But compared to the other things I was doing, it was just so much easier, so much of a lighter lift. I didn’t need to be spending a bunch of capital or a bunch of time after I kind of put in the initial effort and got the products up and listed in my shop.

Tony:
You said there was one week that changed your life, Cody, I’m curious about that. What was that moment that made you feel like this was the right vehicle for you to really produce this income online?

Cody:
We just met up at FinCon, me, Tony and Ashley, we were hanging out a little networking event. So back years and years ago, FinCon had this ski event called Ski Con and I was out in Lake Tahoe, and this is just at the beginning of my digital product journey, my online entrepreneur journey. I had created a bunch of products in getting ready for the Valentine’s Day season. So all of December, all of January, I created love coupons, I had these custom love notes. I had these drag and drop templates where you can put your spouse’s face in it, all this Valentine’s Day stuff. I knew Valentine’s Day was huge on Etsy. So I’m at this event Ski Con, I have my phone’s ringer on because I was expecting a call from someone and I keep hearing this Chaching sound and for those Etsy sellers out there, Ashley, maybe you were familiar with Chaching sound, you remember the sound.
It keeps going off and I’m like, it’s Chaching buy lunchtime. I’d made over a hundred dollars from a handful of products. This is February 9th and I’m like, what the heck is going on? This is amazing. And by the end of that week, again, I’m skiing late Tahoe not working on my laptop at all with these other fincons and they’re like, what’s going on? They were asking me questions about digital products. I felt cool. It was great. This is the beginnings of my digital product expertise and journey. By the end of that week, I’d made over $718. I remember that exact figure. And I had not spent more than 10 minutes that week besides answering customer questions, working on my Etsy shop. So that was the turning point. I was like, screw this freelance writing, I’m done. I’m going to scale back the blogging, all this more active stuff. I’m really going to pair that back and I’m just going to go all in on this digital product thing. These were products that I created in December and January and now it’s the week of February, February 9th to the 16th or 15th, whatever that seven day span was when I made the 718 bucks. These were products I had spent a couple hours a month before making and now they’re making me hundreds of dollars in one week. So that was kind of the turning point. My big ski week in Lake Tahoe,

Ashley:
I love these episodes. I can always see Tony getting shiny objects and drop we’re something cool. He’s already racking his brain as to like, okay, what digital products did I

Tony:
Put together? So Cody, how much can someone realistically make by selling digital products? You mentioned that your first week, 718, we said at the top of the show, you’re up to 15 K per month now, but what can the average person expect to make because an expert in this, can I also expect to get to 15 k or is that just because Cody’s special? What’s a reasonable goal for someone to have getting started in this business?

Cody:
So what I will say was not the first week I had ever sold stuff that I made that $700, that was a couple of months and I learned a lot of hard learned lessons about keyword research and SEO and what products to sell. My first 20 products, Tony, were so ugly, so terrible, not researched and they didn’t sell at all. But once I started to get the hang of, okay, what are people typing into the search bar? How can I create those products? How can I make sure that my product is standing out on the search and results page? That’s when I started making sales. So just want to make that caveat. But to answer your question,

Tony:
Lemme pause you there Really quickly, I want to interject because you said you made a lot of flops along the way and I appreciate you sharing that because a lot of times, especially the age that we live in, everything is very sensationalized on social media where everything seems super easy and there are no failures and everything’s perfect. You said 20 some odd products you had done before they all flopped. Why didn’t you give up? Because I think for a lot of people after failure number six or seven or 15 or even maybe number 19, they’re kind of starting to question, okay, why am I doing this? What stops you from stopping at number 19 and persisting the number 20 that actually broke through?

Cody:
That’s a great question. I am someone who sees someone else succeeding and if I can’t replicate that success, I get mad. I get competitive. So I had seen other people, I knew other people were crushing it on Etsy digital products. I had at this point started to listen to podcasts and read blogs and I was part of communities and I’m like, okay, this person’s making 10 KA month. How could I not make a dollar? Am I dumb? Am I just bad at designing? How can I not figure this out? So it was honestly kind of jealousy and motivation and competitiveness that fueled me. And so I was just not going to give up until I was like, I at least have to make a little bit of money. I can’t be this bad at this side hustle. And thank gosh I kept going. It turned out pretty well seven years later.

Tony:
Cody, back to the original part of the question then. What is a reasonable amount that someone just getting started should expect to make if they were to get into the business of selling digital products on Etsy?

Cody:
So I think this is one of the biggest misconceptions, and I guess people might just have two lofty expectations. This is not a get rich quick overnight scheme. Like this is something that you are going to spend time building up month over month, over month, over month. I recently started a new shop experiment and I wanted to talk a little bit about that today. And I’m someone who’s been doing this for six years. I started a new shop in a silo, didn’t mention it anywhere, didn’t promote it anywhere on social media, email list, nothing. And in that first month, and to give you a rough idea of how much time I was spending, I was spending five to 10 hours per week in that first month I made $185. Now some people might be hearing that. They’re like, okay, I’m doing the math. You have five to 10 hours a week, let’s call it 25 hours over a month and you made $185.
That’s a terrible ROI. Why don’t you just go freelance? Why don’t you go do anything else? You could work at McDonald’s and make more money. That’s fair, but this is because it’s a slow and steady side hustle. The next month, that new shop made $400. The next month after that, that new shop made $900. The next month after that, that new shop made $4,000 and it continued to scale. So to answer your question, Tony, I think I don’t want to get people unrealistic expectations. Can you scale up to the 5,000, 10,000, $15,000 a month? Yes, but it is going to take time. I think just getting your first couple hundred dollars per month, that’s a great goal. If you can get to $500 per month, and I have some real examples here of how that could really kind of change your real estate journey and start investing and some real case studies as well.
If you could just get an extra 500 bucks per month that you don’t have right now in addition to whatever other money you’re making that could be life changing. So I think that’s a great goal and then you can continue to grow and scale from there. I don’t want people to stop listening to this episode and think, okay, I’m $15,000 a month or bust, start small, continue to iterate. And I like to think of each one of my digital products as a little passive income machine. So as each one starts to get a foothold in the Etsy algorithm or wherever you’re selling, this one might be making $200 a month. This one’s making 50, this one’s making 300. And over time you have this little army of passive income monsters who are making you 5,000, 10,000, 15,000 plus dollars per month.

Tony:
Cody, I love that you’re kind of setting realistic expectations both on the amount but also the time that it takes to get there. But even to your point, $500 per month over 12 months is an extra six grand a year. So imagine if in addition to whatever you’re saving for your first real estate deal, you could add on an additional six grand every year. How much acceleration does that give you to kind of build your portfolio? So it may seem like a small amount, but that’s life changing money when you add it up over time.

Cody:
And I want to give people some homework. If you were driving, please don’t do this. And if you’re doing anything that involves you really paying attention, don’t do this. But check out these Etsy shops. So I pulled up two that are real estate specific. One is called the agent site shop. It is this group of, not this group, it’s this couple, they’re realtors, and they basically just decided to take all of the templates that they had that they were using within their own community. I think they were brokers and they had a team under them and put them on Etsy. These guys now have 63,000 sales average price point, I’m just ball parking like 20 bucks per sale. So these guys from assets that they already had have made an extra $1.3 million. Obviously this is a really great example of what could be possible, but imagine if you just took some of the things that you were already creating or already using.
I’m sure we have realtors listening to this. I’m sure we have people who have real estate calculators listening to this. Imagine what that could do for you if you were to just turn that into a digital product for sale. Or there’s another one here just to give you guys some ideas. It’s called The Weekly Crew. This is another Etsy shop, and again, please don’t look this up if you’re driving, but this shop has 126,000 sales average price points, like 10 bucks per sale. These guys have made an extra 1.2 million selling spreadsheets for, they have an Airbnb income tracker, they have a rental income property tracker, they have a yearly budget, they have all these different spreadsheet type printables. So these are people who probably had these spreadsheets that they were using for personal use, and then they decided to then templatize them, sell ’em to other people, and they’ve made millions in the process.
I just want to give people some real life inspiration, like what this could mean. I’m assuming most of the people listening are probably pretty interested in real estate. These are some real life real estate focused shops who have absolutely crushed it. I know we are mentioning numbers. Tony, you mentioned the extra 500. I like using a thousand dollars per month as a good benchmark, and it’s just easy math on a podcast who likes doing public math? But an extra thousand dollars per month is just $33 per day. I love breaking things down into micro goals. $33 per day breaks down to eight $4 products, four $8 products, seven $5 products, three $11 products. And once you start listening to these things and actually have products for sale, these numbers become so much more tangible. And what could an extra thousand dollars per month, $12,000 per year, $12,000 per year could be a 3.5% down payment on your first house hack, depending on what market you live in. That’s a significant amount of money from these silly little pieces of paper, these digital files that you could sell on a platform like Etsy. So even though these numbers might not sound as crazy as some flipper who comes on, they’re like, I made 150 K my first deal. Even an extra thousand dollars per month consistent can seriously change your financial future and give you a lot more money to start investing in deals,

Ashley:
Especially the more passive it is. Basically. It’s almost like you’re getting royalties. You write a book, your book sells, you get your royalty check. Unfortunately, mine and Tony’s royalty checks are not this big as the digital products, but I just looked up someone I’d followed on Instagram for a long time, my wealth, a diary I had remembered years ago, she created a personal finance tracker for You’re Not Worth, and she would share how long it took her to build this tracker and the spreadsheet or whatever. And then she put it on Etsy and for a long time it was our only Etsy product, but she would share how much she made and I just looked up and she’s at 10,000 sales and only has nine products on there that range from $5 to $25 it looks like for her products. But over time you just put it on there and then kind of set it and forget it.

Cody:
Yeah, yeah, it’s huge. It can really add up.

Ashley:
So we have to take a quick break, but when we come back, Cody’s going to walk us step by step through launching your first product from Idea to Listing to sale. We’ll cover that right after Word from today’s show sponsors. Okay, we’re back with Cody and we just covered what a digital product is and how much you can make with them, but how much cash do you actually need to get started? So Cody, what kind of software do we need to buy? What are our fees for Etsy? What’s the startup capital we need?

Cody:
So the awesome thing about this side hustle is you need almost zero capital to get started. So the big price tag to open your own Etsy store, and again, the reason why they do this, they’re very anti AI and they don’t want just bots flood in the platform. You got to pay a whopping 15 bucks and upload a picture of your license, your identification to prove that you’re a real human being. After that, you can pretty much ride on free tools. If you want to go the frugal route, you can use the free version of Canva, which is $0 per month. You can use the free version of various keyword research tools. One I like in particular is Eran. There’s also ever be Insight factory. There’s a couple of good ones out there that are Etsy specific. There are paid versions if you want to go crazy, and this is the cool thing about the Etsy niche.
It’s not like blogging or some of these other niches where the monthly fees on these platforms are egregious. I know there’s some keyword research tools in the blogosphere I’ve used before that are like $200 a month. Eran, the pro version is $10 per month. As we’re recording this, the pro version of Canva is $12 per month. Those are what I use. So if you want to get the official Cody toolkit, you’re looking at a whopping $22 per month in tech, Canva pro, Eran Pro. It’s really that simple. You don’t need many more tools than that, and you can get away going this crappy and free version, although you’ll just have a little less access because the tools are a little worse with the free versions as you’d expect.

Tony:
Cody, I just want to make sure I’m tracking. So you’re saying with a roughly $40 investment between Etsy, Eran and Canva, you could potentially create a side hustle that’s producing four figures a month in net profit to you as the owner?

Cody:
Yes, that sounds sensationalized. You will have to invest your time. That is going to be the biggest investment here. You can’t just get the tools. Then all of a sudden the rain starts pouring down with the cash. But yes, that is in terms of capital, it’s very capital intensive. It is a little bit time intensive. You’ll spend time creating designs and we can talk about using my template method and ways to shave that time down, but it is really not very capital intensive at all.

Tony:
I love that. Right? Again, the challenge of real estate investing is that oftentimes it is capital intensive. So I’m glad we’re going through this. So Cody, let’s start at square one. They’re listening. You’ve sold them on the idea of digital products as a side hustle to help them get their first deal. What is the very first thing that we should be doing?

Cody:
So the first thing I like to do is just generate a massive list of ideas. Now, these could just be ideas from your head. You could use a thought partner like chat, GPTI like using chat GPT to kind of think of product ideas. Just look around the room that you’re in or things that you use. Go through your files and your computer. Look around. I have wall art behind me. I have a tracker on my desk, I have a planner on the desk over there. There’s so many opportunities. If you just literally look around the room that you’re sitting in, or again, look at the files of your computer, what spreadsheets you using? Do you have a media kit? Do you have this? Do you have that? Just look close to home. And then once you start to exhaust that list, start to think of other things like maybe you’re really into meal planning and you’re really into working out and maybe you can go down that niche or maybe you’re really into real estate. You can see what types of real estate principles or digital products you want to create. Maybe you’re really into faith-based principles. There’s so many different avenues you can explore. Then after that, you take that massive list of ideas and I’m basically just, I’m running you through the exact playbook, Tony, that I did for this brand new shop that I started as an experiment, the thousand dollars per month experiment. I just had a massive list of ideas. I then take those ideas.

Tony:
No, I love the brainstorming as the first step. Cody, you also mentioned using chat, GPT. Do you have a good prompt that you found to work well to help with this ideation? Or is it really just like, Hey, here’s what I’m interested in. Help me come up with some ideas. How should we approach using some of those AI tools?

Cody:
I guess it depends how much you know about what you want to create. You could say, Hey, I’m really into fitness and meal planning. Help me think of some fitness and meal planning digital products that I could create. Or you’re like, I really want to create a meal planner. Give me 15 different niche down variations of a meal planner. And it might be like, here’s a keto one, here’s a paleo one, here’s one for women, here’s one for men. Here’s one if you want to gain weight. Here’s one if you want to lose weight, and it can just spit out all these different variations. Now, a lot of these ideas are going to be garbage. So you need to plug these ideas into a keyword research tool like an Eran or ever be or insight factory. Basically take all the ideas that you’ve thought of.
I use this literally a Google sheet. Take all the ideas that you thought of or your thought partner chat, GPT or whatever you’re using, and start plugging them in. Literally type in, you’re like, okay, keto meal tracker, how many searches does this have per month? What does the competition look like? And a lot of these keyword research tools will make it easy. They’ll be like, okay, if it’s green, that means there’s a lot of search volume that’s for a search volume. If it’s red, that means there’s not a lot of search volume. If it’s green, that means there’s not lot of competition. If it’s red, that means there’s a lot of competition. They’ll give you numbers, but it’s color coded super easy. So I’ll kind of go through all of these ideas that chat, GPT spits out and be like, okay, what are the ones that have some decent search volume and not a lot of competition?
And usually if I have a list of a hundred product ideas that gets whittled down to 20 or 25 that I’m actually going to create. And then from there I’ll bucket them into similar types. So I dunno why I’ve been big into meal tracking and fitness tracking. I’ve been really into my FitnessPal and trying to bulk up and stuff. So that’s top of mind. So let’s just use that as an example. Let’s say you’re like, okay, I want to go down this meal planning route. So from there, I’d bucket the different types of printables. I’m like, okay, I want to create a meal planner and I want to create 15 different variations of this meal planner. I know I gave some examples before. So then what I would do is I would go into Canva, I’d create my base template for my meal planner, and what that would be is just like, okay, meals tracked, here’s the calories, here’s the macros, all that fun stuff.
Maybe the days of the week I would, before I even go in actually and create this, I would go on Etsy. I would type in the product that I’m going to create. Let’s use keto meal tracker and just see what comes up. And don’t copy the best sellers, but just use the best sellers in your knowledge base. Don’t be making something that’s so far outside of what, obviously it’s a bestseller, people are buying it. That’s for good reason. So use that as kind of your North star. Like, okay, I want to have similar qualities to this. How can I make mine a little bit better or stand out a little bit better? Or maybe the design is a little bit better. Then I’ll go into Canva. I’ll actually create the product. I’ll create the base template. And then once I have a base template that I’m really happy with, the base template is actually the part that takes me the longest.
I’ll spend a couple of hours creating a really solid base template for something. Once I have that, that’s when I go crazy creating different variations. So this is what I like to call the template method. So once I have a perfect meal tracker based template, then I can just go and make the keto version, the paleo version, the carnivore version. I can just spit out dozens of variations of this product in a very short amount of time. It might just be changing a couple words and the colors, and let’s use another example that’s outside of meal tracking. Let’s say we wanted to create an invitation to some type of party. You could very easily have some Christmas invitation and turn that into a Halloween and turn that into a Thanksgiving and turn that into a birthday and turn that into a graduation and turn that into Mother’s Day, father’s day. You can just basically throw every holiday, every niche, every trend that you can possibly think of as long as the search volume supports it on top of this base template that you’ve created. So that’s kind of the process for the creation part.

Ashley:
Is that what you would call the stacking method though, is to taking one product and then using it to create other products based off that as a template?

Cody:
That’s exactly what I mean. Yeah. So always, I’m never just creating one product, spending a couple hours creating one product, and I’m like, yep, that’s it. I’m not creating any other variations of that product. I’m always creating the most basic, I like to call it a base template version of the product and then seeing how many niches that I can get that product into, because the riches are in the niches. On Etsy, if you’re just creating a generic meal tracker or a generic birthday invite, you’re competing with everyone and their mother who has an Etsy shop. But the more you niche down, the less competition there’s going to be and the more in line with the buyer’s search, your product is going to be, which leads to a higher conversion rate. So yeah, there’s a lot of reasons to niche down, but that’s exactly what I mean. Ashley is taking one base template and just stacking it into as many different niches as humanly possible.

Ashley:
Let me give an example real quick. Okay. So one of the products I had was a tenant handbook, which was basically you put together a guide which tells you where the water shutoff is, how they pay their rent with the addresses, what the local schools are. They can enroll in things like that. And then it’s like eight pages long with different stuff. So as an example, how would you niche that down? So would it be like a duplex tenant handbook, a single family home tenant handbook where maybe you could change the duplex one as to here’s our rules, here’s how we respect the common areas or things like that. What are some examples of real estate as to how you could niche down on digital products?

Cody:
This question is exactly why keyword research and SEO is so important. I don’t know off the top of my head, that’s the honest answer, I don’t know. But if you type that into the Etsy search bar or you type that into one of these keyword research tools, you might see that a ton of people are typing in like the house hack version or the duplex version or the Airbnb version. You just don’t know until you go and do the research. And I think honestly, that’s one of the biggest mistakes that new sellers make is they just create stuff willy-nilly without looking, and they do get the master list, but they just go through and create everything. I create the master list, plug it into a keyword research tool, figure out 80% of them are junk, and then I go and actually create the ones with search demand. So off the top of my head, actually, I have no idea, but if we were to actually go and do this and type in, type that into the SE search bar or into a keyword research tool, we’d very quickly see what people are searching for and then we could create the products accordingly.

Ashley:
That’s an even better answer because anyone looking to do any kind of digital product just got the answer.

Tony:
Exactly. Cody, how often are you buying the quote competitor’s product to better understand what the actual deliverable is? Is that part of your process or is it just based on their Etsy sellers page that you’re kind of gathering this information?

Cody:
I used to do a little bit of competitive research where I’d buy other people’s products, but at this point I kind of know exactly how it’s getting packaged and what they’re doing. The only time I’ve done the research to see how people are delivering things is for a massive shop. Sometimes people will deliver A-P-D-F-A really nice branded PDF, and I’ll have a link to their shop and it might have a freebie that they’re giving away to get people on their email list. And this is kind of next level Etsy. So we can get into this if you want, but it’s definitely not necessary for a beginner, but you don’t need to go and buy the competitor stuff. You can kind of see what the product looks like. You know that if it’s a tracker, it’s probably getting delivered as a PDF. But if it is a link, if you’re curious, for example, if you were to buy a spreadsheet from me, Tony, you buy it on Etsy. Etsy doesn’t just email you the spreadsheet link, I would A PDF would get delivered to you. It would probably have a big button on it, like download spreadsheet or whatever, and you create a copy, it would go into your Google sheets. But a lot of times those PDFs are nice and branded. So I’ve done some competitive research with that. But for a regular old downloadable PDF type of thing, I’m not going and downloading. I kind of know what the customers are getting.

Tony:
So it sounds like step one is the idea generation either using your own brainstorming or some of the AI tools, then doing the keyword research, which you mentioned, and what was the name of the service? You mentioned it was Eran as a way to do some of the competitive research. Then it’s actually creating the product. Canva is your tool of choice. So once the product is actually ready and you’re like, okay, I feel good. I’ve done my research, it looks great. What are the following steps?

Cody:
So once you have your product created, then you list it to your Etsy shop, which includes a title for your product. So making sure, going back to the keyword research that you have, the most optimal keywords in the title, making sure that it’s exactly what people are searching for. You upload your listing images. So this is your images to showcase what the product’s all about. So this is Airbnb income tracking spreadsheet. You might want to show some of the features and be like, okay, this is this tab, this is this tab. You can use up to 20 listing images to kind of describe your product. Then you have a description where you kind of write down all the things like this is how the product is delivered. If you have multiple sizes, this is delivered in letter a four, a five size. You can also add just basically anything you want in the description that’ll help the buyer understand what they’re getting.
And then the last important thing is the tags. And the tags are basically just ways to identify your product. So if you were selling an Airbnb income tracking spreadsheet, you might be like real estate Airbnb spreadsheet like income tracking, and you have 13 unique tags that you can use to identify your product. Once you have all that filled in for your product, you hit publish, it sits in your Etsy shop, and when someone purchases that product, it gets automatically delivered to them. You don’t need to click send, you don’t have to send them an email, you don’t get a notification. It’s like now you have to email this file out. No, it gets automatically uploaded to the person’s Etsy account once they purchase on Etsy. That’s the beauty of this whole side hustle. I know you mentioned at the beginning why digital products versus other things.
It’s because I could have a thousand people buy my products and I basically have no work. I like to say it’s 95% passive because I’ve done the stat analysis on this. I get about one in 20 customers messaging me who are like, Hey, I don’t know how to download this, or they have some clarifying question. And for most of those I have just, they’re called auto replies or saved replies, just like a canned response. I click one button, ship it off, and all of a sudden they have no trouble downloading the file. So it is a pretty passive side hustle once you get the products up and listed in your shop.

Tony:
Cody, what about actually marketing? Are you doing any additional marketing to drive traffic back to those products? Are you going into the comments and forms and trying to redirect people back that way? Or are you running paid ads on Etsy, or is it just truly organic traffic from the platform? All the SEO and the research you’ve done that’s driving eyeballs back to the actual listing.

Cody:
So I’ll answer this question in two ways. If are a more advanced person, once you get to the level that I’m at, you can use other strategies. You can start promoting on social media, like Pinterest is a great tool. You can create an email list where you’re having people download some kind of freebie on the PDF deliverable. There’s a lot of fancy stuff that you can do. But for someone just getting started, and this is exactly what I did with that news shop that I scaled from zero to a thousand dollars in 116 days, a thousand dollars per month I should say, in 116 days, you do not need an email list. You don’t need an audience, you don’t need anything like that. All you need to understand is keyword research and SEO, and I know I’ve been throwing those terms around. Lemme just define them real quick.
They can sound like jargon. That doesn’t mean anything. It sounds like nerd speak. Basically what keyword research is is understanding what people are typing into the search bar of Etsy, of Google, of whatever, whatever platform, YouTube and delivering the thing that they’re looking for. So if someone is typing in keto meal tracker onto the Etsy search bar, your job as a keyword researcher is to create the exact thing that they’re looking for. That is keyword research. In a nutshell. It is literally researching the keys that people are typing into their keyboard on the search bar. I know it can sound fancy and jargony, but that’s pretty much it. So hopefully that answered your question a little bit, Tony. But yeah, that’s kind of all you need to understand to start making sales with this. That’s the cool thing too, is you don’t need 10,000 followers on Instagram.
You don’t need a big YouTube channel. You don’t need any of this stuff because Etsy, Etsy inherently doesn’t sell stuff. They’re just a platform. So they make money when you make money. They take 6.5% of digital product sales, which they raised from four to 6.5 a couple of years ago when everyone was up in arms. But I think it’s a great thing. I don’t know if you guys watched the Super Bowl last year. There’s a big Etsy ad, there’s a big Etsy ad two years ago in the Super Bowl. They’re spending so much money. I see Etsy ads on the gym, TV screens when I’m at the gym. They’re spending so much money getting people onto the platform, and that’s exactly what they’re using those dollars for. So I’m more than happy to pay Etsy 65 cents to deliver my $10 product to someone that never would’ve known about me.
They don’t have to follow me on social media, they don’t have to know anything about me. They just have to be typing something into the search bar that I was clever enough to create and then list and have it look good enough for them to be interested in buying it. So that is kind of the reason I like Etsy over other platforms like a Shopify or selling on your own website. Those are great if you have an audience, if you guys were to start a real estate specific shop, you could have an Etsy shop and you could have a separate Shopify store, but Shopify isn’t going to drive traffic to your shop. Etsy is. So that’s why I’m such a huge fan of Etsy. They have a hundred million buyers just waiting on the platform to buy your stuff.

Ashley:
I think this is so comparable to Airbnb. I have two Airbnbs listed on there. I don’t have to do any kind of marketing, any kind of advertising. They take care of that for me. I pay them a percentage now, a way higher percentage than I was, a little higher than Etsy. But the same concept, I think very comparable. And it seems to be working for both the end user, the provider, and also the platforms themselves.

Tony:
So Cody, you’ve mentioned this challenge that you did to relaunch a new Etsy shop first. What was the genesis of that and did you learn anything new as you were going through this process in 2025 that maybe wasn’t a lesson you learned when you started back in 2018?

Cody:
So this is a funny story. The reason I started this whole thing, I had a hater leave a comment on one of my videos and they were like, must’ve been easy for you starting back in 2018. Etsy is so saturated now. You could never repeat this. I’m like, okay, bet. Let’s put this to the test. So I was kind of mad about it, honestly. I was fuming for a couple of days and I was like, this guy, I can still do it. I got the chops. So I started a brand new Etsy shop in a silo. Again, I didn’t promote it anywhere, and the goal was to see how fast I could get to a thousand dollars per month. I think that’s a pretty meaningful number. We talked about it’s $12,000 per year. That’s literally a down payment on a house hack. It’s a pretty meaningful number.
So I was like, okay, let’s see how fast I can get to a thousand dollars per month. And I didn’t want to basically dedicate my life to the shop. I wanted to be realistic. So I was spending five to 10 hours per week. As I mentioned before, it wasn’t like I was just spending 80 hours a week on this brand new shop, and again, it went kind of slowly. It was like 185 bucks in month one. It was like 400 a month, two, 900 month three, and then month four took off and made over $4,000. It was between month three and four, day one 16 where I hit that a thousand dollars per month milestone. But yeah, man, the genesis was honestly a hater, and I was like, I’m going to prove this guy wrong. And I mean, it was great for me just to kind of go back through the things that I already knew, kind of not reteach myself, but just reinforce force that, okay, I know what I’m doing, the things that I’m teaching, we have a whole community and course and stuff.
Is the stuff that we’re teaching, does it actually still work? I hadn’t built a new shop from scratch since 2018, and the answer was that it does. To answer the second part of your question, there was honestly not really any gotchas or things that I didn’t know. It is funny, there’s all this AI stuff and all these new tools coming out, but it’s seriously, just going back to the basics. It is just going back to the keyword research and SEO stuff, and that is exactly what I focused on. It was just relentlessly or ruthlessly getting rid of crappy product ideas, creating the ones that worked. And I wouldn’t want to say every single product worked because I had, using the template method, I had listed 350 products in four months, which might sound like a lot or a little depending, but it was because I was able to pump out six variations of one product in an hour or 10 variations of a product in an hour. So it was very quick. So I was just basically throwing as many product ideas as I possibly could as long as they passed all the checks, like, okay, people are searching for this. There’s not a crazy amount of competition. And yeah, it was a slog. But after day one 16, I crossed that a thousand dollars per month mark and the shop has continued to chug along since.

Tony:
Let me ask one follow-up question. I’m sure this is what everyone’s going to ask in the comments anyway. If you were to do that again, what niche and product would you start with and why?

Cody:
If I were to start right now, Tony, we’re recording this the end of October, 2025, I would go crazy in the Christmas niche. The holidays are insane on Etsy. Like some Etsy sellers make 40% of their income for the year, especially in the handmade space on Etsy. So I don’t have a specific product in mind. I’d have to go and do the keyboard research, but it would definitely, I just go crazy with Christmas digital products. Honestly, I would just create as many as humanly possible in the next month throughout the entire month of November. And then I probably have a pretty big December and I bet I could get to the a thousand dollars per month milestone even faster.

Tony:
Alright, coming up next, we’re going to talk about how to scale. We talked about how to get started, but how do you scale beyond that 1000 bucks per month? We’ll be right back with Cody after this. Alright, we’re back here with Cody and he’s walked us through what digital products are, how much we can make the step-by-step process we’re getting set up. And I want to get into the nitty gritty of how do we actually scale this thing once we’ve got a good foundation laid? So Cody, we talked about 100 bucks per month, $1,000 per month. What are the levers that someone can pull to really scale this up exponentially beyond that first kind of four figure threshold?

Cody:
This is where we start getting into the more advanced stuff. So at this point, if you want to get to $5,000, $10,000 per month, you probably want to start opening up some other traffic sources. Like I mentioned before, you can totally get to a thousand dollars per month, just strictly keyword research and SEO, no social media presence, no Pinterest, no ads, nothing like that. But once you want to scale, you might want to again, open up some, open the floodgates as you will. So you probably want to start building an email list of some sort. So you could pick whatever email platform you’d like. Start building an email list. An easy way to do this is when you deliver a PDF to someone, you could have some kind of freebie or some kind of download. Maybe someone’s downloading your Airbnb income tracker and you’re like, Hey, you like my Airbnb income tracker?
I also have this personal finance tracker. You might give that away for free to someone who buys your product. It’s Goodwill. And you can then get them on your email list. They trade their email, they get your personal income tracker or whatever, your personal finance spreadsheet, and then you have them on your email list. Now you know that this person is the exact type of person who is primed to buy your stuff. They already bought your Airbnb income tracker. So when you buy the ultimate Airbnb listing guide, and then you can pump it out to your email list. And chances are that the people on your email list are going to be pretty interested in that thing because they, again, they’re the exact avatar that’s buying the stuff. Anyway. So that’s probably one lever that I would definitely take full advantage of is build that email list.
And my main business, gold City Ventures email is our number one traffic source, and it’s something that we focus a lot on. So email list second would probably be Pinterest. Pinterest and at sea we like to say, goes together like peanut butter and jelly. The types of people who are on Pinterest typing in these things, they might type in income tracker or they might type in Airbnb income tracker, or they might type in meal tracker using a lot of the examples we’ve talked about today. And they might type that in the Pinterest looking for one, and then they click through from Pinterest, brings ’em to Etsy, and boom, they’re in your shop. So Pinterest is another great one. And just like the crossover between Pinterest users and Etsy users is huge. I don’t have exact data on that. They haven’t released it, but it’s a pretty good swath that use both.
Next would probably be probably ads. I don’t want people to start or to think that they have to start using ads right away because I don’t want people to think that they have to spend money to make money. But once you reach a certain threshold and you have products that are actually performing, you can then start to turn up the ad dials a little bit. So you could run ads on Etsy platform itself. You could run ads on Pinterest to get traffic to your Etsy store, but please, please, please only run ads on once you start having some traction. The biggest mistake I see is people will be like, well, I could get to a thousand dollars per month. I could just run a ton of ads. It’s like, well, ads only buy eyeballs. Ads don’t buy sales. So if you have a hundred people who saw your product and didn’t buy it, and then you buy a thousand eyeballs to look at that same product, chances are you’re not going to make any more sales.
But if you have a product where a hundred people saw it and four people bought it, you have a 4% conversion rate, then you buy a thousand eyeballs. Now you might make 40 sales from it. So just please understand the numbers and don’t think that you’re going to magically going to start making sales by running ads. But once you have some proof in the pudding, you can kind of use ads to juice the traffic to your shop. Next would probably be social media of other types. You could create a Facebook page about people who are passionate about tracking their Airbnb and come with real estate, or you could create an Instagram page or you could create a TikTok or pick your poison, whatever social media you like. This is what I’ll say too. Don’t think you have to do all these things. You don’t have to do all the things, just do the things that you have the least resistance towards, because then friction, if there’s too much friction, then you’re not going to do it.
I’m a big believer in taking small steps every day rather than, okay, I am finally going to put on my shoes and go for that run. It’s the consistent, small, daily actions that produce results. It’s not just one big heroic effort. So the less friction that you can have in this side hustle in general, the better. So if you’re like, well, I don’t want to post on social media, then if you don’t want to create a Pinterest account, then you don’t have to do these things to be successful. But I’m just answering your question, Tony, about how do you maximize the juice? How do you get the most squeeze out of this juice?

Tony:
And Cody, that was like a phenomenal breakdown, man. I mean, you gave a lot of super tactical things. I think one additional question that comes to mind for me is, is it common for sellers on Etsy of either digital or physical products to offer additional services or coaching on the backend? The example you gave of a keto planner, if I’m someone who is maybe a trainer in my day job and I sell this digital product of a keto meal planner, could I then reach out to those people for maybe be like virtual fitness coaching? Is that something that you see on that platform of reaching back out to those buyers for actual services that you can offer to them?

Cody:
I’m talking to a businessman here. Okay, yes, people do do that. And so that is a really good point. And another great point about Etsy. Since Etsy, a marketplace where you don’t need an audience, you don’t need an email list, any of that stuff, it is a free lead generator. You pay to get people into your orbit with Facebook ads. You pay to get people into your orbit with Google ads, with YouTube ads, with any other ads there are out there on Etsy, you could sell people a little $5 printable. And then if you have a coaching business on the backend you got them on their email list, you warm them up, you start to maybe bring them into your webinar, whatever your business model might look like. These are free leads who are already interested in the things that you have to sell. So going back to the Airbnb income calculator example, if you have someone who downloaded that for, they paid 10 bucks to get access to your spreadsheet, you think they’re going to be interested in a real estate course or community?
Heck yeah. A lot more than the average Joe or Jane off the street. So that’s a great question, Tony, and that’s kind of next level Etsy business is if you do build a business on the backend, Etsy is a fantastic lead generator. Now, I wouldn’t be like, okay, you bought this $5 thing and then there’s a direct upsell on Etsy to my thousand dollars coaching program. But if you can get them into your orbit, onto your email list, following you on social, all those good things, then later on you can convert them on higher price point products and services.

Ashley:
Maybe Tony and I should do our own challenge. The first one to get to a thousand dollars benchmark where we each do trade our own shop and put real estate stuff up, and as

Tony:
Just you’re going down, don’t bring out the competitors here.

Ashley:
So Cody, to wrap up here, if someone listening wants to start today, like Tony and I for our challenge, what’s the one action that they should take immediately after this episode ends?

Cody:
You could literally have an Etsy shop up and running within the next hour. If you were to stop listening. Again, if you’re driving, don’t do this. But if you’re at home, if you have an hour, half an hour, you might again be sitting on a product that you could then easily templatize, just white label it. Obviously, if you have an income tracker or a net income tracker, delete your numbers out of there and then templatize it. But you might be sitting on a product that you could list literally within the next hour, and that’s all it takes. I’m a huge fan, again, of momentum, of the snowball effect. Once you get that first product listed, then the second one becomes easier, the third one, the fourth, so on and so forth. So it’s kind of the Nike thing. It’s just do it. Get over that first hurdle.
There’s so many people I see who just sit on the sidelines forever, whether it’s real estate or a side hustle. They have a 20 page business plan. They have a list in their notes of a hundred different business ideas, and it’s been there for four years and they’ve never taken action. Just take that first piece of action, go into Canva, create something for fun. If you don’t have anything that you already are sitting on, like I mentioned, the barrier to entry is so low with this side hustle and this side hustle is just a segue into so many other things. You never know what the keyword research knowledge that you might gain from doing the side hustle could teach you, or the design skills. The design skills could translate into so many different things. You could use the skills that you learn from a digital products business to freelance to earn some quick now money if you need some extra cash. It’s just kind of a masterclass in business. It’s a little mini MBA, if you will, creating a digital product business. So yeah, please just take that first step of action. I see so many people who just have these endless business plans and notes of all the things they’re going to do, but that first step is so elusive, but the first step is everything, and that’s what leads the second and the third and the hundredth step. So yeah, take that first one.

Ashley:
Well, Cody, thank you so much for joining us today. Can you let everyone know where they can reach out and find more information about what you’re doing?

Cody:
Yeah, so Gold City ventures.com is the website where everything, digital products. And if you want to follow me on social media and actually check out for the thousand dollars per month challenge, I recorded a video every day. It was a lot. It was grueling. I was pretty happy when I hit day one 16 and actually reached the goal, but at Cody d Berman everywhere, and you’ll see that series and you can DM me, reach out. I love talking to people and talk and shop. Thanks for having me, guys.

Ashley:
Yeah, thank you so much. This was a wealth of knowledge and me and Tony definitely have to do this challenge. So everybody makes you come to my Etsy shop to download a product and not Tony’s. Well, Cody, thank you so much again. I’m Ashley. He’s Tony. And we’ll see you guys on the next episode of Real Estate Rookie.

This article is presented by Baselane.

Tax season is upon investors, and with it, a lot of missed opportunities to reduce your tax burden. 

The average real estate investor leaves $8,200+ in deductions on the table every year—don’t be that person. If you know what to look for, you could significantly improve your cash flow by making a few simple changes on your tax return. 

For example, did you know that 100% bonus depreciation is back for good? Or that the SALT cap will rise to $40K, which means you could have a lot less personal property and local tax to pay? 

These are all low-hanging fruit that could save you a lot in business taxes. You don’t need to be a professional accountant to take advantage of them, but you do need to make sure you have a solid, detailed record of your real estate business incomings and outgoings.   

Of course, there’s another important reason for having all your tax-related documents in order: minimizing your chances of being audited by the IRS. While statistically this chance is pretty low (around 0.4%), discrepancies in reported income, especially from platforms like Airbnb and Vrbo; overly large or unusual expenses; and incorrectly filed forms can put you at a much higher risk. 

Some errors are very basic and avoidable, like reporting rental income on the Schedule C form when it must be reported on Schedule E. But for investors juggling multiple properties, the potential for errors is greater simply because the complexity inevitably increases when you need to report multiple sources of income and expenses. 

With these two goals in mind, here is a checklist of the documents you’ll need to have ready to file your taxes as a real estate investor. 

Phase 1: Income Documents

First, you’ll need those all-important 1099 forms that reflect your annual income, including from your real estate investments. 

The fundamental thing to remember is that the income you report to the IRS can be greater than the sum total recorded on your 1099s (for example, if you had 1099-K income that was less than the current reporting threshold), but it cannot be smaller than what’s on the forms. If there is a discrepancy, the IRS will bill you for the missing income; if there is a large discrepancy, you may fall under further scrutiny. So, it’s very important to make sure you have all your forms.

1099-NEC/MISC

If you made payments to independent contractors, e.g., property managers or builders, during the past calendar year, those payments will need to be recorded on 1099-NEC forms, one form per each contractor if the total you paid during the year was more than $600 (this amount will go up to $2,000 for payments made in 2026). Don’t believe what you may have heard about only needing to submit these forms to the IRS if you want to qualify for passive income loss; all landlords must file 1099-NEC forms if they paid for nonemployee services.

Apart from the fact that it is a requirement and there are penalties for nonfiling, there is a very good financial incentive for filing all your 1099-NEC forms: Doing so will help qualify your rental activity as a business. And qualifying as a business will mean that you qualify for the so-called “pass-through business deduction,” which allows you to deduct up to 20% of your taxable business income.

1099-K

Do your tenants pay rent by credit card? You’ll receive a 1099-K from the card processor. Perhaps they pay you via PayPal or Venmo? If the total payments exceeded $20,000 and 200 transactions, you’ll receive a form 1099-K. 

The threshold was lowered to $5,000 for payment apps in 2024, but it has been restored to $20K in 2025. Some states have their own reporting thresholds, however, so you might still receive a 1099-K if you receive less than the threshold amount. And if you are processing payments via a card payment processor like Visa or Mastercard, they’ll send you the form, regardless of the amount. 

Remember that 1099-Ks record your gross income, which isn’t necessarily the same as your taxable income. You will be taxed on your business profits, which is your gross income minus legitimate deductibles like business expenses and, for example, any rent discounts you might have given your tenants. 

1099-S

Sold an investment property in 2025? You will receive a Form 1099-S from whomever closed the transaction (your real estate agent or attorney). Receiving a Form 1099-S triggers reporting requirements, namely Form 8949 (Sales and Other Dispositions of Capital Assets) and Schedule D, Capital Gains and Losses. 

Although selling your own home that’s your main residence generally excludes you from these reporting requirements (unless you made over $250,000 on the sale of your home), selling a vacation home does not. 

Although vacation homes are considered personal property, selling them is treated in the same way as selling an investment property. That means you have to report all capital gains on the sale. Selling an investment property also qualifies you for deducting a loss from such a sale, but you can’t apply this deduction to your own home or a vacation property for your own personal use.

Vacation homes that are rented out are another story. You can deduct a loss from the sale of a vacation home you rented out, in which case you’ll have to report the sale on Form 4797, Sale of Business Property. The owners of short-term vacation rentals need to be scrupulous with their recordkeeping—you’ll need to be able to prove to the IRS what purpose the home was held for.  

K-1s

The K-1 form is a crucial piece of financial documentation every real estate investor needs to file their taxes correctly. This form links all your real estate investment income together and shows the IRS your total income, losses, and deductions from each investment, as well as your share in any partnership or LLC’s equity. 

The K-1 is very important for filing taxes, but it’s also a key piece of evidence for you, the investor. It is good business practice to evaluate these forms to assess the current profitability of your business.  

Rent rolls/bank statements

A rent roll is a historical record of your rental income, which details the type of property you have, the number of tenants, and the amounts paid in rent each month. It’s not a legal requirement to keep a rent roll, but it’s good practice to do so. 

Apart from providing an easily accessible record of your rental income, rent rolls allow you to assess which units are performing well. You’ll also need a rent roll for future investments, as they are used by mortgage lenders to assess your risk.

Again, bank statements are not a legal requirement, but good to have to back up your tax returns if needed.

Phase 2: Expense and Deduction Records

Now comes the good part: As a real estate investor, you qualify for a number of business expenses and deductions, which can make a significant difference to how much of your income from real estate is taxed. It takes a bit of time and effort to wrap your head around all the rules, but the financial rewards are absolutely worth it.

Mortgage interest 

The most basic tax deduction every landlord should know is the mortgage interest deduction. As a real estate investor, you can deduct the amount you paid in interest from your income. That amount will be reflected in Form 1098, which you will receive from your mortgage lender if you paid more than $600.

Property taxes

Property taxes are considered a necessary expense, and you can deduct the whole amount from your federal taxable income—even if the amount is more than $10,000, which is the state and local taxes (SALT) cap and includes personal property taxes. 

The SALT cap has been an issue for business owners who also live in a high-tax area (e.g., New York or California) and pay a lot in mortgage interest and property taxes, which can easily add up to more than $10,000. From 2025 and until at least 2029, however, this cap will be raised to $40,000 for married couples, which is great news for those investors who are also paying high taxes on their own family homes, in addition to their investment properties. 

The deduction will work especially well for smaller-scale investors earning under $500,000, because, under current proposals, the cap will decrease for those earning more than $500,000 and remain at $10,000 for those earning over $600,000.

$2,500 de minimis election

A less obvious and less-used deductible is the so-called de minimis safe harbor election. This deduction allows business owners to expense certain lower-cost expenses immediately rather than capitalizing them. 

As a real estate investor, you could expense things like equipment or building improvements, up to $2,500 per invoice for most private investors/LLCs. Expensing items like building supplies and small repairs can help reduce your taxable income. 

The beauty of this rule is that, if each invoice is under the threshold, you will only need to keep a record of the amount paid (although you should still keep itemized invoices for what it is you’re expensing). You can only expense small repairs this way; larger home improvements must be depreciated (we’ll talk about depreciation in a minute). You’ll also need to include a statement with your tax return explaining your election.  

If you decide to apply the de minimis election to some supplies or materials, you’ll have to expense all of them this way, unless you decide to use depreciation. 

Mileage 

Do you make regular trips to collect rents, inspect your rental properties, and meet with contractors and prospective tenants? You can deduct the cost of this business-related commuting from your taxable income. 

There are a few caveats. One is that trips made from your primary residence and rental properties are nondeductible unless your home is registered as your “principal place of business.” 

You also have two options: deducting on a mileage basis (at $0.70 per mile in 2025), in which case you’ll need to keep a mileage log; or deducting on the actual expenses method, where you’ll take the total cost of everything vehicle related, including insurance, maintenance, and fuel—and then deduct the portion used for business travel. 

You can only use one or the other.

Home office expenses

Similarly, you can deduct a portion of your household expenses such as utilities if you are using a designated space in your own home exclusively for business purposes (e.g., you have a home office). You can deduct $5 per square foot of the designated business space, up to 300 square feet, and $5 per square foot in utilities. Alternatively, you can once again use the actual expenses method, working out the exact footage and utilities and deducting the percentage that is used for business. 

Phase 3: Depreciation and 2025 Bonus Rules

As of 2025, bonus depreciation is back for assets placed in service after Jan. 19, 2025.

What does that mean for investors? You have a choice: Use traditional depreciation over time, or deduct the cost of certain assets right away, up to 100% of the cost of the property. These assets include machinery and equipment, some home improvements (like HVAC upgrades), and business vehicles (especially heavy trucks used for property maintenance), among others. 

Being able to write off the cost of the items can significantly improve cash flow by reducing your tax burden. However, you should always perform a cost segregation study to understand which assets qualify, and how much of a deduction you’d be looking at. In many cases, you could end up at significant tax burden reductions.

For example, let’s imagine you bought a $1 million duplex. A standard depreciation deduction might allow you to write off about $30K in taxes, based on a 27.5-year depreciable basis. But if you (with the help of a team of finance and engineering experts) conducted a cost segregation study and found that the building’s plumbing has a $120K depreciation value over a five-year period, plus the same again for the electrics, storm and drainage reinforcement, roofing, and new curbing/driveway, you could be looking at an $120K write-off in the first year. 

You will need to file Form 4562 to claim depreciation. 

Phase 4: Key Forms and 2025–2026 Deadlines

Filing on time is key. Here are the deadlines for all the main forms real estate investors typically need to submit: 

• Schedule E: April 15, 2026 (Oct. 15 if you filed an extension request by April 15) 
• Form 4562: April 15, 2026 (March 15, 2026, for partnerships and multimember LLCs) 
• Form 8824: April 15 following the year of the sale/exchange 
• Form 1040-ES: Quarterly estimated tax payments must be made by April 15, June 15, Sept. 15, and Jan. 15 of the following year for the fourth quarter.

Being Prepared Is Being Organized

Keeping track of all the documentation, deduction options, and deadlines can be daunting, especially if you’re a new investor. 

That’s where Baselane comes in: Our banking platform is created especially with real estate investors in mind, helping you with everything from bookkeeping to rent collection. Having everything in one place can make a huge difference come filing day!

This article is presented by Lennar Investor Marketplace.

Once upon a spreadsheet, new construction homes were the fancy properties: shiny, flawless, and out of reach for the budget-conscious investor. But what most investors don’t know is that these new homes aren’t always more expensive today.

In many markets right now, brand-new homes are going head-to-head with older resale properties on price. When you factor in the benefits of a new home (minimal maintenance, energy efficiency, loyal tenants, and builder perks), new builds come out ahead.

For beginner and intermediate investors focusing on long-term rentals, investing in new builds could be a strategic move. Let’s break down the numbers and reveal why buying new could mean spending less, stressing less, and earning more—especially when you use the right tools like Lennar’s Investor Marketplace. 

Lower Maintenance Costs, Fewer Surprises

One of the biggest perks of new construction is dramatically lower maintenance and repair costs in the early years. Everything is new—the roof, HVAC, plumbing, appliances—so major fixes are typically not needed for a long time. 

Statistics support this claim: According to NAHB analysis of the American Housing Survey, only 11% of owners of newly built homes (under four years old) spent over $100 per month on upkeep, compared to 26% of all homeowners. In fact, 73% of new homeowners spend less than $25 per month on routine maintenance. 

Lower maintenance properties save money, absolutely, but also time and stress. New homes usually come with builder warranties on major systems and structural elements for 5 to 10 years, meaning that if something breaks, it’s often covered. In a new build, your maintenance “responsibilities” might be as simple as changing HVAC filters or touching up caulk. 

Investors who purchase an older home have to factor in many line items in their budget, including potential water heater replacements, reroofing, leak repairs, electrical wiring updates, and so on. Those costs can add up fast. In 2024, common home repair projects ranged from thousands for system replacements to tens of thousands for big-ticket items like roofs.

Energy Efficiency and Lower Operating Costs

New construction homes are built to the latest energy-efficiency, insulation, and building-material standards. This translates into lower utility bills and operating costs, benefiting both the landlord and tenants and making the property more attractive to renters. 

Modern windows, better insulation, Energy Star appliances, LED lighting, and high-efficiency HVAC systems all contribute to reduced energy usage. In practical terms, a tenant in a well-insulated new home will enjoy lower electric and gas bills than they would in an older, drafty house of the same size.

Other operating costs are lower as well. Homeowner’s insurance premiums are often less for new homes. Insurance companies know that new structures carry less risk of issues like old wiring causing fires or an older roof being blown off in a storm (because new homes are built to modern code and with new materials). Likewise, water and sewer bills are often lower, since new plumbing is less leaky and new fixtures conserve water.

Attracting Quality Tenants and Longer Tenancies

Beyond the dollars saved on maintenance and utilities, new construction rentals offer a less tangible but very real benefit: They attract high-quality tenants and encourage more extended stays. Renters love new homes. Everything is clean and modern, there’s no wear and tear from previous occupants, and the style is up to date. 

Modern open layouts, fresh paint, new floors, and contemporary kitchens and bathrooms make a strong first impression on prospective renters. In contrast, if a house feels dated (shag carpet, old cabinets, or an AC that can’t keep up in the summer), tenants notice and may be less enthusiastic about signing a new lease.

Incentives and Financing Advantages of New Builds

New construction is very popular right now, and it’s surprisingly affordable.

As of mid-2025, the median new home price was $401,800, while existing homes averaged $441,500. That’s a 9% price difference in favor of new builds. Think paid closing costs, free upgrades, and mortgage rate buydowns that can slash your monthly payment.

In some markets, these incentives make new homes more economical month-to-month than older ones, especially since resale sellers rarely lower prices. In places like Florida, builders’ rate buydowns and credits can make the payments on a brand-new home lower than those on an older property with a smaller sticker price.

The Long-Term Value Proposition

When you add it all up, new construction homes give investors something older properties rarely do: peace of mind that actually pays.

Even if the upfront price looks similar, you’re getting a home that’s easier to manage, less expensive to maintain, and more attractive to tenants. No leaky roofs, surprise plumbing issues, or middle-of-the-night repair calls. That means your cash flow stays consistent, and your tenants stay longer.

More investors are building portfolios around new construction. One of the biggest names leading that charge is Lennar. Through Lennar Investor Marketplace, you can browse curated, turnkey homes across 90+ markets. An industry-leading warranty, rental comps, and end-to-end support back each one. They’ve streamlined the entire process so you can focus on scaling.

Whether you’re looking for your first rental or building a nationwide portfolio, Lennar Investor Marketplace makes it as simple as choosing your market, picking your home, and watching your investment perform. No remodels. No contractors. Just modern homes designed for modern investors.

Dave:
The end of 2025 is here, which means it’s time to look back and reflect a little bit on what worked this year and what tactics that we enjoy that we’re going to carry into our strategies for 2026, and today we’re going to do something a little different. We are sharing our favorite things of 2025. It might be a trend that you’re obsessed with, a headline that changed how you invest, a portfolio pivot that really paid off or just a big lesson that we think every listener should carry with them into next year. To do this, of course, I am joined by Henry Washington, James Dainard and Kathy Fettke for our ideas, strategies, and moments from 2025 that we’re going to bring with us into next year. You’re listening to On the Market. Let’s jump in. James, Henry, Kathy, welcome to the show. Thank you all so much for being here. Every year, my wife’s family does this big Christmas Eve party and they do this thing called favorite things, and rather than just doing a white elephant or like a secret Santa, you bring three of the same thing. It’s something that you really like and then everyone trades them and every year for the dudes, it’s just either you get a three pack of golf balls or a six pack of beer. Everyone. Men are just, all we have is two things that we like.

Kathy:
It’s so simple.

Dave:
Yes, but it’s a fun game, so we thought that we would do something like that. We won’t obviously do any trading, but I’m curious about your favorite things of 2025 so that we can share them with the audience and hopefully they can learn something about what they might bring into next year. Does that sound good?

Henry:
Yeah.

Dave:
Yeah. Alright. Well, Henry, I’m going to pick on you. What is your favorite thing about 2025 that you’re bringing with you?

Henry:
Well, look, Dave, as someone who enjoys finding real estate deals and someone who wrote a book on helping other people learn how to find real estate deals, my favorite thing of 2025 by far has been the return of being able to find a good deal without having to be this professional investor. There have been great deals on the market.

Dave:
Yes,

Henry:
There have been great deals if you’re just willing to do a little bit of work and reach out to some sellers. I’ve bought more deals from wholesalers this year. Typically that’s been a harder thing to do. It’s just the availability of a quality deal seems to be back and it was gone for a few years. You had to work really hard

Dave:
After four years of this show. The name of our podcast finally makes sense on the market. You can now actually buy deals on the market in 2025 going into 2026.

Henry:
Absolutely. Do you have to still negotiate? Yes. Do you have to put in some level of work? Yes. If you want to find a deal on the market, you still have to be willing to make an offer at substantially less than what somebody may have it listed for, but what we’re finding is there are more people willing to say yes to those than there was before. It used to be this needle in the haystack drill and now it’s not as challenging. Like last week I probably made 10 to 12 on market offers and these were just verbals. We weren’t even submitting the actual written offer. We just had my agent verbally and we say verbal, but they basically sent a text message to the listing agent saying, Hey, my investor client is interested in this property. We’re willing to make an offer of x. I know it’s not what you’re looking for, but we can assure you that we’ll close fast, it’ll be all cash. We won’t ask for any repairs, and just sending 10 to 12 of those text messages. I got two responses where I was able to go look at the properties and then adjust my offer and one of those were about to put under contract. That’s an amazing number to make 10 verbal offers and to have two responses and get one under contract, that’s easy.

Dave:
Join me on the lazy side of investing, Henry,

Henry:
So

Dave:
The water is warm. It’s so nice over here

Henry:
And the deal we’re going to put under contract, no work. It is completely renovated. It’ll just be a turnkey rental. I’ll get it. With 60 grand of equity,

Dave:
I mean this is the best favorite thing. Now I switch my head. It’s so true. This is the best one. This is the best thing that’s going on in the market right now is that you can find good deals. It just feels so much easier than it has. It’s funny, I do the state of real estate investing thing every year on BiggerPockets and I’ve been writing it over the last couple of weeks and I was like, I think investing is just getting easier. I think that’s what’s happening right now. It’s not easy, but it is trending in that direction and that feels good after years of it just feeling harder and harder and harder. I just think on market’s always been available, they’re just less hairy right now. It’s just a little bit simpler on market distressed homes people, not everyone sells those to an investor or goes through a wholesaler. Those still hit the MLS, but there are decent condition properties, properties that you could buy with a conventional mortgage on the MLS that actually makes sense these days. That is different. That’s a good favorite thing

Henry:
And it’s really excitement about what comes after the deal. Yes, it’s amazing that now it is air quotes, easier to be able to find deals, but what that truly means is we’re starting to see the return of year one cashflow. Again, that’s kind of gone away over the past two to three years where you were having to wait until year two, three year five before you’re really seeing the cashflow numbers and you were really just breaking even if you wanted to a buy and hold investor over the last couple of years, but because of this opportunity of being able to find deals easier, if you’re willing to do just a little bit of work year one cashflow is returning in a lot of markets now, maybe not in California where Kathy is. That’s still a challenge, but in a lot more markets, you’re able to now buy properties without having to do a ton of work and get cashflow in year one. We’re back, baby, we’re coming

Dave:
Back. It’s slow, but it’s good. Yeah. All right. Well, Henry, I think you stole the show already going first with this one, but let’s move on to someone else’s favorite thing. James, what’s your favorite thing?

James:
A couple of things I do like about this upcoming year that was a great experience for me this year was one, because there’s more deals, like you’re saying on market. You can buy a little bit easier flips right now. You don’t have to go as deep to make the return, but my favorite thing for the year, I feel like this is what everyone’s talking about, is the expenses have been increasing all the way across the board, and I love being a private money lender right now because no matter what, even if you’re not taking, you can do it in so many different ways and they’ve been great because they’ve freed up time for me where I’ve done some passive equity deals, but also just the steady interest rate, the consistency of it. It’s the only thing that hit a hundred percent of what I thought it was going to do for the year.

Dave:
I mean, I love it too as a concept. Are you worried though, with flip sitting on the market? Are you worried at all about the operators being able to execute deals right now?

James:
No. You have to vet your people, right? I do seconds. I do a hundred percent first, but it has to be for the right operator in any kind of deal. If you’re investing with the right operator, you might actually charge them a little bit less for that kind of leverage, but they’re bankable and they have assets and they will pay the bill, and to this day, I’ve never lost money on a hard money loan and we’ve been lending since 2009. You have to do it correctly. I saw people get smoked in 2008 doing the bad kind of loans, second thirds, gre, gre, greed, chase the rate, but it’s steady. You don’t have to worry about rising taxes, rising insurance, eating up your cashflow. You don’t have to worry about sitting on the market too long, paying too much in an interest expense. You are the interest, and at the end of the day, being the bank last year was the most profitable thing.

Dave:
Wow. Some people like James operates his own hard money lending fund. I do hard money investing just in other people’s funds and even that’s great, you don’t earn as much, but I’m in a couple of funds and they just pay every month. That’s real mailbox money if you want it. The minimums are typically expensive, but I know a lot of good operators who have debt funds right now and they do really well. It’s a great way to make cashflow and it’s way for me personally, I think about trying to balance my long-term investing approach, which is what I do with most things. Buy properties I want to own for 5, 10, 20 years, but I’ll take some cash right now and the hard money renting works pretty well for that, so I think it’s great as well, and I’m glad you have such an optimistic outlook for it going forward as well, James.

James:
Well, the cool thing about it is you can balance, it’s hard to make cashflow on a single family right now, but you can park some money there, or even if you’re losing a little bit on that, you can offset it by putting it in a hard money fund, kicking out the cashflow to cover, so you can do a blend to get a really good rental property, but you have to vet your funds, vet your operators, who are you putting in the fund? What assets do they have? What are they lending on? What’s their average duration? Don’t just take someone’s word for it. Dig into their portfolio and what they’re lending on and who they’re lending to.

Dave:
That’s a great point, and thank you, James. I think this is something we don’t talk about a lot, but I think lending and being on the lending side has been a great thing and probably will continue to be for the foreseeable future. A great favorite thing. Alright, let’s take a quick break, but when we come back, we have mine and Kathy’s favorite things. Stick with us. Welcome back to On the Market. I’m Dave Meyer here with Kathy Fettke, Henry Washington, James Dainard, talking about our favorite things in 2025 things we’re going to carry over into 2026. Kathy, what was your favorite thing of 2025?

Kathy:
Oh my gosh, I have like three, but okay,

Dave:
Me too. There’s so many good things that happened this year, but so many start with

Kathy:
One. I’ll throw the first one out that I’m not going to go elaborate on, but AI has been extremely helpful in underwriting in so many things, but I’m just going to say, I’m just going to put that out there. We’ll do a whole nother show on that, but that was one of my favorite things and I really look forward to learning it more in 2026, but I would say for 2025 specifically bringing back that a hundred percent bonus depreciation, baby, that’s a big one.

Dave:
Not surprised to hear that. That being your favorite thing, that is a big one for real estate investors. Maybe explain to anyone who’s not familiar with what changed this year and how beneficial that could

Kathy:
Be. Bonus depreciation is the first year depreciation that you can take, and it was sort of winding down under the Tax Cuts and Jobs Act is when we first got it and it was a hundred percent and then it went down to 80 and then the next year it went to 60 and then this year it would’ve been 40% bonus depreciation that you could take in your first year of owning a property. Again, I am not a CPA, do not hold me to this. Talk to your CPA, make sure you get the right information. Don’t trust me. I have to always say that when you talk taxes, but it was really dwindling and so you couldn’t take massive write-offs in one year. You used to be able to, until the O-B-B-B-A, that one big beautiful Bill act brought it back up to 100% and it’s permanent.
However, I have personally talked to several CPAs, interviewed them, tried to really get the nuts and bolts of this, and they disagree, and I’ve hounded them on this one thing, and I just want to say this is something that’s really important to look for is that the way I understand it is that the a hundred percent bonus depreciation is only good on properties that are purchased after January 19th, 2025. So a lot of people think, oh, I’m just going to get this a hundred percent bonus depreciation on an older property, and I’ve had CPAs go, yeah, yeah, that’s what it is, but the way I understand it is it has to be a property bought this year after January 19th, so look that up because it sounds like you can still get the bonus depreciation on older properties, but it’s at the 40% level that it was. So the a hundred percent is on newer properties. Again, don’t take my word for it, but go out and buy a good property that you can bonus depreciate.

Dave:
And from what I understand too about the one big beautiful bill act is it is not set to expire, right? It is indefinite,

Kathy:
Right? It’s permanent.

Dave:
So even if anytime you buy a property now you can consider doing this. So bonus depreciation is an amazing thing for real estate investors, but all of you are considered real estate professionals, right? Tax status.

Kathy:
Yeah, absolutely.

Dave:
Yeah. As someone who’s not that, it doesn’t really help me unfortunately, which stinks, which I just want to call out for people because it can help a little bit, but depreciation usually, at least for me as a real estate investor, if I buy a rental property, the normal depreciation without bonus depreciation usually offsets my rental income, and I don’t wind up paying tax on the income from a rental property, but I still have to pay all of my income tax for my job at BiggerPockets. I can’t take the depreciation from my passive investments and apply it to my active income. That is only reserved for people who have this real estate professional status. And so bonus depreciation is amazing. If you’re an agent, you’re a professional investor, if you’re a property manager, if you have that status, you can offset almost all, sometimes more than your active income. But if you are not doing that, and you should look up what it means to be a real estate professional status, I just want to call out to people that you might not get the full benefits of bonus depreciation because I painfully am aware that you don’t get them unless you’re a real estate professional.

Kathy:
Unless you have a short-term rental.

Dave:
Short-term rental loophole.

Kathy:
That’s the only way

Dave:
Around that.

Kathy:
Yes. That’s why there’s all this talk about the short-term rental loophole because yeah, James Henry and I can get this bonus depreciation on anything because we’re real estate professionals, but if you have a full-time job and you do that more than you do real estate, then you’re not, and unless you have a short-term rental, it’s a loophole for now, and that’s why people kind of go about those

Henry:
Unless you have a short-term rental that you manage,

Kathy:
That you manage, manage that you have to

Henry:
Manage.

James:
Yes. But isn’t it also too, if someone’s significant other is a licensed real estate broker that then you can run it through that way?

Kathy:
Yes. If your spouses,

Dave:
Yes.

Kathy:
It’s not just if they’re a broker, they have to also manage your portfolio. There’s more to it than just being a licensed real estate agent.

Dave:
You have to be actively involved. There’s something called active participation in each deal that you bonus depreciate.

James:
Oh, it’s not just sitting in open houses. Yeah,

Dave:
No, you have to actually, I’ve looked into it. Believe me, you can’t do it that way. But this is great for anyone who does have it. I do think it breeds a little bit of life into the market too because it just adds a bit of incentive for people to transact on real estate, which we need right now because there’s just not a lot of transaction volume. So I think this is definitely a good favorite thing. Did you have another one, by the way? Ai? You said this one.

Kathy:
Yeah, I do. And we could talk about it on a future show, but seller financing I think is a really incredible opportunity because there’s a lot of people out there who can’t qualify, and if you can help them qualify by being the bank, being the bank and doing seller financing, then there’s a huge opportunity there. I think

Dave:
Another good one. Yeah, we will have to talk about that on another show. We do have to take a quick break, but I will tell you my favorite thing when we come back, stick with us. Welcome back to On the Market. I’m Dave Meyer here with James Dainard, Henry Washington, Kathy Fettke, talking about our favorite things of 2025. Henry started with on-market deal availability. Then we talked about James’s love of being the bank right now and hard money lending. Kathy shared with us her love of bonus depreciation. I’m going to bring, I struggled with this. There’s a lot of things I like. I got to be honest, James, I thought about saying flipping because James has brought me over to the dark side. We’ve done two deals, but they haven’t closed yet. They’re pending, and I’m not going to call them my favorite thing until they actually close, but it was close.
But my favorite strategy is actually something I’ve been doing for a long time, but I named it this year and it seems to have sparked some interest from people. I love the slow. This is just something where I think it’s basic boring real estate investing, but it has been working for me and I’m going to keep doing it in 2026, I think during the pandemic and the years leading up to it, people got the idea that the burr, it had to be perfect. You had to be able to take a hundred percent of your money out of your deal that you had to do it in six months and extract all this value out of it immediately. I honestly never bought that. I don’t think that way. I think the way that I’ve been buying deals for the last two or three years makes a lot of sense.
I’m buying small multifamily properties with tenants in them often, and I just wait. I left the tenants stay there as long as they want, and these deals typically cashflow right off the bat, but not crazy, like two 3% cashflow. So I’m at least making money, holding costs are covered. Then when the tenants move out, I renovate it, I bring the rents up, and then the next time tenant moves out, I renovate it. I bring the rents up, and once I’ve done that, I’ll refinance, take some money out and still have a great cash flowing property, usually in the eight to 10, maybe even higher percent cash on cash return. I’m not pulling a hundred percent of my equity out on these deals, but I’m at least pulling out all of my renovation costs. And then you have a great property that’s now in great condition.
You could go on and do it again. And I just love it because it takes all the time pressure off of it. I feel like so many people have these expectations that a burr is like a flip, but when I’m buying these properties, I don’t have a 12% hard money loan. I have a conventional mortgage on these properties. I’m making cashflow on it. There’s no rush. I am making money every month holding onto this. So it really, as someone who works full time, I think is a really good strategy because it allows you to get the benefits of value at it gives you cashflow, but it’s not this super time consuming stressful thing. So the slow burr is what I love and it’s something that I am planning to do more of heading into 2026,

Kathy:
I love me a slow burr,

Dave:
Which

Kathy:
Is basically real estate investing.

Henry:
I was going to say it’s called real estate.

Kathy:
Buy a property, it goes up in value, you refi it, you get your money out. I mean, yeah, that that’s traditional.

Dave:
I know. I guess I felt the need to name it because everyone says the bur is dead. You’ve heard this, right?

James:
It’s such bs. Bur

Dave:
Is dead, right? It’s such bs. I guess I’ve said this in a lot of context recently, but I just don’t think the market sucks. I think people’s expectations suck. What’s holding back real estate right now is people are expecting these crazy returns. It’s magic. The fact that you could ever do a perfect bur is a little bit of magic. You could, and that’s great if you were able to pull that off, good for you. But don’t count on that happening. Lightning can’t strike every single time. This is a great way to make money. It is a boring way to make money, but it is predictable. It is very safe in an uncertain environment and there’s very low risk to this. And so I just think this is the tried and true way of being a real estate investor.

James:
Have you ever noticed that the people that say the burrs are dead are usually trying to sell something and then they’re trying to sell something else and then they’re trying to sell something else? It’s just because it’s not the trending topic anymore.

Kathy:
Yes,

James:
But there’s so much opportunity. I’m with you, Dave. Actually, I might go slow. I think it works really well. There is no excuse to do a burr sometimes. I don’t want to do that heavy of a rental, and that’s the only way I can get that deal done. But what you’re saying is the strategy works, right? You just got to park your money, wait for ’em to move out, and your repairs are not that heavy. They’re more cosmetic.

Dave:
Yeah, exactly.

James:
Which is great. You can control those costs and then just those minor little cosmetics increase it enough to get your cash back out or a chunk of it. But it’s a great way. I’m trying to buy 10 of ’em this year. That is my goal is to buy 10 burrs and I’m going to go a little bit heavier. I want a 10 31 ’em later into a little bit bigger property in California. That’s the only way I can afford this rental property in California is if I buy 10 burrs somewhere else and then create the equity and trade it out. And so it’s just money in the bank burr is by far the most impactful strategy you can do.

Dave:
I totally agree. And I’ll say some of them are cosmetic, some of them are a little bit more, I’ll change a layout, you’ll do some structural stuff if it makes sense, because some of the deals I’m seeing, and I think, again, this goes back to what Henry said about more deals on the market. Some of these deals right now, the rents are like 50% of market rate. It’s crazy how low some of these rents are. No one’s renovated them, and maybe you need to change the bathroom, change the layout to be a little bit more modern, but you could double your rent some of these times if you’re willing to do this, and it’s not. You’re going to have three months, four months of vacancy in these things. But the other part of this that I love, James taught me this, but it’s like you could permit these things while people are living there.
So you’re not losing all this time or having all these holding costs, just get it permitted. You’re ready to go. They’re moving out usually 60 days ahead of time. You could really reduce your holding costs and your expenses by doing it this way. So depending on your skill level and your appetite for risk, you can do a heavier reno too and still use this method to control your costs. Alright, well those are our favorite things. I have to add my one bonus one, I read a stat the other day that said that affordability in the housing market is the best it’s been in three years, and that just warms my heart. I just want to tell you, I think it’s awful how unaffordable housing is in the United States, both our investors and homeowners. That’s why it’s felt so hard. This is so hard, and don’t get me wrong, we’ve gone from 40 year lows of unaffordability to like 38. It’s not great, but it is moving in the right direction. You got to bottom out. Things need to start moving in the direction. And so that is my number one trend that I hope goes into next year because all of these strategies, whether it’s on market, deal fighting, slow burrs, doing hard money loans, bonus depreciation, everything gets better if affordability improves. And so I am hopeful that this trend that we’re starting to see develop in the second half of 2025 extends into 2026.

Kathy:
Yeah. It’s just that all that appreciation happened all in a couple of years instead of over five or six years. So we’re getting closer to that five or six year point where we would be, had rates not been so low. And in that time period, there have been some jobs where there’s wage growth, there’s some areas where there’s wage growth and we’re seeing housing prices flatten and even in some areas go down and now mortgage rates getting back to closer to 6%, which is very normal. Very good rate. So yeah, I think that this lack of affordability has been a temporary thing, a result of the pandemic and just like the pandemic through a lot of things out of whack, a lot of prices went crazy. It’s all kind of coming back to where it would’ve been had there been no pandemic. So hopefully things are going to come back to normal normalize, and then Henry and James are going to be like, why is it taking a normal amount of time to sell a property? I don’t like this. I

Henry:
Don’t. We just want the best of both worlds. I want to be able to find a deal without working for it, and I want to be able to sell it in three days.

Dave:
Yeah, exact opposite. Investing market conditions. You want both of them at the same time. Yeah, that’s a reasonable request. Absolutely. Well, guys, I have to say my real favorite thing is doing this podcast with all of you. So I’m going to end on a corny note at the end of the year, but I really do love doing this show. It’s very fun having you all here. And thank you all so much for listening to this show. It has been a great year for on the market, and we have some more fun, exciting stuff planned for next year. So thank you all for being a part of On the Market Community.

Kathy:
Oh, thank you. And I think we’re coming up on another anniversary.

Dave:
It’s going to be our four year anniversary.

James:
No way.

Dave:
Yeah. Isn’t that crazy?

James:
Love it. Yeah,

Dave:
It has been a delight and the show continues to grow and do great, and it’s really because of three of you. So thank you. Thank

Kathy:
You. Well, thank you.

Dave:
Alright, that’s it. That’s what we got for you for On the Market Today. Thank you all so much for listening. We’ll see you next time.